By Tsering Namgyal
FinTech Association of Hong Kong (FTAHK) has been working hard to create a vibrant fintech ecosystem in Hong Kong. Blockchain Asset Review spoke to Musheer Ahmed, general manager of the FTAHK, on some of the key developments and challenges facing the industry. He discusses HK’s fintech regulatory framework, some exciting subsectors (insurtech, payments and blockchain), opportunities in China, and why the financial center is the ideal gateway for fintech startups looking to scale up.
Q: In a recent survey conducted by FTAHK majority of the respondents thought that regulatory clarity is the top priority?
A: The FTAHK Blockchain ecosystem map and survey resulted from interviews with over 150 companies who have blockchain related services in Hong Kong. One of the main results from the survey was that regulatory clarity in the space is the top priority for firms. This is understandable as the industry is fairly new, and especially so with crypto. Regulators around the world have been scrutinising the space, and following the wild market moves and ICO mania of 2017-18, have started to bring in regulations and guidelines. In Hong Kong, the Hong Kong Monetary Authority (HKMA) has been receptive towards blockchain technology and exploring it for the last few years. This is highlighted by the fact that the trade finance platform it launched with the Monetary Authority of Singapore is built on blockchain.
Alongside this, the Hong Kong Securities and Futures Commission (SFC) clarified its position on Bitcoin futures in late 2017, followed by a further clarification regarding ICO marketing and listing of tokens with securities properties in Q1 of 2018. In Q4 of 2018, the SFC issues guidelines for fund managers who manage crypto funds together with traditional funds, as well as plans for a “crypto sandbox” for exchanges and trading operators. I see the moves from both the HKMA and SFC as positive. The regulators have actively engaged with the industry and continue to build their knowledge and expertise around crypto, while bringing in regulations and guidelines around it.
Q. You have done a lot of work in building the fintech “eco-system” in Hong Kong? How many members do you have now?
A: The Fintech Association of Hong Kong is a not for profit, community organisation built on the principles of “advocacy,” “collaboration” and “education.” We launched in June of 2017 and now have over 1,500 members representing over 400 firms ranging from large global corporates to new startups, as well as educational institutions and individuals.
Q: What are some of the new opportunities emerging for fintech firms from the Guangdong Hong Kong Macau Greater Bay (GBA) area development plans?
A: The Greater Bay Area opens up quite a few opportunities for firms from both Mainland China as well as the Hong Kong and Macao SARs. For firms from Guangdong, mainly based in Shenzhen, it gives an opportunity to collaborate and utilise Hong Kong’s standing as an international financial centre and global regulatory best practices. It also opens up Hong Kong’s large B2B financial services industry for Guangdong based FinTechs.
On the other hand, for Hong Kong firms the GBA opens up a large, 68 million-people market and provides further access to Mainland China. In addition, it will help firms utilise the deep technology talent that is available in Guangdong.
As a region, it creates a global powerhouse of innovation and services that is the size of large global economies with a GDP of $1.7 trillion, projected to reach $3 trillion in 2030, that serves as the gateway to all of Asia.
Q. Which sub sectors in fintech in Hong Kong you are most excited about or see most promising?
A: The Hong Kong market is quite dynamic and tends to be focused on B2B owing to its small population and status as Asia’s largest capital markets hub. The four main subsectors are:
- Regtech: with the highly regulated nature of Hong Kong’s financial services, solutions for complying with regulatory requirements from onboarding to supervision and reporting are in big demand.
- Insurtech: the insurance industry is lagging banking in development by a couple of years, and so insurance firms have become more focused on digital transformation in the last two years. With a vast majority of insurers having their APAC headquarters in Hong Kong, insurtech companies are finding opportunities in the space, especially as insurance firms are quite open to partnering with technology startups.
- Payments: Hong Kong is the largest offshore Renminbi centre and among the largest cross border payment gateways in the world. Payments will continue to be a space for fintechs to grow across many financial services verticals.
- Blockchain: with many large blockchain and crypto firms based in Hong Kong it is a vibrant space for blockchain development and the exploration of use cases.
Q: If you are a start-up in the fintech and blockchain sector, why do you think they should choose Hong Kong as a hub?
A: Hong Kong is Asia’s largest financial center and amongst the largest in the world. It has served as a gateway to Mainland China for decades, and in the recent past has become a launch pad for Mainland Chinese firms going abroad. In addition, 40% of the world’s population and a majority of Asia is easily accessible via Hong Kong. It is an ideal gateway for anyone wanting to access the Asian market from the West. In addition, with Hong Kong being a large B2B centre, it provides fintech firms with the ideal market in which to scale up.