The Great Race to own the Fintech Space…. Can Hong Kong Leave its Mark?


In the latest edition of Newgate Views, we explore why industry figures believe Hong Kong is losing out to China and Singapore in the quest to link fintech start-ups and venture capital investors

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In May, NexChange hosted its latest Fintech O2O Meetup for fintech startups and venture capital investors at Hong Kong’s Cyberport. Approaching full capacity, the monthly event is full of hopeful startups, financiers and advisers eager to participate in Hong Kong’s burgeoning start-up space.

But Gordon Yen of Radiant Venture Capital (pictured below left) had a dose of cold reality for attendees; he said that Hong Kong is a less attractive fundraising market for fintech startups in Asia than China or Singapore. “There is a perception that there is so much money in Hong Kong and if you come here as an entrepreneur, you’re bound to get funded. But it’s much harder than people think.”

Screen Shot 2016-06-01 at 18.00.00By comparison, Singapore is throwing both public and private money to spur the development of startups and a venture capital ecosystem in the city-state.  It’s a strategy that has worked marvelously for Singapore over its 50 year history – mobilize resources into sectors where Singapore can compete aggressively throughout the region.

Regulators in Western markets are taking notice of Singapore’s development.  This month, the UK Treasury formally announced a “fintech bridge” between both countries that allows regulators to “refer fintech firms to its counterpart… making it easier for fintechs to scale between countries” and enjoy easy access to Asia via Singapore.

 

Hong Kong ‘falling behind’ 

Hong Kong has always taken a more laissez-faire approach, enshrined in the “positive non-interventionism” approach that has guided economic management in the city for decades.  But professionals like Mr. Yen are increasingly sounding the alarm that Hong Kong is rapidly falling behind when it comes to developing a fintech ecosystem.

Certainly there are reasonable steps that the Hong Kong government will need to consider and implement, quickly, in order to attract entrepreneurs and risk-loving venture capital to the city.  But there are two curiously overlooked yet critically important points to Hong Kong’s credit in this horse race:

newgate_315x280The first is that Hong Kong has a critical mass in asset managementAccording to the HK Trade Development Council, total assets under management in Hong Kong reached US$2.27 trillion as at the end of 2014, while Singapore held about US$1.75 trillion.  Hong Kong’s advantage in private equity is even more pronounced: US$110bn in assets under management versus about US$68bn in Singapore.  If your start-up is for the asset management or private equity community, chances are you have many more customers in HK than in Singapore.

The other is open and independent mediaThe city is Asia’s unrivaled media center with an institutionalized commitment to press freedom.  There has always been more local and international media based in Hong Kong producing more regionally relevant content.  As a result, the region’s media industry and related technological developments are likely to stay concentrated in Hong Kong; meanwhile, entrepreneurs and investors seeking to reach the global investment community will likely need to speak with Hong Kong-based journalists.

Hong Kong is less centralized and more markets-driven in its economic development than Singapore, and this has worked to the city’s great advantage in the past and contributes to Hong Kong’s unique cultural vibrancy.

Regulators, entrepreneurs and investors will need to build on these strengths if they are to carve out a niche in Asia’s developing technology scene.

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This column is sponsored by Newgate Communications. For more information on Newgate contact Richard Barton, Managing Partner Greater China, via Richard.barton@newgate.asia  or +852 3758 2686