Like other markets around the world, Hong Kong is racing to position itself as a fintech innovation hub. But the city’s status as an important hub for fintech innovation is now closely linked to its successful integration to the Greater Bay Area (GBA) initiative, according to research from PwC.
Spearheaded by the Chinese government, the GBA scheme aims to link the cities of Hong Kong, Macau, Guangzhou, Shenzhen, Zhuhai, Foshan, Zhongshan, Dongguan, Huizhou, Jiangmen and Zhaoqing into an integrated economic and business hub.
At the 2018 Fintech Week, PwC’s China and Hong Kong Financial Services lead, Matthew Phillips revealed that fintech will play a key role in the integration and development of the GBA. The survey of over two dozen senior executives from fintechs, financial institutions (Chinese and overseas) and other firms believed that Hong Kong’s position as a global fintech hub will be seriously undermined if it fails to capture the fintech opportunity across the GBA.
Most respondents agreed that greater regulatory reciprocity or alignment will be needed to ensure that the 9+2 cities of the GBA can work together in an integrated and productive way. Furthermore, most believe that Hong Kong’s ongoing competitiveness as a global fintech hub may depend on the scale of GBA access that it can provide.
“Most of the executives we spoke to see the immediate opportunity for fintechs in the GBA as serving the needs of SMEs and individuals, rather than large corporates,” says James Tam, Financial Services partner, PwC Hong Kong. “These customer groups stand to benefit the most from the greater speed and wider access to markets that FinTech can bring.”
PwC’s research identified a number of areas where regulatory alignment would support the development of fintech. These include passporting for the new virtual banks from Hong Kong into the GBA and vice versa; introduction of a GBA regulatory sandbox; steps to achieve seamless financial identity verification and KYC processes; alignment of data governance rules; and measures to address legal pain points. Many of the respondents saw these steps as key to addressing impediments to efficient GBA integration, as well as to resolving practical challenges, such as the difficulty of opening bank accounts in Hong Kong.
The talent pool available to fintechs is cited as another issue, with tech talent seen to be concentrated in Shenzhen and global financial expertise in Hong Kong. Steps to address the mobility of this talent from one part of the GBA to another are important – particularly in areas of critical shortage, such as AI and blockchain skills.
“In the last ten years or so China’s regulators have shown themselves willing to roll out defined liberalization measures that have created digital-only banks and world-leading payments businesses, and granted access to wider investment options,” said Phillips. “The GBA and fintech will need more such initiatives if the GBA is to take off. But the growing sophistication of fintech solutions should make that feasible.”
First published in FinTech Innovation