FinTech Boxing: Hong Kong and Singapore battle it out again

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November 25, 2016

Source of Picture: companyincorporationsg.com

New York, London, Singapore (SG) and Hong Kong (HK) are all seen as international financial centres in the World. SG has experienced an increased flurry of activity in November, with FinTech activities in both HK and SG making headlines. InvestHK presented the 1st HK FinTech Week during Nov 7-11, immediately followed by SG Fintech Festival during Nov 14-18.

The battle between HK and SG can be likened to a boxing game where the two competitors have different strengths, strategies, pace and mentality. Despite their similar weight (population size and diverse cultural background), Singapore has a pair of aggressive quick hands that are more willing to push forward and are not afraid of being punched. HK is like a quiet but strategic boxer who is looking for opportunities and reluctant to get a hit in the face.

In this HK/SG FinTech Boxing Series, we offer in-depth comparisons between HK and SG FinTech development.

Round 1

  • Policy Support in 2015-2016 – helps you quickly recap what the governments have been up to in the past two years
  • FinTech Accelerators Comparison – listings and comparisons of the FinTech focused

 

Round 2

  • 2015-16 FinTech funding situation update
  • Fintech talent Comparison
  • Top FinTech Startups highlights in different stages

 

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Source: Oddup

 

 

HK slightly behind  SG…

We have mapped out the key FinTech related policy support and regulations in HK & SG during 2015-2016. We note that the HK FinTech development is not as behind as many have imagined when compared with SG. Instead, we believe it is more about different focal points of the two financial centres. In HK, the focus is on payment (stored value facilities) and cyber-security while Singapore’s focus is on Blockchain related technology and equity crowdfunding. Oddup believes it is too early to conclude which path could lead to final success as FinTech covers many areas and its development in Asia is still at an early stage. However, we do believe that the HK government can take a more active role going forward.

 

… with a more active role and needed

When we look at Singapore, we note that not only does the government put significant in facilitating development, they also provide most essential and direct support – money.  In the last 2 years, the Monetary Authority of Singapore (MAS) has already committed to invest S$225 mn for FinTech development and also to offer grants to FinTech projects in Singapore. Unfortunately, we see minimal support from the HK government in this area as most initiatives are mainly at the “discussion” and research stage.

Besides monetary support, recent blockchain involvement is another example. When the MAS is already working with banks on the adoption of blockchain to speed up and simplify interbank deals (even providing Know-Your-Customer database to help banks to further save more costs), the Hong Kong Monetary Authority (HKMA) only published a Whitepaper on related technology, which does not include a solid action plan.

 

Tech audience does not like the old-school tone. Time for HK to sound more aggressive

 

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Regulatory SandBox” takeaways 

Besides the way of presentation, Oddup also notes a difference among the HK & SG governments in terms of their preferred FinTech development approaches. Singapore appears to be an open field while Hong Kong is a playground just for large corporations.

In Singapore, FinTech development approaches are more open to different levels, catering to banks, large corporates and startups. In Hong Kong, rules and regulations tend to start with large financial institutions. The “Regulatory SandBox*” is a good example. The “Regulatory SandBox” aims to enable companies to experiment with FinTech solutions in a small sample group without worrying about the regulatory framework before it is applied to mass public. In Singapore, the “SandBox” is open to both financial institutions (FIs) as well as non-financial players; when in Hong Kong, it is only open to authorised institutions, mostly banks or well established corporates. Besides that, the newly announced Stored Value Facility (SVF) regulation is another example. In Singapore, almost any entity can operate payment systems and e-wallets without seeking approval, while rules introduced in Hong Kong last year require firms to have a license for SVF, or a prepaid electronic cash or card. As of November 25, 13 licenses were released to different large entities.

Which approach is better? In our view, while the approach that Singapore is using can stimulate innovation, while the Hong Kong government is better in terms of possibly a stronger foundation and lower systematic risk. This is especially important when we come to sophisticated products in FinTech. However, whether letting the big banks lead the way implies better user protection in still in question particuarly as we reflect back on the HKMA’s experience from the “Lehman Brothers Minibond saga”.

What’s next?

For short term development, Oddup expects to see the MAS put more effort on blockchain technology for inter-bank payments, especially after their recent partnership with R3 and initiatives to test directly with banks. Since this will affect cross-border settlement sooner or later, we expect to see the MAS to sign more cooperation agreements with other monetary authorities. One of them could be the HKMA.

However, we do not expect the HKMA to invest into exploring blockchain technology like Singapore. Instead, they may wait for the results from Singapore. This could be a smart move in light of the technology needed to be shared when it comes to cross boarder settlement, where HK is still a gateway for China.

 

 

FinTech Accelerator Program

Startup accelerators are one of the most common way for corporates to tap into new and innovative technology of startups. In this area, Hong Kong is slightly ahead of Singapore with a longer history of FinTech accelerator programs. Currently, both cities have three FinTech focused accelerators and each batch will accept around 8-10 startups.

Did you know?

  1. None of the accelerators were launched by a local bank in HK
  2. Development Bank of Singapore (DBS) does not run an accelerator in Singapore but in Hong Kong
  3. The FinLab is the only program led by government (SG government through Infocomm Development Authority of Singapore)

 

Singapore

 

Hong Kong

 

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Want More?

If you’re keen to read more, about deeper analysis and similar startups, or want more in depth analysis about these Demo Day startups, visit us at Oddup.com

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