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FinTech (Financial Technology) has always been a hot topic in Hong Kong. As a financial center of global significance, Hong Kong naturally hopes to achieve the next breakthrough with the help of technology. This seems to be a reasonable expectation, as Hong Kong has all the advantages it needs. However, ironically, fintech in this city always seems to be just a topic of a small circle.
After working for a while in the finance industry of Hong Kong, I gradually understood the reasons. In Hong Kong, FinTech is seen more as a market rather than an incubator.
FinTech is a new business thinking, not a new technology
I think too many people wrongly see FinTech as technology innovation when it should be defined as business innovation. It is all about how to tap into untapped possibilities in past businesses using technology. Therefore, any plans overly focusing on technological capabilities are in my view, castles in the air. Many start-ups often use terms like AI, Web3, or blockchain in their promotions, overlooking the practical plans to integrate technology and business. This is why it's always so challenging for FinTech innovation to take off in Hong Kong.
Who Owns the Business?
The question is, who owns the business? Only companies with extensive business experience have a claim for real fintech innovation. Hong Kong's financial businesses are mainly concentrated in traditional companies, such as HSBC, Standard Chartered, and Hang Seng in banking, and AIA, Manulife, and Pru in insurance. With their rich industry experience, adherence to mainland China's reform and opening up, coupled with the professional spirit of the Hong Kong people, they have accumulated their unique business strategies and working methods.
Ideally, they should have a clear understanding of the strengths and weaknesses of the financial industry in Hong Kong. However, we did not see a new force brought by technology coming from these companies. Why?
IT in Hong Kong
In the past, IT was not given enough importance in Hong Kong, but in recent years, with the slowdown of mainland China's economy and tension in China-US relations, Hong Kong, after years of prosperity, has finally begun to focus on the future. Hong Kong has invested a lot of IT resources in hopes of re-enhancing the competitiveness of the city. IT demand in Hong Kong is gradually increasing.
Presently, Hong Kong's FinTech is mainly based on two types of IT teams: The internal IT departments of financial companies and independent technology service providers. In practical operation, both sides face significant obstacles.
Challenges for Innovation
The IT department of a traditional company should be the team most likely to lead company innovation. However, contrary to expectation, the software of Hong Kong's financial companies is not as good or user-friendly as those in mainland China. After observing for half a year, I have identified several possible reasons:
- IT departments are used to being cautious and have fewer opportunities to try out innovation.
- IT departments are seen as internal software providers of the company and only handle IT needs raised by the company.
- The organization structure still follows the hierarchy of the past, making it difficult to foster a spirit of innovation and initiative in the IT teams.
- Unlike the "growth-orientated" philosophy of mainland Chinese tech companies, divisions are more focused on clearly defined responsibilities. To avoid mistakes, cooperation between divisions during project advancement is usually too cautious, hindering fast progress.
In contrast, software service providers have more freedom in product development, but the high human resource cost in Hong Kong hinders their development. Their competitors, mostly from mainland China, have enriched software development experience and half the labor cost, putting Hong Kong service providers at a competitive disadvantage, making it hard for them to grow into large companies.
Renegades
Current innovation projects in Hong Kong solve either small needs or pseudo needs. Most are merely facilitating the digital transformation of traditional Hong Kong companies. Despite the tough environment for FinTech development in Hong Kong, there are still some intriguing "renegades". I think the most noticeable are in the virtual bank, insurance, and Web 3 sectors.
Virtual banking and insurance may seem no different from mainland China's internet finance, but for the Hong Kong financial market, they constitute significant innovation. This "virtual" model might blaze a new trail among conventional enterprises and might even reshape industry habits. Web 3, on the other hand, is more of experimental exploration, aiming to maintain Hong Kong's leading position in the exploration of decentralized exchanges for the future.
On the other hand, we notice that most of the job descriptions posted by these companies involve working remotely or in mainland China. This means these enterprises are also facing the challenges of lack of talent and high labor costs.
So, even if these company projects finally land in Hong Kong, if they can't stabilize and root their talents and technology in Hong Kong, we face the question: Have we already deviated from our original intention?