China’s Tencent Holdings has signed a memorandum of understanding with the Hong Kong Science and Technology Park (HKSTP) in a move to speed up the deployment of financial technology in the city. Currently, one in every seven tenants in HKSTP operate in the fintech space, according to the science park.
Tencent will provide its technology expertise in areas including payment systems, electronic wallets, data security, the blockchain, artificial intelligence, and the internet of things. HKSTP will serve as an incubator for Tencent’s new projects. The two entities will also explore investment opportunities, as well as establish a talent development programme and a joint incubation programme. These moves are all aimed at fintech research and development.
This collaboration is an important step for Tencent as it move further into developing enterprise solutions. Locally, the Hong Kong government is also attempting to diversify its economy, which places an outsized focus on finance and real estate. In October 2018, Hong Kong’s government allocated HKD 28 billion (US$3.57 billion) to boost the city’s innovation and technology scene.
That official push came as nearby Singapore is also in a race to bolster its fintech players. The Asia Pacific region’s fintech industry is will reach US$72 billion by 2020, according to Frost & Sullivan.
The common belief is that Hong Kong has a firmer foot as Asia’s main financial centre, but it is Singapore that is ahead in innovation and developing new services.
In recent years, Hong Kong firms have faced tougher regulatory hurdles than their counterparts in Singapore. For instance, early-stage e-wallet startups in Singapore do not require a license to offer their services, while similar business in Hong Kong do need an operating license issued by regulators, and have to comply with strict rules that govern their accounts. According to private equity firm tryb, Hong Kong only had fewer than 100 fintech firms in mid-2016, despite attracting close to US$300 million in fintech funding. Yet as of 2018, that number has more than tripled.
Last year, the Hong Kong Monetary Authority placed the city’s fintech agenda at the heart of its new initiatives. A total of HK$500 million (US$64 million) had been allocated for a five-year push to support the development of new technology in Hong Kong’s financial services. Some of the agreements that were inked in the first half of 2018 include projects to develop a cross-border trade finance system and fintech research projects.
Tencent’s partnership might just be what Hong Kong needs to become the heart of Asia’s fintech scene.
Editor: Brady Ng