Singapore and Hong Kong’s financial technology (fintech) future has been called into question, with regional rivals' lighter regulatory burden cited as part of their success.
While the two cities can rightly claim to be Asia’s financial hubs, the chance to be financial innovation centres is in the process of being seized by the likes of China, Vietnam and Indonesia.
But the two cities still have fintech hope, say industry players, with native innovation set to be a potential game changer if it can be achieved.
China’s financial technology innovation has attracted worldwide attention. Most noticeable has been e-commerce giant Alibaba, which teamed up with mainland fund house Tianhong in 2013 to launch online money market funds which can be bought with a click of a button. Meanwhile arch-rival Tencent has launched six fund offerings alongside its new online bank WeBank.
But in contrast, Singapore and Hong Kong have been seen as laggards.
Much of the issue comes down to regulation, market participants say. Mainland China, with a less-developed financial market system in regulatory terms, tries to generate far more innovation than the two cities, although the downside has meant the lack of rules have been lucrative for scammers.
“If you go to Vietnam, China, Indonesia, the regulatory approach to supervision is to let 10,000 flowers blossom,” said Keith Pogson, Asia financial services consultant at EY. “We’ll define the rules, you go and be innovative around those rules and if we don’t like what you’re doing, we’ll come and tell you so.
“In China, you’ve got more P2P lending, WeBank, Alibaba and Alipay to name a few, which are all far more innovative and entrepreneurial than things we necessarily see in Hong Kong or Singapore.”
Singaporean financial market app Call Levels, which gives out alerts when securities hit a certain price, took regulations into consideration when designing its services.
“We made a conscious decision not to add any buy or sell [functions] or any form of investment advice because those two areas are heavily regulated,” said Call Levels co-founder Cynthia Siantar. “As a start-up you don’t want to deal with regulation so early on because it would be brought down by much back and forth [with the regulator].”
While Call Levels is expected to eventually provide a full suite of services, such as brokerage and trading, the cost of waiting for regulatory approval for up to three years on top of lawyer fees can make life tough for such a start-up.
The appetite for fintech in Singapore and Hong Kong has also been questioned, with Pogson suggesting the two Asian cities are “tech lazy”, given the luxury of convenience that they enjoy compared to their much larger neighbours.
“Claiming to be tech hotspots, I think a lot of that is quite wishful thinking,” said Pogson. “International entrepreneurs may see Hong Kong and Singapore as easier places as entrepots to do business into Asia rather than necessarily hotbeds in innovation themselves. In reality, in countries like China you will see a much faster adoption, particularly in retail base fintech solutions.”
Despite this, Siantar insists that there is still room for innovation in Singapore and Hong Kong. She cites the biggest potential game changer as mentality, with innovators in the cities needing to look inside their own markets for inspiration as opposed to replicating what is already available in Silicon Valley or London.
Call Levels co-founder Daniel Chia agreed, pointing out that wealth management is an area where Singapore can excel at given the city-state’s status as a private banking centre coupled with a sophisticated and tech-savvy population.