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Brief Summary on “Overcoming Challenges to Financial Innovation in Hong Kong” Seminar

Last Tuesday, my office and the Office of Hon Kenneth Leung co-organised the “Overcoming Challenges to Financial Innovation in Hong Kong” Seminar and it was a great pleasure to meet with close to 200 guests from IT, accountancy and financial services sector. Our speakers generously shared their observations on equity crowdfunding, online lending and digital currencies, as well as insight on regulatory challenges from the experience of other jurisdictions that is very valuable to Hong Kong. The Q&A session was lively and there were some really good questions, I would like to share them with you.

Hong Kong’s FinTech advantage

Emmanuelle Norchet from Investable, a equity crowdfunding platform, pointed out that the potential global market opportunity of equity crowdfunding is up to USD $96 billion. Asia has the highest percentage of population and GDP but we merely own 15% of the crowdfunding platforms in a global perspective, demonstrating an enormous potential for development. She raised the example of Oculus Rift on Kickstarter as a proof of opportunity and potential in equity funding. Comparing to London and New York as a traditional financial centre, she pointed out that as Hong Kong lacked clear regulations for equity crowdfunding platforms, while investors and startups and not familiar with crowdfunding platforms. Hong Kong is quite the last mover and really should catch up.

As for online lending, Welab founder Mr. Simon Loong summarised three important reasons for internet finance to gain worldwide popularity: first of all it is Big Data driven, taking advantage of digitized data to create opportunities; it is also innovative in its business model,where crowdfunding platforms, P2P lending platforms and third-party payments are all good examples of the disintermediary nature of internet finance; and finally the frictionless online experience. He thinks that Hong Kong is lagged behind in internet finance for the moment but as we enjoy the advantage as a traditional financial centre, possess a deep pool of finance talents and condensed tech-savvy population, Hong Kong has great capacity and should aim at becoming Asia’s Fintech hub.

Professor Douglas Arner is dedicated to his research in ‘Enhancing Hong Kong’s future as a Leading International Financial Centre’. He reminded us that FinTech is not something new and has a history of at least a decade and a half, for example NASDAQ index is the foundation of e-Exchange. Finance is always the biggest client of the IT sector and it is continuously challenged and changed by technology. He thinks that Hong Kong is a world leader in infrastructure, payments and settlements, data and security, privacy policy and risk management and regulation, which created tremendous opportunity for traditional finance, but we are lagged behind in innovative FinTech business models. He suggested that regulating through platforms or sponsors while aiming at promoting investment and aiding SME finance could be the most viable route.

Lack of clear regulations
The lack of clear regulations will effectively obstruct FinTech development in Hong Kong, as it is very difficult for business to try something new in early stage if they can’t be sure that it is legal. From the industry’s aspect, without clear regulations and guidelines they have no idea how to start a FinTech business, and it is risky to make attempts in innovative ways as negative news could easily harm the credibility of a company. I think the government tend to be highly risk-sensitive in handling investments, they might also be worried about the impact of FinTech on traditional finance big players, but the government should really learn to listen to the masses and cater for the internet finance needs.

Participants of the event told me that there are limited chances to discuss FinTech and regulation, I hope that the new steering group on FinTech will follow suit and engineer more interactions with ICT and related industries.

Office Of Hon. Charles Mok, Legislative Councillor (IT)