Hong Kong’s emergence as a fintech hub is no secret as the city has long been at the forefront of adopting new technologies and developing innovative financial products and services.
In recent years, Hong Kong has seen a surge in fintech startups and a growing interest in digital currencies. The city is also home to several world-class financial institutions and is a key regional hub for private equity and venture capital.
With its robust infrastructure and talent pool, Hong Kong is well-positioned to continue its leadership role in the finance and technology industries in the years to come.
As we embark into the new year, we’d like to take this moment to look back at Hong Kong’s top five fintech stories of 2022.
HKMA Officially Launches Its Commercial Data Interchange
The Hong Kong Monetary Authority (HKMA) has been actively promoting fintech development and adoption in the banking sector and has launched several initiatives to support the fintech ecosystem.
In its latest move, the HKMA has officially launched its Commercial Data Interchange (CDI), one of the key initiatives under its Fintech 2025 strategy. The CDI is a platform that enables banks and businesses to exchange data in a standard format, making it easier and faster for businesses to onboard onto the platform.
The CDI will streamline financial processes for financial institutions, such as Know-Your-Customer (KYC), credit assessment, loan approval, and risk management. This will help reduce information asymmetry between banks and SMEs and enable banks to make more informed lending decisions.
Since its launch, CDI has registered over HK$1.6 billion in approved SME loans, seeing the participation of 23 banks with material SME business and 10 data providers in CDI.
Among the banks involved are Ant Bank (Hong Kong), Bank of China (Hong Kong), Citibank, Dah Sing Bank, DBS Bank (Hong Kong), ZA Bank, Standard Chartered Bank (Hong Kong), and more.
Massive fundraising rounds for Animoca and Airwallex
Hong Kong-based startups have been on the rise recently, with many attaining unicorn status. The city is home to a thriving startup ecosystem, and many startups are choosing to base their operations here due to the favourable business environment and the availability of talent.
One of the most notable trends in the Hong Kong startup scene is the increasing number of startups raising large sums of money through fundraising rounds. Hong Kong was also ranked Asia’s largest hedge fund hub as of March 2022. In 2022, the top five HK startups by venture funding alone raised over US$472 million.
Some of the most well-known startups based in Hong Kong include blockchain gaming group Animoca Brands and global payments and banking platform Airwallex.
Animoca Brands has raised US$110 million in its latest funding round led by Singapore’s Temasek and South Korea’s Mirae Asset Management. Meanwhile, Airwallex has closed its Series E extension round with US$100 million in funding. The investors in this round are Square Peg, Salesforce Ventures, Sequoia Capital China, Lone Pine Capital, Hermitage Capital, 1835i Ventures, and Tencent. This brings Airwallex’s total funding to more than US$900 million and its valuation to US$5.5 billion.
Hong Kong ramps up CBDC developments into high gear
The Hong Kong Monetary Authority (HKMA), Bank for International Settlements (BIS), Bank of Thailand, Central Bank of the United Arab Emirates, and the Digital Currency Institute of the People’s Bank of China have published a report on the completed pilot of the use of central bank digital currencies (CBDCs) by commercial banks for real-value transactions across borders.
Project mBridge, which involved 20 banks in Hong Kong, Thailand, mainland China, and the United Arab Emirates, successfully conducted 164 payment and foreign exchange transactions totalling over US$22 million (HK$171 million).
The project was previously known as Project Inthanon-LionRock, which aims to explore the capabilities of distributed ledger technology (DLT) in facilitating real-time cross-border foreign exchange payment-versus-payment transactions in a multi-jurisdictional context on a 24/7 basis.
Digibanks Moving into Wealth Management
Banking in Hong Kong is currently in a state of change and development as we see new technology-driven contenders, “Digibanks,” such as WeLab, Fusion Bank, and ZA Bank, move into the Wealth Management space in 2022. They were granted licensing from the Hong Kong Securities and Futures Commission (SFC) to offer digital wealth advisory services.
Meanwhile, Livi Bank has been granted an insurance agency license from the HKMA, allowing the bank to introduce a range of insurance products within its app.
These companies are coming into a market that has been hitherto held by incumbents such as HSBC, Hang Seng Bank, and Standard Chartered. The new players appeal to a new generation of digital-native customers who want their wealth management to be as simple and efficient as possible.
It is an exciting time for banking in Hong Kong, and we will be watching with interest to see how the landscape develops over the next few years.
Hong Kong’s FSIs are debuting in the metaverse
The line between physical and virtual reality is blurring in a rapidly digital world. We are increasingly living in multi-dimensional, online worlds where we can interact with others, create digital avatars, and explore new environments. This metaverse is growing in popularity, with corporations and businesses investing in its development.
In the past year, several major institutions in Hong Kong debuted in the metaverse. AXA was the first insurer in Hong Kong to enter the metaverse by acquiring a 3×3 LAND, enabling it to provide an innovative interactive space for its customers. StanChart and HSBC followed suit, partnering with The Sandbox, a decentralised gaming metaverse and a subsidiary of Animoca Brands, to make their metaverse debut.
HSBC is acquiring a 3×3 LAND site in The Sandbox metaverse, intending to engage and connect with sports, esports, and gaming enthusiasts.
Meanwhile, The Sandbox has committed US$50 million to global venture accelerator Brinc for The Sandbox Metaverse Accelerator Programme, which will target 100 startups to enhance the open metaverse.
The programme will invest in, mentor, educate, and support the development of promising startups and projects while also providing access to potential partnerships and business development opportunities across the growing networks of The Sandbox, Animoca Brands, and Brinc.
Future of Hong Kong’s fintech
As we move into 2023, it is becoming increasingly clear that the future of fintech in Hong Kong looks very promising. The city has a strong ecosystem of startups, investors, and support infrastructure.
In addition, the Hong Kong government is supportive of the fintech industry and has put in place several initiatives to promote the development of the sector.
According to Invest Hong Kong, there are over 600 fintech companies and 3,700 startups operating in Hong Kong. It is home to over 10 unicorn companies. The country has one of the highest consumers fintech adoption rates of 67 percent in the world, which is significantly above countries including France, the United States, and Japan.
Looking ahead to 2023, it is clear that fintech will continue to play a major role in Hong Kong’s economy. With its strong ecosystem and supportive regulatory environment, Hong Kong is poised to become a global fintech hub.
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