Tal­ents, fund­ing hold key to win­ning the race

China Daily (Hong Kong) - - HK | BUSINESS - By OSWALD CHAN in Hong Kong oswald@chi­nadai­lyhk.com

Per­ti­nent is­sues of tal­ent short­age, fund­ing re­sources and reg­u­la­tory over­haul should be ur­gently ad­dressed for Hong Kong to catch up in the fi­nan­cial tech­nol­ogy (fin­tech) rev­o­lu­tion, ac­cord­ing to in­dus­try prac­ti­tion­ers.

The sit­u­a­tion has also been com­pounded by the fact that the city is es­ti­mated to have been lag­ging be­hind its re­gional com­peti­tors for four to five years at least.

To­mas Holub, founder and chief ex­ec­u­tive of­fi­cer of CoverGo — the com­pany that runs the epony­mous app which helps users man­age their in­surance poli­cies through their phones — sees huge po­ten­tial in the mar­ket.

Holub’s father died two years ago with­out tak­ing good care of his life in­surance poli­cies — ei­ther records of paid pre­mi­ums were miss­ing or pre­mi­ums had not been paid on time — lead­ing to the lapse of fi­nan­cial value cov­er­age.

Holub said he was un­able to claim ben­e­fits from the life in­surance poli­cies and, worst of all, he was li­able to re­pay the mort­gage loan taken out by his father.

So he founded CoverGo in Oc­to­ber last year and de­vel­oped the app that — through photo-tak­ing or man­ual in­put — dig­i­tal­izes and iden­ti­fies all the de­tails of in­surance poli­cies to en­able cus­tomers and in­surance bro­kers to man­age their in­sur- ance pol­icy port­fo­lios in one go.

L a u n c h e d i n Fe b r u a r y, the app has since reg­is­tered 1,000 down­loads with 500 ac­tive users. About 50 in­surance agents in Hong Kong pay monthly sub­scrip­tion fees to man­age their clients’ in­surance pol­icy port­fo­lios with the dig­i­tal ex­pe­ri­ence and in­stant feed­backs the app pro­vides.

The com­pany plans to ex­pand its ser­vices to Malaysia and Tai­wan in Au­gust and Septem­ber, and aims to tap into other South­east Asian mar­kets as well.

“Hong Kong is a niche mar­ket for us as the city boasts one of the high­est mo­bile and in­surance pol­icy pen­e­tra­tion rates. Be­sides, there aren’ t many in­surance tech­nol­ogy star­tups in Hong Kong, mak­ing it more at­trac­tive for us to de­velop the busi­ness here,” Holub told China Daily.

“How­ever, there are no clear fin­tech reg­u­la­tions in Hong Kong. Given the fast pace of the fin­tech sec­tor’s de­vel­op­ment, fin­tech com­pa­nies may, some­times, find it dif­fi­cult to fig­ure out whether their op­er­a­tions are reg­u­lated or not.”

The SAR should also de­velop more fund­ing sources for fin­tech en­ter­prises as this is a cap­i­tal-in­ten­sive in­dus­try, he added.

Mioy­ing Fi­nan­cial Tech­nol­ogy — a fin­tech startup backed by main­land ven­ture cap­i­tal firm ZhenFund — launched its wealth man­age­ment plat­form MioTech re­cently, tar­get­ing wealth man­agers, fam­ily of­fices and pri­vate banks in Hong Kong.

The plat­form pro­vides an end-to-end so­lu­tion cov­er­ing data ag­gre­ga­tion, data man­age­ment and ar­ti­fi­cial in­tel­li­gence­based analy­ses that fa­cil­i­tate robo-ad­vis­ing and com­pli­ance man­age­ment. The plat­form is trans­form­ing Hong Kong’s wealth man­age­ment busi­ness, whereas the city’s as­set man­agers are still re­ly­ing mostly on man­ual cal­cu­la­tions and Mi­crosoft Ex­cel to han­dle in­creas­ingly com­plex data analy­ses and op­er­a­tional pro­cesses.

“Hong Kong has a bright fu­ture for fin­tech given its profin­tech gov­ern­ment poli­cies, a sta­ble reg­u­la­tory frame­work, plus a sound mar­ket struc­ture be­cause of the city’s high density of fi­nan­cial in­sti­tu­tions, giv­ing it the po­ten­tial to be­come Asia’s next cra­dle of B2B (busi­ness-to­busi­ness) fin­tech rev­o­lu­tion,” Mioy­ing Chief Ex­ec­u­tive Of­fi­cer Ja­son Tu told China Daily.

“The big­gest hur­dle to de­vel­op­ing fin­tech here is hir­ing en­gi­neer­ing tal­ents as many lo­cal grad­u­ates do not know what is hap­pen­ing in the fin­tech scene ei­ther in Hong Kong or on the Chi­nese main­land. We’re pro­vid­ing in­tern­ships and jo­bro­ta­tion op­por­tu­ni­ties at our Hong Kong and Shang­hai of­fices to help grad­u­ates,” he said.

A fin­tech re­port is­sued in May by the Fi­nan­cial Ser­vices De­vel­op­ment Coun­cil — the gov­ern­ment’s fi­nan­cial ad­vi­sory body — de­scribed Hong Kong’s fin­tech sec­tor as “nascent” as the sec­tor’s de­vel­op­ment is be­ing re­stricted by small mar­ket de­mand, tech­no­log­i­cal in­no­va­tion lim­i­ta­tions, as well as the pa­per-based and “multi fi­nan­cial reg­u­la­tor” model.

In a re­search re­port in 2015, lo­cal think tank Our Hong Kong Foun­da­tion called Hong Kong a “fi­nan­cial hub but not yet a tech­nol­ogy hub of fi­nance”, say­ing the city’s “reg­u­la­tory bod­ies should re­view the bal­ance be­tween in­no­va­tion and reg­u­la­tion”.

Cur­rently, there is no reg­u­la­tory frame­work gov­ern­ing fin­tech in Hong Kong. A gov­ern­ment-ap­pointed Steer­ing Group on Fi­nan­cial Tech­nolo­gies is said to be work­ing on a pol­icy blue­print out­lin­ing de­vel­op­ments in the in­dus­try.

Hong Kong’s mul­ti­ple fi­nan­cial reg­u­la­tor model — the Hong Kong Mone­tary Au­thor­ity mon­i­tor­ing banks, the Se­cu­ri­ties and Fu­tures Com­mis­sion con­trol­ling se­cu­ri­ties and funds, and the In­surance Au­thor­ity over­see­ing in­sur­ers — is reg­u­lat­ing the fin­tech in­dus­try at a dif­fer­ent pace.

“The gov­ern­ment should be proac­tive in co­or­di­nat­ing with th­ese reg­u­la­tors to con­duct con­sis­tent reg­u­la­tion in fin­tech,” said law­maker Charles Mok Nai-kwong, who rep­re­sents the in­for­ma­tion tech­nol­ogy sec­tor in the Leg­isla­tive Coun­cil.

Blockchain tech­nol­ogy, the dig­i­tal ledger tech­nol­ogy that could skip a cen­tral au­thor­ity and bring greater trans­parency to reg­u­la­tory re­port­ing, is a new fin­tech area that Hong Kong can ex­cel in.

Bank of China (Hong Kong) said in May it had com­pleted Hong Kong’s first case of set­tling trade fi­nance us­ing blockchain. It was also the first bank­ing in­sti­tu­tion in the SAR to launch prop­erty val­u­a­tion ser­vices us­ing blockchain last year, fa­cil­i­tat­ing faster mort­gage loan ap­provals.

The bank is pon­der­ing whether the tech­nol­ogy can be ap­plied to other fi­nan­cial ser­vices.

“Not only banks, but also sup­ply chain com­pa­nies and ship­ping com­pa­nies that should em­brace this tech­nol­ogy be­cause their busi­nesses in­volve many trans­ac­tion-based and multi-task­ing in­for­ma­tion shar­ing ac­tiv­i­ties,” said Peter Man Chi-fung, re­gional di­rec­tor at Red Hat Inc — a US in­fra­struc­ture plat­form so­lu­tion provider.

“It’s too early to as­sert that blockchain tech­nol­ogy will blos- som in the lo­cal fi­nan­cial sec­tor,” he cau­tioned. “To catch up with re­gional com­peti­tors, Hong Kong gov­ern­ment must be more proac­tive in for­mu­lat­ing tax poli­cies or build­ing a qual­ity work­ing en­vi­ron­ment to at­tract global cor­po­ra­tions to es­tab­lish their re­search and de­vel­op­ment (R&D) cen­ters here to make sure the city will not lag be­hind in fin­tech in­no­va­tion.”

“As a fi­nan­cial ser­vices hub with good fi­nan­cial reg­u­la­tion, Hong Kong can play a lead­ing role in reg­u­la­tory tech­nol­ogy (regtech) and help fi­nan­cial in­sti­tu­tions ad­dress com­pli­ance bur­dens,” said Henri Arsla­nian, PwC fin­tech and regtech lead for China and Hong Kong.

“As a lim­ited mar­ket with a pop­u­la­tion of just sev­eral mil­lion, Hong Kong should fo­cus on de­vel­op­ing B2B rather than busi­ness-to-con­sumer (B2C) fin­tech ini­tia­tives, with in­surance tech­nol­ogy as an­other po­ten­tial area of fo­cus,” he urged.

The Hong Kong Ap­plied Sci­ence and Tech­nol­ogy Re­search In­sti­tute (ASTRI) — the gov­ern­ment-founded agency for pro­mot­ing tech­no­log­i­cal in­no­va­tion — is de­vel­op­ing cross- bound­ary trade set­tle­ment, as well as on­line per­sonal iden­tity man­age­ment plat­forms for open­ing bank ac­counts us­ing blockchain tech­nol­ogy. Th­ese ini­tia­tives have gone through the stage of “proof-of-con­cept” and are poised to en­ter the “pro­to­type and pi­lot” stages as more fi­nan­cial in­sti­tu­tions are will­ing to par­tic­i­pate.

How­ever, de­spite the en­thu­si­asm in the pri­vate sec­tor, the public sec­tor is rather luke­warm about blockchain tech­nol­ogy.

“The Of­fice of the Gov­ern­ment Chief In­for­ma­tion Of­fi­cer has not no­ticed any gov­ern­ment de­part­ment or bu­reau which has put for­ward any con­crete ap­pli­ca­tion pro­posal to uti­lize blockchain tech­nol­ogy in ar­eas like han­dling tax re­turns, land reg­is­tra­tion, vot­ing and is­suance of iden­ti­fi­ca­tion doc­u­ments”, Sec­re­tary for In­no­va­tion and Tech­nol­ogy Ni­cholas Yang Wei-hsi­ung told LegCo in June.

ASTRI will ded­i­cate more than HK$200 mil­lion to fin­tech de­vel­op­ment and dou­ble the num­ber of fin­tech R&D ex­perts in the com­ing three years. It has funded a to­tal of 48 fin­tech R&D projects with HK$145.5 mil­lion since 2014.


Bank of China (Hong Kong) said in May it had com­pleted Hong Kong’s first case of set­tling trade fi­nance us­ing blockchain tech­nol­ogy.

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