Hong Kong needs to catch up with mainland in use of fintech to avoid stagnation
For Chinese mainlanders, a visit to Hong Kong feels like a voyage back in time. At home they spend weeks without visiting an ATM or a bank. They use mobile wallets to pay for meals, bills and cabs, or even to donate to beggars; they invest their unused balance in moneymarket funds, still using their smartphone. But when they cross the border into the special administrative region, they leave such conveniences behind.
Cabs accept only cash. Not all small shopkeepers take cards, and they often charge extra if they do. Outside of big chains, mobile- payment penetration is shallow. The city accumulates in pockets so heavily that special government trucks drive around buying up spare change. A Hong Kong Monetary Authority ( HKMA) study shows the city is oddly cash- intense.
To be fair, there’s been no wholesale rejection of electronic money. Cards are used heavily and Internet banking is ubiquitous. Even so, the financial center, consistently found near the top of global competitiveness rankings, lags when it comes to innovation in financial technology ( fintech).
The irony is that officials are eager to bag flotations of mainland companies like Alibaba affiliate Ant Financial and Lufax. But they have been slow to allow those companies to roll out systems. The first licenses for mobile- wallet apps were granted to Apple, Android Pay, Tencent and others in 2016. Alibaba’s Alipay launched its localized app in May, more than a decade after starting on the mainland.
And it’s not just the consumer side. A recent survey by PwC showed local financial institutions invest far less in fintech than counterparts in the main- land. The city risks stagnating as money pours into areas like blockchain technology and transaction security. There are less benign obstacles. The PwC survey showed executives saw “regulatory uncertainty” as the top challenge for fintech in Hong Kong. Institutions, be they cab companies, banks, or mall developers, don’t want to be disintermediated.
That the city’s cabbies were able to fend off Uber is uninspiring to entrepreneurs. The banks earn plenty from deposits, credit- card issuance, and ATM fees. Mall owners look at the mainland and see a nightmare: e- commerce killing rents. Their resistance, however, has created an embarrassing image problem for a city that is fighting for dominance among Asian financial hubs.
A wider problem with creativity is slowing development. Hong Kong has slid in the Global Innovation Index for four years, and now ranks far behind Singapore. Official support for entrepreneurs is lukewarm, and they struggle to find talent: The need to pay stratospheric rents drives most smart young people into the arms of giant institutions.
The HKMA is belatedly snapping into action. Last year it established a Fintech Facilitation Office to develop a local ecosystem. Octopus is upgrading itself. Now if only the cabbies would get on board, the city could stop running the coin- collection trucks.