Hong Kong banks turn to start-ups for tech edge

The Pak Banker - - COMPANIES/BOSS -

Hong Kong's tow­er­ing skyline is dom­i­nated by ma­jor banks and in­vest­ment houses - but smaller start-ups are play­ing an in­creas­ing role on the fi­nan­cial land­scape.

The num­ber of "Fin­Tech" start-ups in Hong Kong - of­fer­ing tech­nol­ogy tai­lored to the world of fi­nance - is ris­ing rapidly, tak­ing ad­van­tage of the city's po­si­tion as an in­dus­try hub and gate­way to China.

From data anal­y­sis to al­ter­na­tive lend­ing and in­vest­ment op­tions, nim­ble smaller firms with a tech edge are vy­ing to lure con­sumers.

Some ma­jor play­ers are now seek­ing to team up with these po­ten­tial ri­vals as a short cut to in­no­va­tion. "I think that what you're find­ing with a lot of these tra­di­tional in­sti­tu­tions is the recog­ni­tion that their cus­tomers and con­sumers are all de­mand­ing more from them," Adrian Seto, di­rec­tor of Fin­Tech in­no­va­tion at con­sul­tancy Ac­cen­ture, said.

"They are look­ing for bet­ter ser­vice, quicker ser­vice, bet­ter user ex­pe­ri­ence." Bank­ing is, Seto said, "be­com­ing a more com­pet­i­tive mar­ket­place, and all of this is driven by tech­nol­ogy." Some lead­ing fi­nan­cial in­sti­tu­tions have launched their own pro­grammes to sup­port fledg­ling start-ups as a way to tap in to new ideas. "They have recog­nised that in­stead of push­ing back, they should em­brace the change and work with these start-ups," says Seto.

Ac­cen­ture runs the Fin­Tech In­no­va­tion Lab, which sees seven start-ups from across the Asi­aPa­cific re­gion come to Hong Kong for a 12week pro­gramme, at the end of which they will present their con­cepts to in­vestors and fi­nance ex­ec­u­tives.

US fi­nance gi­ant Citibank and Sin­ga­pore­based bank DBS have also launched sim­i­lar pro­grammes in Hong Kong.

Hong Kong's sta­tus as a fi­nance hub and its con­nec­tions to the Chi­nese mar­ket have led to an ex­plo­sion of Fin­Tech firms, ac­cord­ing to Janos Bar­beris, founder of Fin­Tech HK, an online plat­form which looks to help such star­tups. "The level of ac­tiv­ity in Hong Kong has been in­cred­i­ble and it is due to con­tinue, driven by the large mar­ket op­por­tu­nity within Asia," he says. There are around 50 Fin­Tech start-ups in Hong Kong with five or more new com­pa­nies emerg­ing each year, he adds.

"Com­pared to Sin­ga­pore, Hong Kong's Fin­Tech de­vel­op­ment is much more driven from the ground up, let­ting the mar­ket de­cide the best way for­ward," says Bar­beris, who adds that the in­creas­ing num­ber of fi­nance pro­fes­sion­als look­ing for a new di­rec­tion is also a boost.

Start-up founders have of­ten bro­ken away from a cor­po­rate back­ground. "They are will­ing to take the risk and say: ' I'm go­ing to leave my job and build a busi­ness be­cause the re­turn will be bet­ter'," says Bar­beris.

One such firm is De­mys­tData, which launched four years ago af­ter founders Mark Hookey and Oliver Meyrick met at a start-up event in Hong Kong.

The com­pany quickly analy­ses large sets of data to help fi­nan­cial in­sti­tu­tions make bet­ter de­ci­sions on loans and other forms of credit, and has since se­cured sev­eral high-pro­file clients, in­clud­ing Citibank.

But while some start-ups are keen to team up with tra­di­tional fi­nance houses, oth­ers want to pave their own way.

"One of the du­ties of small, in­no­va­tive firms is to pres­sure big­ger in­sti­tu­tions to get bet­ter quicker and faster, and also to re­duce fees and re­duce what they charge cus­tomers," says Mathias Helleu, ex­ec­u­tive chair­man of Hong Kong-based 8 Se­cu­ri­ties.

Launched in 2011, Helleu's firm helps smaller in­vestors choose be­tween in­vest­ments from around the world - typ­i­cally only within reach of large in­vest­ment houses with global oper­a­tions - which 8 Se­cu­ri­ties says of­fers an af­ford­able al­ter­na­tive to ser­vices of­fered by banks. "In that par­tic­u­lar seg­ment, the fees charged by the banks are very, very, very, high, and I think the only way for them to cool down is to have pres­sure," says Helleu.

As con­sumers de­mand im­proved ease of use, trans­parency and au­to­ma­tion, banks will need to work with the new kids on the block, says Fin­Tech HK's Bar­beris.

"Fi­nance has been us­ing tech­nol­ogy since the 1950s and has been one of the in­dus­tries with the largest IT spend­ing," he says. "How­ever, to­day, tech­nol­ogy is de­vel­oped by start-ups and used di­rectly through them. "Banks will adapt ... be­cause the stakes are too high if they don't."

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