A variety of regulatory and financial issues are beginning to show in the Hong Kong fintech sector, which experts warn is beginning to fall apart.
Hong Kong’s lack of appropriate regulatory framework in the financial services industry is beginning to undermine its competitiveness with other, more advanced Asian fintech realms including China and Singapore.
According to a report from KPMG, fintech businesses in mainland China are among the strongest, not only in the Asia-Pacific market, but on an international scale.
“The Chinese government allows fintech start-ups to test their models in the market,” said Simmons and Simmons counsel Xun Yang.
“When their business grows stronger, the government will give their support and help them to follow the rules.”
Simmons and Simmons regulation specialist Ian Wood said that Hong Kong is now “a little behind” on fintech development, with the government unable to give the non-traditional finances the regulatory and financial support needed to keep up.
“The regulatory regime in Hong Kong is reasonably complex and it can be difficult to determine which regulatory regime applies to fintech service,” said Wood.
“Coupled with high compliance costs, this can deter entrepreneurs from entering the market.”
Wood identified both Britain and Singapore as models for Hong Kong to work towards, with the regulatory sandbox policies in both countries allowing innovative fintech products and services to be tested and rolled out in a controlled manner.
“I think we’re going to see more regulatory sandboxes,” he said.
“This idea of proportionate regulation is very key to developing this industry.”