The vast majority (82%) of financial institutions in Hong Kong intend to form partnerships with FinTech companies in the next 3-5 years, rather than radically re-invent themselves, according to PwC’s 2nd Global FinTech Survey.
Only 51% of Hong Kong institutions have adopted a ‘disruptive’ strategy, compared to 56% globally and 59% in China.
“The survey respondents in Hong Kong are showing a very pragmatic response to the challenge thrown down by FinTech start-ups,” says Matthew Phillips, Financial Services leader for PwC China and Hong Kong.
“The incumbents are looking for a win-win. They can import culture change through partnership, and the start-ups can more easily gain penetration. We are excited about the momentum that is building in the Fintech space and see significant potential for Hong Kong to play a regional role.”
However, the survey finds that there are some issues that can dampen enthusiasm for these partnerships. Sixty-percent of Hong Kong respondents are concerned by the regulatory uncertainty that could arise (compared to a global average of 54%).
More starkly, 70% of Hong Kong respondents believe that FinTech firms can increase information security and privacy threats – against 42% of respondents in China.
The race for talent could also be an issue: 87% of Hong Kong respondents say it is difficult to hire and retain people who can innovate. This is a higher rate than in China (71%), Singapore (79%) or globally (80%).
“While there are challenges, the survey highlights a number of exciting opportunities in the FinTech sector in Hong Kong,” says Henri Arslanian, FinTech & RegTech lead for PwC China and Hong Kong.
“Respondents here show strong interest in Robotic Process Automation and other RegTech solutions that can greatly reduce the cost of compliance. This presents a unique opportunity for Hong Kong to position itself as a relevant hub for such services that can then be successfully exported regionally, or even globally.”
Potential applications for Blockchain
While looking to FinTech generally as a solution to the growing regulatory and compliance burden, Hong Kong respondents see several potential applications for Blockchain.
The main uses are for fund transfers and payments, but respondents also see a lot of potential for Blockchain in digital identity management: 54% cite this as a potential use for the technology, against a global average of 46%.
“Hong Kong’s financial services sector boasts a number of large incumbents who can partner with and learn from start-ups,” says Phillips. “The territory’s regulatory environment and market size are favourable to such partnerships. If Hong Kong can nurture the technology skills it needs then it can gain a lead. There are opportunities to deploy these solutions not only into China but across the region.”