A port city that transformed into a major global hub, Hong Kong has a long history that has solidified its status as one of the most important financial centres in the world.
Since China took Hong Kong back from the British during the 1997 handover, the uniqueness of the Hong Kong Special Administrative Region (SAR) meant that under the ‘one country two systems’ policy, it continues to thrive thanks to its own strengths.
Hong Kong remains a global leader to this day and increasingly offers a link to Mainland China for the rest of the world. As a result, Hong Kong SAR is the world’s largest offshore yuan financing centre.
It is no secret that Hong Kong is a financial services leader. It is one of the world’s most active and liquid securities markets, while 78 of the world’s top 100 banks call Hong Kong home. Hong Kong’s financial services sector accounts for 21.3 per cent of the city’s gross domestic product (GDP) and boasts 163 licensed banks, 164 authorised insurers, and eight virtual banks.
Some of the world’s largest banks and financial institutions originate from the city, including HSBC (its acronym, after all, stands for ‘Hong Kong Shanghai Banking Corporation’). In 2022, one-third of Asia’s international sustainable bond issuances were arranged in Hong Kong (Asia’s leading city in this category).
According to the Global Financial Centres Index, Hong Kong remains the fourth largest financial centre in the world – behind Singapore, London and New York City.
The Hong Kong Science and Technology Park
In 2023, an estimated 800 fintechs called Hong Kong home, 180 more than five years prior. Today, it is home to closer to 1,000 fintechs and startups. Some of those fintechs headquartered in Hong Kong include the likes of virtual bank WeLab Bank, insurtech Bowtie and digital-only bank ZA Bank.
HKMA’s efforts
The government has been supportive and active throughout the years. For instance, the Fintech Facilitation Office (FFO) was established in 2016 by the Hong Kong Monetary Authority (HKMA), which facilitates the development of Hong Kong’s fintech ecosystem and promotes Hong Kong as a fintech hub in Asia.
In June 2021, HKMA introduced the ‘Fintech 2025‘ strategy, facilitating growth, as well as enhancing the digital transformation of the financial industry in Hong Kong. The strategy also looks to encourage co-creation within the fintech ecosystem, as well as expand the fintech workforce in the region.
HKMA has also been responsible for a number of other initiatives:
Along with the Bank of Thailand, HKMA launched the ‘Faster Payment System x PromptPay’ Link for cross-border QR payment in December 2023. Both central banks are collaborating on the Inthanon Project, working alongside commercial banks to explore the potential of Distributed Ledger Technology in developing a wholesale central bank digital currency (CBDC).
In November 2023, the People’s Bank of China (PBoC), HKMA and the Monetary Authority of Macao signed a Memorandum of Understanding, to bolster fintech cooperation in the Guangdong-Hong Kong-Macao Greater Bay Area. The initiative provides a one-stop platform to facilitate pilot testing of cross-boundary fintech initiatives within the three regions. This follows a Guangdong-Hong Kong one-stop fintech pilot testing platform the year prior between PBoC and HKMA.
Completion of the first phase of the e-HKD Pilot Programme in October 2023 by studying domestic retail use cases in various areas such as programmable payments, offline payments and tokenised deposits. Just this March, the programme’s second phase commenced, with plans to further explore new use cases of e-HKD.
Project Ensemble, a new wholesale central bank digital currency project to support the development of the tokenisation market in Hong Kong, kicked off this year in March.
Other developments in Hong Kong in 2024
In June, the Financial Service and the Treasury Bureau (FSTA) launched its ‘Green and Sustainable Fintech Proof-of-Concept Funding Support Scheme’. The scheme involves funding of HK$10 million ($1.23million) and aims to provide early-stage funding support for green fintech solutions, helping aid their commercialisation, thereby with the intention to foster new fintech initiatives.
Despite Hong Kong having some of the strictest COVID-19 restrictions in the world, lasting until last year, the SAR has been resilient and proactive in maintaining its global status. As in the rest of the world, the pandemic saw this city further digitalise, particularly in the banking and financial services sectors with artificial intelligence (AI) and data capabilities in key focus areas such as chatbots, robo-advisers and automation with robotic process automation (RPA). Know-your-customer (KYC) and biometric facial recognition also experienced significant advancement.
Other aspects of the strength of fintech include the city hosting a major fintech conference – Hong Kong Fintech Week. Last year, the show, hosted by the FSTB and InvestHK, attracted over 35,000 attendees in person and over five million views online.
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