Returning to China in 1999, Macau became a Special Administrative Region (SAR) under the ‘one country two systems’ policy. Since then it has established itself as a gambling powerhouse, but how else has the country’s financial ecosystem evolved?
Having originally been owned by China, the country was rented and administrated by Portugal before the European country acquired perpetual colonial rights in the Sino-Portuguese Treaty of Peking in 1887. However, just before the turn of the 21st century, Macau was handed back over to China. Now the country is much like Hong Kong, in that it operates under its own autonomy while being a part of China.
In 2002, Macau relaxed its rules on gambling and by 2006, the country had overtaken Las Vegas to become the largest gambling destination in the world. With it supporting the only city in China where gambling is legal, much of its clientele comes from the mainland. As a result, Macau has come to rely on gambling as a major source of revenue. Pre-covid, gambling accounted over at least 50 per cent of Macau SAR’s total gross domestic product (GDP) and accounted for over one-third of total employment.
However, as a result of covid, many organisations suffered as China had very strict restrictions during the pandemic, meaning that Macau’s tourism sector felt the knock-on effects.
Nonetheless, the gambling sector has been so impactful, that the country’s GDP per capita was valued at over $66,000 last year according to the World Bank. However, the country wants to diversify its economy.
Diversifying the economy
When China reopened, economic development and rebooting the tourism industry were top priorities. This sentiment was shared in Macau. Consequently, the SAR launched its plans for diversifying the economy based on the ‘1+4’ model in 2023.
According to the Government of Macau’s website: “The ‘1+4’ economic development and diversification strategy and its implementation aims to enrich Macao’s function as ‘One Centre’ for integrated tourism and leisure, while facilitating the development of four nascent industries, namely: the ‘Big Health’ industry; modern financial services; high and new technology; and convention and exhibition, sports, and the commercial and trade industries.”
Macau’s other initiatives are actively tied to Mainland China’s development plans and strategies. For example, the Belt and Road Initiative (BRI) and the ongoing development of the Guangdong-Hong Kong-Macau Greater Bay Area (GBA).
The GBA can particularly help the financial services and fintech sectors, by fostering collaboration in fields such as cross-border wealth management, digital payment systems and blockchain applications.
Support from the government
The Macau government is also playing its part in advancing the country’s financial ecosystem, looking to emulate the success of its neighbouring SAR Hong Kong.
For instance, Macau SAR’s Legislative Assembly approved a Financial System Act in August 2023 (implemented in November 2023), which permitted the registration of banks with restricted operations. It also expanded the usage of financial technologies. Additionally, it aims to build a more intricate e-commerce and digital payments ecosystem, replacing the previous law which was 30 years old.
Another way in which the Macau government is adjusting its role in the financial ecosystem, is in its active combat against illegal financial players, which is much stronger than it was in the past.
Access to finance
According to the Statistics and Census Service (DSEC), 95.8 per cent of all households had internet access, 97.9 per cent used mobile networks and 91.2 per cent used home broadband.
Connectivity is one-way access to finance is being improved in Macau. The MPay cross-border payment service, launched by Macau Pass (‘MPass’) in August last year, expanded its coverage to over fifty countries overseas, enabling the MPay wallet within Chinese mainland and Hong Kong, to be used globally for consumption.
Financial preferences
Macau’s defacto central bank, the Autoridade Monetária de Macau (Monetary Authority of Macau) continues to promote the popularisation of cashless payment systems and coordinate with financial institutions to launch Simple Pay. This service can connect all local mobile payment terminals and covers 90 per cent of the shops in Macau.
Simple Pay drove mobile payment transactions amounting to HK$25.3billion last year ($3.24billion). To note, electronic payments in Macau surged in the last four years with an increase of more than 1,723 per cent this year with total transactions amounting to 300.9million. This is particularly impactful when you consider Macau’s population is only around 700,000 people.
Payment methods that are popular in Macau are unsurprisingly similar to its neighbours Hong Kong and China. They include:
WeChat Pay
Alipay
UnionPay International
BoCPay (from Bank of China)
Octopus
MPass
FPS
Various catalysts exist in the financial services and fintech space in Macau. Besides the Monetary Authority of Macao they include:
Macao Association of Banks
Macao Insurers’ Association
Macao Insurance Agents and Brokers Association
Macau Institute of Financial Services (IFS)
Banks in the country include the Macau Development Bank and Banco Nacional Ultramarino (BNC).
With financial services as a whole, according to the Macau government: “The financial industry in Macao has stable assets, robust capital adequacy ratio, sufficient liquidity and good profitability, and an increasingly high degree of internationalisation.”
Emerging fintech sectors
Partnerships have emerged as a key accelerator in Macau. For example, global cryptocurrency exchange Binance joined forces with the Macau Judiciary Police to launch a joint anti-scam campaign to increase risk awareness and reduce the risk of fraud in the digital space.
As early as 2021, the Macau government began exploring the idea of a digital currency (like Hong Kong, Macau as a SAR issues its own currency called the pataca). Interestingly, as Hong Kong is further ahead with its digital Hong Kong dollar (e-HKD), many of Macau’s casinos actually deal in the Hong Kong dollar.
The post Changing Tides in Macau: A Turn Away From Gambling to a More Diverse Financial Ecosystem appeared first on The Fintech Times.
