Smarter Digital City: Advancing Hong Kong’s FinTech Ecosystem
This presentation reviews the FinTech landscape in Hong Kong, examining the various challenges, priorities, and technology use of Hong Kong FinTechs across product innovation, sales & marketing, and management & operations. In addition, the report also evaluates the availability of talent and funding for FinTechs in Hong Kong, and the state of policymaking.
Benjamin Quinlan, Jeanny Ang, and Eashan Trehan
August 18, 2022
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With growing consumer and institutional adoption, backed by soaring investments from banks and venture capitalists (‘VCs’), FinTech carries immense potential to supercharge the biggest sector of Hong Kong’s economy: financial services (‘FS’) which contributes to a quarter of the city’s gross domestic product (‘GDP’).
Product innovation is the most important growth driver for local FinTechs
Establishing product market fit is the most important yet most challenging factor facing FinTechs. Early-stage companies also struggle with market insights, product launches, and deployment & integration of their solutions.
To achieve optimal product market fit, more mature FinTechs are making informed decisions in safe testing environments, enabled via regulatory sandboxes, A/B testing, mockups / wireframing tools, and focus groups.
Technology plays a crucial role in scaling product innovation efforts, with at least 50% of FinTechs find application programming interfaces (‘APIs’), data analytics and visualisation, and artificial intelligence (‘AI’) / machine learning (‘ML’) tools to be important. These solutions are also helping FinTechs enhance product features, shorten the time-to-market, and boost revenues.
Local FinTechs view Sales & Marketing as their most challenging business pillar
Customer acquisition, brand awareness, and sales conversion are the most essential focus areas for Hong Kong FinTechs, with early-stage FinTechs in need of sharpening their focus on customer identification much earlier on.
Over 75% of FinTechs express digital marketing has been critical for their sales and marketing efforts, particularly search engine optimisation (‘SEO’) for late-stage companies and influencer marketing for early-stage companies.
Beyond brand building, many mature FinTechs, particularly those in the B2B space, are also utilising customer relationship management (‘CRM’) software to generate and convert leads, adding discipline to their sales process.
Management & Operations is key for ensuring business continuity
Information technology (‘IT’) is seen as both a very important and challenging factor for FinTechs in Hong Kong, with human resources (‘HR’) representing one of their biggest obstacles, especially for late-stage companies.
The use of collaboration tools and workflow automation / robotic process automation (‘RPA’) has yielded enhanced productivity for more than half of the firms, in addition to better data management for early-stage firms. In addition, cybersecurity is emerging as an area of growing importance.
Talent & funding remain pressing issues for local FinTechs
Given the intense competition for talent, many FinTechs are facing a talent crunch, which has been further exacerbated by the COVID-19 pandemic, especially in the field of product innovation where 64% of FinTechs are facing a severe talent gap.
75% of FinTechs find the lack of suitable professionals in the market as a key reason behind this talent crunch, as well as rising compensation costs, with expertise in sales and product design being the most sought after skill sets by local FinTechs.
To address their talent needs, over 60% of FinTechs are turning to talent networks and more than 40% using talent search services. Early-stage FinTechs are also seeking third-party support in the form of wage subsidies / grants, in an effort to offer more competitive remuneration packages to prospective employees.
Many local FinTechs also face a notable funding gap, 57% of FinTechs express their lack of access to suitable investors as the primary issue, which has prompted FinTechs to leverage investor networking opportunities, often facilitated as part of quasi-public agencies’ support programmes.
Regulatory hurdles are dampening Hong Kong’s relative competitiveness
FinTechs have expressed their desire to see greater policy support, including wage subsidies to alleviate the ongoing talent crunch, as well as financial subsidies and funding grants to narrow the funding gap.
These concerns are well-aligned with the Hong Kong Monetary Authority’s (“HKMA’s”) FinTech 2025 Strategy, with more than 70% of FinTechs view “Nurturing the ecosystem with funding and policies” and “Expanding the FinTech-savvy workforce” as critical to their immediate interests.
However, FinTechs see opportunities for improvement in Hong Kong’s regulatory landscape, as many find it costly, complex, and time-consuming.
60% of FinTechs share their concern over Hong Kong‘s international competitiveness as a FinTech hub, making it imperative for further policy reforms to be introduced in the coming years.
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