Financial technology (FinTech) investment is making its presence felt on the global investment scene. According to a report from the Hong Kong Internet Finance Council, a non-profit dedicated to developing the sector, the United States accounted for nearly 80 percent of the global total of $12.2 billion in FinTech investment in 2014, compared with Europe's 12 percent and Asia's 6 percent.

However, analysts are bullish on future prospects for FinTech in the Asia Pacific because the region has both the highest number of unbanked population and fastest growth of high-net-worth individuals (HNWIs).

According to FinTech HK, a local think tank that seeks to promote the SAR as a FinTech center, the Asia-Pacific region has 4.3 million HNWIs with a combined wealth of $14 trillion. At the same time, the region has an unbanked population of 1.2 billion. FinTech companies can hence satisfy the banking services demands of both the poor and the HNWIs.

Second, physical banking infrastructure in the Asia Pacific is less dense than in Europe, while telecommunication networks are set to boom in this region. This mismatch between physical banking infrastructure and telecommunication networks makes the introduction of digital banking particularly likely in the Asia Pacific.

Traditional banks are faced with a more onerous regulatory framework that diverts their resources toward compliance, instead of delivering innovative and tailor-made solutions. FinTech companies can therefore leverage on the opportunity arising from public demand and the incapacity of banks to adapt quickly to enter the market.

However, despite the bright prospects, Hong Kong must contend with three different levels of fierce competition -domestically from Shanghai and Shenzhen, regionally from Singapore and Sydney, and internationally from London and New York. New York and London are the world's major FinTech centers and capture over 80 percent of global investments and deals in the sector, while regional players such as Irish capital Dublin, Singapore and Sydney have already beefed up efforts to promote FinTech business.

Sydney recently commissioned a report to evaluate the steps needed to become a FinTech hub while Dublin has officially announced it will host the FinTech Innovation Lab in partnership with multinational consultants Accenture and the government agency Enterprise Ireland.

Singapore, Hong Kong's regional archrival, has extended its state-owned venture capital fund to support European Union tech startups. The city-state is widely perceived as being ahead of Hong Kong in terms of government backing for the sector. In terms of both business potential and competition aspects, it is clear that FinTech stakeholders in Hong Kong must increase collaboration to boost development.

oswald@chinadailyhk.com

(HK Edition 10/23/2015 page9)