Tax benefits, government help and easy access to regional markets led Joe Seunghyun Cho to choose Singapore as the headquarters for his six financial technology (fintech) companies, rather than base them in the rival hub of Hong Kong or his native South Korea.
“We are quite impressed by government agencies here,” said Cho, whose Marvelstone Group is developing a mobile-payments platform and invests in other fintech firms.
Singaporean authorities introduced him to tax advantages and connected his company to potential partners.
Many fintech companies are making similar choices, adding a new dimension to the decades-old tussle between Singapore and Hong Kong for the position as Asia’s premier financial center. With banks’ profits under pressure from stricter global regulations and increasing compliance costs, it is a battle either city can ill afford to lose.
Interviews with fintech entrepreneurs and business consultants show that while Hong Kong is making strides to catch up, Singapore has the lead — in part because its government was quicker in recognizing the industry’s potential. In a February study commissioned by the UK government, Ernst & Young LLP ranked the Southeast Asian country fourth among global fintech hubs, while Hong Kong came seventh.
Singapore was the “preferred gateway” into Asia, the report said, highlighting its “increasingly progressive regulatory regime.”
“Financial services is an important contributor to economic growth and jobs in these cities,” said Mohit Mehrotra, Deloitte LLP’s strategy consulting leader for Southeast Asia. “The industry is under lot of pressure to maintain its margin and growth. The key is to build up players that can supply innovative technology solutions to the financial services industry and support the growth of the ecosystem.”
Companies and investors poured US$10.5 billion into fintech in the Asia-Pacific region in the first nine months, about US$2 billion more than in the Europe and the US combined, according to an analysis by Accenture PLC based on CB Insights data. The bulk of that money went to mainland China.
The gap between Hong Kong and Singapore was on display last month when they hosted their own inaugural fintech conferences within a week of each other.
The Singapore Fintech Festival drew more than 11,000 attendees and featured blockchain cheerleader Blythe Masters, ex-Standard Chartered PLC CEO Peter Sands and former Deutsche Bank AG head Anshu Jain as speakers.
Hong Kong’s event the previous week drew less than a quarter of that number of participants.
“Singapore is extremely well-positioned to back a hub of fintech activities that represents an avenue into the broader Asia markets,” Masters, who once ran JPMorgan Chase & Co’s commodities business, said in an interview on the sidelines of the Singapore meet.
For South African-born Shailesh Naik, picking Singapore over Hong Kong as the base for his mobile-payments technology firm MatchMove Pay Pte came down to the supply of highly skilled professionals, access to regional markets and the regulatory environment.
The Singaporean government’s focus on startups and fintech provides “gravity and momentum for career paths,” he said.
What is more, it is “easier to navigate in Singapore and nearby countries due to the use of English in business. This is a big point compared to Hong Kong,” he said.
Founded in 2009, MatchMove has expanded into India, Vietnam, Indonesia, the Philippines and Thailand, and now has 160 workers. Credit Saison Co, Japan’s third-largest consumer finance company by value, bought a stake in the firm in January last year.
For Hong Kong, its traditional role as the financial gateway to mainland China has proved a mixed blessing. That is because China, the home to Ant Financial Services Group (螞蟻金服), Lujiazui International Financial Asset Exchange (陸家嘴國際金融資產交易市場) and other homegrown giants, already has a booming fintech industry. Almost 90 percent of fintech investment in Asia-Pacific this year bypassed both Hong Kong and Singapore and went directly into China, according to the Accenture study.
Undeterred, Hong Kong is moving to catch up. The Hong Kong Monetary Authority (HKMA) unveiled a Fintech Innovation Hub in September that seeks to bring banks, startups and central bank representatives together to develop and trial fintech ideas. The HKMA also set up a “sandbox” that allows companies to test their innovations in a loosely regulated environment before releasing them publicly — three months after Singapore proposed such a structure.
Hong Kong’s history as a mammoth fundraising center could allow the government to take a more hands-off approach than Singapore in bankrolling startups. The US$369 million of investment into fintech in the territory from the end of 2013 through Sept. 30 was almost triple Singapore’s haul, according to Accenture’s figures.
“Hong Kong is a highly open market with strong legislation but little governmental intervention,” Albert Wong (黃克強), CEO of the Hong Kong Science and Technology Parks Corp (香港科技園), which operates research facilities for the government, said in an e-mailed reply to questions. “Therefore the development of fintech will be mainly, just as other market development in this city, be driven by market force.”
Still, Wong said startups in Hong Kong need better support in terms of seed capital and early-stage funding. It also needs to take steps to improve its talent pool in technology and engineering, he said.
The Ernst & Young study ranked Hong Kong higher than Singapore for availability of capital, but put Singapore ahead in terms of talent and government policy.
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