Comparative Guides

Welcome to Mondaq Comparative Guides - your comparative global Q&A guide.

Our Comparative Guides provide an overview of some of the key points of law and practice and allow you to compare regulatory environments and laws across multiple jurisdictions.

Start by selecting your Topic of interest below. Then choose your Regions and finally refine the exact Subjects you are seeking clarity on to view detailed analysis provided by our carefully selected internationally recognised experts.

4. Results: Answers
Fintech market
Which sub-sectors of the fintech industry have become most embedded in your jurisdiction?
Hong Kong

Answer ... Insurance, wealth management and payment systems are the highest-profile fintech sub-sectors that have developed in Hong Kong over the past decade.

Hong Kong is home to at least eight unicorn companies (start-ups valued at US$1 billion), including:

  • Airwallex, a cross-border payment service provider;
  • TNG, a fintech company;
  • Welab, an online lending platform;
  • Lalamove and GoGoVan, both in logistics;
  • Asia Medical, a medical company;
  • Klook, a travel product booking platform; and
  • SenseTime Group, an artificial intelligence company.

Following the crypto-boom of 2017, many blockchain companies have also set up shop in Hong Kong; although the development and application of relevant technologies remain to be seen. The next few years will therefore be critical for this sub-sector.

The Hong Kong government has also invested significantly in developing virtual banking practices. Eight initial licences have been granted in a bid to make Hong Kong the primary hub for this emerging industry.

For more information about this answer please contact: Dominic Wai from ONC Lawyers
What products and services are offered?
Hong Kong

Answer ... Currently, the most established products in the fintech space in Hong Kong are found in the insurance and wealth management sectors. Products such as digital non-life products have matured significantly over the past few years since they were first launched.

Payment services are also well established. For example, Octopus Card Limited (which can trace its lineage back to 1997) has become one of the longest-running stored value facility licence holders in Hong Kong’s history. Starting out by providing contactless card services for the city’s metro system, it has since evolved into a payment system that touches the lives of every single Hong Kong resident.

Thanks to its competitive business environment and advantageous tax exemptions for offshore companies, Hong Kong has become a major hub for technology start-ups and e-commerce businesses. Today, unicorn payment service providers active in Hong Kong include Stripe, Braintree, PayPal, PayMe, AliPay and FPS.

Given the government’s strong investment in virtual banking, it is also noteworthy that one of the conditions of the eight recently granted virtual banking licences is that live services commence within six months of the date of issuance. As this deadline quickly approaches, there is a good chance that new initiatives in this sector may jump start the industry.

For more information about this answer please contact: Dominic Wai from ONC Lawyers
How are fintech players generally structured?
Hong Kong

Answer ... Generally, fintech companies seek to establish themselves in Hong Kong due to the jurisdiction’s status as Asia’s sole Tier 1 financial centre. Accordingly, the main objective is reputation establishment.

Fintech start-ups in Hong Kong have the opportunity to work with long-established financial institutions in developing their products. In fact, a culture of cross-industry collaboration is long engrained in Hong Kong, in policy and regulation.

For example, the recent virtual banking endeavours (which aim to promote innovation, enhance the customer experience and increase financial inclusion) laid down requirements for partnerships between applicant technology companies and financial institutions.

For more information about this answer please contact: Dominic Wai from ONC Lawyers
How are they generally financed?
Hong Kong

Answer ... Hong Kong’s start-up ecosystem is vibrant. There are not only many government-supported programmes and incentives (eg, Cyberport, Science Park), but also numerous institutional investor corporations based in Hong Kong (eg, New World Development).

In terms of private investments, Hong Kong fintech companies reportedly raised a total of HK$8.61 billion from 2016 to 2018, and the jurisdiction was ranked third in Asia and seventh globally for fintech capital investment.

Hong Kong is also a hub for capital markets investment: in the first half of 2019, Hong Kong recorded a total of 84 new listings, which raised a total of HK$69.8 billion.

Hong Kong fintech companies also enjoy access to a number of government funding schemes, with entities such as Hong Kong Science and Technology Parks Corporation and Hong Kong Cyberport taking the lead on such endeavours.

For more information about this answer please contact: Dominic Wai from ONC Lawyers
How are they positioned within the broader financial services landscape?
Hong Kong

Answer ... Fintech companies in Hong Kong enjoy access to the full spectrum of the market, from virtual banks (aimed at bringing banking services to the masses) to sophisticated algorithm analysed trading (used by more sophisticated traders).

All in all, almost all sectors of the financial community are receptive to the increased use of tech in their day-to-day operations.

Hong Kong also happens to also be one of the most highly digitised financial centres in Asia. According to the Ernst and Young Global Fintech Adoption Index, the consumer fintech adoption rate has reached 67%. In short, fintech is well entrenched within the broader financial service landscape, with access to every stratum of the economy.

For more information about this answer please contact: Dominic Wai from ONC Lawyers
Do start-ups generally outsource back office functions and is there a developed market for them to access? What are the legal implications of outsourcing?
Hong Kong

Answer ... The start-up culture in Hong Kong is diverse. Depending on the specific make-up, there are start-ups that wish to conserve resources (which are less likely to put money into outsourcing); and start-ups that might wish to recognise the cost saving opportunities that outsourcing can provide.

The most critical issue that comes to mind when outsourcing is liability and adequate supervision.

In this regard, a specific analogy may be drawn to the requirements for virtual banks: while they are allowed to outsource certain functions of their operations to external vendors, adequate supervision and data protection measures must be put in place.

The issue of data security and integrity will be more relevant for fintech enterprises, given that much of their trade is in raw data. One of the greatest concerns is that unless sufficient safeguards are employed to protect such data, it may be easily accessible by wrongdoers.

For more information about this answer please contact: Dominic Wai from ONC Lawyers