Hong Kong Towards a Leading Global FinTech Hub

12 13 Introduction Introduction EUROPE Region Ranking Overall Ranking Movement Country 1 2 ±0 United Kingdom 2 5 ±0 Switzerland 3 7 ±0 Sweden 4 8 ▼ -2 The Netherlands 5 9 ▲ 2 Germany 6 10 ▼ -6 Lithuania 7 11 ▼ -1 Estonia 8 13 ▲ 1 Finland 9 16 ▼ -3 Spain 10 18 ▼ -1 Ireland 11 19 ▲ 13 Russia 12 20 ±0 Denmark 13 22 ▼ -6 France 14 24 ▲ 3 Norway 15 25 ▼ -2 Luxembourg 16 27 ▼ -2 Austria 17 29 ▼ -3 Belgium 18 33 ▲ 16 Latvia 19 34 ▼ -6 Portugal 20 36 ▼ -7 Poland 21 37 ▼ -13 Italy 22 38 ▲ 10 Cyprus 23 39 ▲ 17 Bulgaria 24 40 ▲ 4 Turkey 25 41 ▼ -10 Czechia 26 42 ▼ -9 Malta 27 48 ▼ -5 Ukraine 28 50 ▲ 4 Slovenia 29 51 ▲ 2 Hungary 30 52 new Liechtenstein 31 54 ▲ 3 Romania 32 56 new Croatia 33 58 ▼ -17 Greece 34 60 new Slovakia 35 63 new Georgia 36 74 ▼ -15 Belarus LATIN AMERICA & CARIBBEAN Region Ranking Overall Ranking Movement Country 1 14 ▲ 5 Brazil 2 17 ▲ 46 Uruguay 3 32 ▼ -2 Mexico 4 45 ▼ -5 Colombia 5 47 ▼ -12 Chile 6 49 ▼ -11 Argentina 7 62 ▼ -7 Peru 8 67 new Belize 9 69 new Ecuador 10 82 new Venezuela NORTH AMERICA Region Ranking Overall Ranking Movement Country 1 1 ± 0 United States 2 12 ▼ -3 Canada MIDDLE EAST & AFRICA Region Ranking Overall Ranking Movement Country 1 3 ▲ 9 Israel 2 28 ▲ 6 United Arab Emirates 3 31 ▲ 11 Kenya 4 44 ▼ -7 South Africa 5 57 ▼ -5 Nigeria 6 59 new Seychelles 7 61 new Rwanda 8 64 ±0 Uganda 9 65 new Saudi Arabia 10 68 new Tunisia 11 71 ▼ -13 Ghana 12 72 ▼ -12 Egypt 13 73 ▼ -8 Lebanon 14 75 new Jordan 15 76 new Zimbabwe 16 79 new Somalia 17 80 new Cameroon 18 81 new Iran 19 83 new Ethiopia ASIA PACIFIC Region Ranking Overall Ranking Movement Country 1 4 ▼ -1 Singapore 2 6 ▲ 2 Australia 3 15 ▲ 6 China 4 21 ▲ 1 Japan 5 23 ▼ -8 India 6 26 ▼ -8 South Korea 7 30 ▲ 15 New Zealand 8 35 ▲ 15 Taiwan 9 43 ▲ 4 Indonesia 10 46 ▼ -10 Malaysia 11 53 ▼ -7 Philippines 12 55 ▼ -16 Thailand 13 66 new Kazakhstan 14 70 ▼ -19 Vietnam 15 77 ▼ -15 Pakistan 16 78 ▼ -17 Bangladesh Introduction Fintech, an amalgam of the words “finance” and “technology”, generally refers to financial services delivered through and enhanced by the use of technology. In recent years, its fast-paced growth around the world, facilitation of easily accessible, around-the-clock, and lower-cost financial services for customers, and a global market value worth billions in US dollars, fintech has contributed greatly to the financial services industry. Fintech is the new industrial revolution for banking and financial services. With appropriate support from the government and regulators, fintech can be a strong leverage for strengthening the economy – one reason governments around the world have already dedicated significant effort and resources to develop fintech. Source: https://findexable.com/wp-content/ uploads/2021/06/Global-Fintech-Rankings- 2021-v1.2_30_June.pdf Regional Rankings [ Exhibit 1 ] : Regional Rankings of Global Fintech Index 2021 by Findexable Many governments have been devoting substantial resources into fintech development. Most of the top ranking nations have retained their position in both regional and overall rankings, indicating their continued effort to develop fintech capabilities. Among listed nations, 17 out of 83 have entered the ranking for the first time, which demonstrates the strong presences new entrants have made in fintech in the past year. The Urgent Need to Further Strengthen Fintech in Hong Kong Hong Kong cannot afford to miss out on opportunities to grow its fintech industry because the financial services industry is one of its most important economic pillars. Failing to keep up with the world’s fintech technology developments would negatively affect Hong Kong’s overall competitiveness. Hong Kong is a well-established international financial center. As of 2019, the financial services sector accounted for more than 21% of Hong Kong’s GDP and provided over 270,000 jobs. 7 As of December 2020, Hong Kong’s stock market was the third largest in Asia and the fifth largest in the world, with more than 2,500 listed companies and a total market capitalization reaching US$6tn. 8 The latest Global Financial Centres Index (GFCI) released in March 2021 9 ranked Hong Kong at fourth, ahead of Singapore, Tokyo, Zurich, and San Francisco, but behind New York, London, and Shanghai. Hong Kong’s financial services industry has long recognized the importance of fintech. In recent years, a multitude of fintech startups have emerged with the number of fintech startups increasing from 86 in 2015 to over 600 in 2019. 10, 11 Such rapid growth has revolutionized the industry and given traditional financial service providers new opportunities to enhance their offerings. Eighty-six percent of banks have already adopted or have plans to adopt fintech, 12 as they recognize it is not only crucial to their business operation, but has become fundamental to the financial industry. Innovative fintech products and services such as: (1) artificial intelligence (AI) chatbots to improve customer experience; (2) blockchain to increase the security of financial transactions; and (3) big data to help banks better understand their customers and the market have greatly enhanced financial services and increased the capabilities of financial institutions. 7. HKTDC Research. | Financial Services Industry in Hong Kong (Feb 2021). | https://research.hktdc.com/en/article/ MzEzOTI4MDY3 8. HKTDC Research. | Financial Services Industry in Hong Kong (Feb 2021). | https://research.hktdc.com/en/article/ MzEzOTI4MDY3 9. Z/Yen and the China Development Institute (CDI). | The Global Financial Centres Index 29 (Mar 2021). | https:// www.longfinance.net/media/documents/GFCI_29_Full_Report_2021.03.17_v1.1.pdf 10. Financial Services and the Treasury Bureau. | Report of the Steering Group on Financial Technologies. (Feb 2016). | https://www.fstb.gov.hk/fsb/en/publication/report/docs/Fintech_Report_for%20publication_e.pdf 11. InvestHK. | Annual report 2019. Hong Kong: A diversified business hub. | https://www.investhk.gov.hk/sites/ default/files/InvestHK_Annual%20Report%202019.pdf 12. Hong Kong Academy of Finance. | Fintech Adoption and Innovation in the Hong Kong Banking Industry. (May 2020). | https://www.aof.org.hk/docs/default-source/hkimr/applied-research-report/fintechrep.pdf [ Exhibit 2 ] : Implementation of Fintech Solutions for Continuous Growth in the Financial Services Industry Fintech solutions Financial services industry Consumer market e.g. online banking, mobile payment, AI chatbot, alternative finance and investment, etc Market adoption and consumers' feedback digital footprint and data Market adoption Through implementing fintech solutions, banks and financial institutions are able to collect substantial amounts of data from their customers. This increased understanding of customer behavior through big data analysis and other cutting-edge fintech solutions enables them to make more effective and accurate business decisions. By continuing to enhance fintech solutions through ongoing collection of market feedback and data, they could achieve a higher fintech adoption rate, in turn driving growth in the fintech ecosystem and benefitting the financial services industry.