Hong Kong Towards a Leading Global FinTech Hub

30 31 Regulation Part I: Examination of Seven Fintech Hubs SSCCC meeting, the Shanghai Fintech Industry Alliance (SFIA) and Singapore Fintech Association (SFA) signed an agreement for talent exchange and joint collaborations to nurture the growth of fintech firms. · Switzerland is keen to expand its fintech ecosystem into Asia and forge closer ties with countries including Singapore and China through collaborations, co-innovation, and deal making. F10, a Zurich and Singapore-based startup hub, has been creating multiple opportunities for Switzerland to strengthen ties with the Asian markets. In late 2019, an MOU was established between F10 and Zheshang Venture Capital 57 to help attract Chinese investments into the Swiss fintech ecosystem and create opportunities for Chinese venture capital companies to cooperate with Swiss multinational companies in Zurich. F10 began offering its prototype-to-product program in Singapore in May 2020, while the FINMA and the MAS had already signed a cooperation agreement for fintech cooperation between the two countries in 2016. Additionally, FINMA has established bi- lateral agreements with different authorities worldwide including Hong Kong, Japan, and Singapore to promote Swiss fintech at a global level. · The UK signed the first Fintech Bridge agreement with Singapore in 2016, followed by similar agreements made with Australia, China, Hong Kong, and South Korea. 58 However, with the exception of the Singapore fintech bridge that has sent fintech entrepreneurs to London, the other bridges have been deemed ineffective for being under-utilized. 59 The efforts of regulators worldwide to upscale their fintech ecosystems from local to regional to international levels are obvious, but the question about the degree of actual effectiveness remains. Similar to their regulatory frameworks, the fintech hubs are still experimenting with different approaches. Time will reveal which types of inter-regulatory collaboration results in the most benefit. We expect each government to continue putting resources into enhancing their fintech capabilities and strong efforts into becoming one of the top performers on the global fintech stage. Regulatory Response and Innovation Initiatives Before governments adjust their regulatory system, they need to engage with the stakeholders to get feedback on how to best design policies and programs that effectively address the challenges and opportunities in fintech. Active engagement with stakeholders can be through institutional feedback mechanisms (e.g., public consultations, industry surveys) or ad-hoc opportunities (e.g., industry events, business meetings). It is important for regulators to not only regulate, but to also address industry needs to achieve a healthy environment for mutual understanding and growth. Fintech companies in the US have expressed their needs 60 for government collaboration to achieve the following: (1) ensure fintech solutions meet safety and soundness criteria; (2) ensure legal and regulatory frameworks are “digital-ready”; (3) reduce administrative obstacles and regulatory complexity; (4) endorse adoption of efficient digitization 57. Fintech Switzerland. | Collaboration between the Swiss and Chinese fintech ecosystems (Dec 2019). | https:// fintechnews.ch/fintech/collaboration-between-the-swiss-and-chinese-fintech-ecosystems/32009/ 58. Department for International Trade, The United Kingdom. | Building fintech bridges (Jan 2020). | https://www. great.gov.uk/international/content/about-uk/industries/financial-services/building-fintech-bridges/ 59. The Sydney Morning Herald. | Government plans fintech push to boost export sector (Nov 2019). | https://www. smh.com.au/business/small-business/government-plans-fintech-push-to-boost-export-sector-20191124- p53dix.html 60. FinTech Futures. | Fintech and the role of government (May 2017). | https://www.fintechfutures.com/2017/05/ fintech-and-the-role-of-government/ 61. HKUST Business School - Fintech Research Project. | The Fintech Talent Development, Competency, and Manpower Study (2020). | http://www.bm.usthk.cn/files/Content/FlippingBook/Report/The-Fintech-Talent- Development-Competency-and-Manpower-Study_v6/ 62. Digital Finance Forum. | Findings of the Digital Finance Forum Summer Survey of Fintech Founders (Aug 2020) | https://static1.squarespace.com/static/5c45e807f7939273c6da571d/t/5f23f3e085a31508c7eb5a de/1596191721812/DFF+-+Summer+Survey+2020.pdf 63. Monetary Authority of Singapore. | MAS Launched S$125 Million Package for Financial Institutions and FinTech Firms to Strengthen Long-Term Capabilities (Apr 2020). | https://www.mas.gov.sg/news/media-releases/2020/ mas-launches-package-for-fis-and-fintech-firms-to-strengthen-long-term-capabilities 64. Monetary Authority of Singapore. | MAS Launched S$125 Million Package for Financial Institutions and FinTech Firms to Strengthen Long-Term Capabilities (Apr 2020). | https://www.mas.gov.sg/news/media-releases/2020/ mas-launches-package-for-fis-and-fintech-firms-to-strengthen-long-term-capabilities 65. GOV.UK . | Billion pound support package for innovative firms hit by coronavirus (Apr 2020). | https://www.gov.uk/ government/news/billion-pound-support-package-for-innovative-firms-hit-by-coronavirus 66. Department of Financial Services. | Superintendent Lacewell Announced the Launch of New DFS Program to Drive Innovative Financial Services and Products for New Yorkers in the COVID-19 Era (Jun 2020). 67. American Fintech Council (AFC).| The Leading Voice in Fintech, Adds 10 New Members, Diversifying Fintech Industry Participation; Introduces the formation of a community advisory board consisting of leading consumer groups, CDFI's and academic leaders to help further promote responsible innovation and dialogue (Mar 2021). | https://www.prnewswire.com/news-releases/american-fintech-council-afc-the-leading-voice-in-fintech-adds- 10-new-members-diversifying-fintech-industry-participation-301242110.html solutions; and (5) offer coordinated government identity protocols. The need for regulator-industry collaboration echoes our observation in our previous study on fintech talent development 61 in Hong Kong where a strong consensus was found for an adaptive regulatory framework and more frequent engagement with regulators. According to a survey of UK fintech founders conducted by Digital Finance Forum in August 2020, two- thirds of the 100 surveyed felt their input was not being properly responded to and not being reflected in UK policy and regulatory circles. 62 From our research across the selected hubs, we would expect regulators to engage with fintech stakeholders and respond to industry needs more before they formulate regulatory policies. We note that regulators have shown resilience and responsiveness to ongoing challenges, including the COVID-19 pandemic that has heavily impacted fintech worldwide. Fintech hubs such as Singapore, New York and the UK have all provided support packages specific to the fintech sector with a variety of responses such as retraining programs and financial assistance. For example, the Singapore government created a support package 63 of S$125mn (US$94mn) that includes the setup of the Training Allowance Grant and the Digital Acceleration Grant to help fintech companies with workforce training, digitalization and operation resilience as well as gain access to digital platforms and tools. 64 The UK government focused on providing financial assistance to high-growth start-ups, and announced a £1.25bn (US$1.65bn) coronavirus package to protect start-ups that are driving innovation. The package also included a £500mn (US$662bn) Future Fund , which is a loan scheme for high-growth businesses including fintech. 65 At the same time, New York had a headstart and launched the DFS FastForward to encourage fintech innovation in the post-pandemic economic recovery. 66 Other financial centers such as Shanghai, Tokyo, San Francisco and Zurich provided support packages for a wider range of industries, which included fintech. The number and variety of regulatory initiatives implemented over recent years indicates regulators’ determination to strengthen collaboration with the industry. In March 2021, the American Fintech Council (AFC) expanded its membership to broaden its representation and diversity as “the leading unified voice of the fintech industry” for creating new practice standards and promoting policies” that advance responsible innovation and inclusivity within financial services”. 67 Singapore’s government has invited key fintech innovators and