Hong Kong Towards a Leading Global FinTech Hub

56 57 Business Environment Part I: Examination of Seven Fintech Hubs Tokyo: Leveraging Japan’s Robotics and IoT markets; Long-term Cryptoasset Development Plan Japan is recognized for its innovation and R&D capabilities with the world’s top IP protection, robust robotics development, and strong IoT market. The Japanese government uses its competitive strengths to establish a super-smart society to create growth potential for emerging technology clusters including robotics, AI, IoT, and cybersecurity. Society 5.0 167 is the Japan government’s vision that was proposed in its 5 th Science and Technology Basic Plan 168 as a future society to aspire to. Compared with other Asian hubs who also have plans for moving towards a smart city, Japan’s progress so far has shown to be the most promising. In addition, Japan has a leading position in the world’s most active crypto exchange market, with 11% of global trading volume for Bitcoin Trade Volume (BTC). As of March 2018, over 3.5 million individuals in Japan were trading cryptocurrencies. 169 A blockchain- based stock exchange in Osaka is planned by SBI Holdings and Sumitomo Mitsui Financial Group for 2022. 170 Japan’s leading position in cryptocurrency acceptance, regulation and legalization attracts overseas companies. In 2017, the largest bitcoin company in China – Huobi, launched an office in Tokyo. As of February 2021, there were 27 approved cryptocurrency exchanges operating in Japan, of which 23 were based in Tokyo. 171 Tokyo offers some tax incentives to the general industry, which can also benefit fintech firms. In late 2020, the Japanese government proposed 2021 tax reforms 172 that include (1) the establishment of tax incentives for investments in digital transformation; (2) revisions on R&D tax credits; and (3) revisions on taxation for foreign investors. These reforms are part of the initiative to promote Japan as a global financial center, and are expected to further enhance Tokyo’s attractiveness to fintech businesses. Shanghai: Large Domestic Market and Proactive Government to Unlock its Potential Based on data from different global indexes, it appears that Shanghai may need to do more to catch up with the other hubs. Being the largest city in China by population, Shanghai has tremendous business opportunities for both the domestic and overseas markets. Since 1992, the Shanghai economy has been achieving double-digit growth nearly every year. It is also the largest center for trade, finance, and technology industries and business activities in China, with trading volumes at the Shanghai Stock Exchange being some of the highest in the world. Today, over 370,000 financial professionals are in Shanghai, 173 and its financial market potential has attracted many MNCs and entrepreneurs from other cities in China to gather in Shanghai. As of July 2019, Shanghai already had over 1,000 multinational headquarters and R&D centers, which is the largest number of all cities in Mainland China. 174 167. Realizing Society 5.0. | https://www.japan.go.jp/abenomics/_userdata/abenomics/pdf/society_5.0.pdf 168. Japan’s 5th Science and Technology Basic Plan (2016-2020). | https://www.tillvaxtanalys.se/download/18.62dd 45451715a00666f169a1/1586366153339/Japans%20fem%C3%A5rsplan.pdf 169. Skalex.| Cryptocurrency in Japan: A Brief History. | https://www.skalex.io/crypto-japan/ 170. Nikkei Asia. | Japan's SBI and SMFG to set up digitalized securities exchange (Jan 2021). | https://asia.nikkei . com/Business/Markets/Japan-s-SBI-and-SMFG-to-set-up-digitalized-securities-exchange 171. Financial Services Agency of Japan. | List of licensed (registered) crypto-currency exchange service providers. | https://www.fsa.go.jp/menkyo/menkyoj/kasoutuka.pdf (In Japanese) 172. Liberal Democratic Party. | Reiwa 3rd year tax reform outline (Dec 2020). | https://www.jimin.jp/news/ policy/200955.html (In Japanese) 173. Think China. | Is Shanghai on track to becoming an international financial centre in 2020? (Feb 2020) | https:// www.thinkchina.sg/shanghai-track-becoming-international-financial-centre-2020 174. China Briefing. | Shanghai Moves to Attract Foreign Investment, Open Up China’s Financial Sector (Mar 2020). | https://www.china-briefing.com/news/shanghai-moves-attract-foreign-investment-open-chinas-financial-sector/ 175. EY. | Global Fintech Adoption Index 2019 (2019). | https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/ topics/banking-and-capital-markets/ey-global-fintech-adoption-index.pdf 176. KPMG. | 2020 China Leading Fintech 50 (2020). | https://home.kpmg/cn/en/home/campaigns/2021/01/china- fintech-50.html 177. HKUST Business School. | The Fintech Talent Development, Competency, and Manpower Study ( June 2020). | https://www.bm.ust.hk/en-us/media-resources/overview/publications/reports/issue: 2/ 178. Beauhust. | Top 50 Fintech Startups and Scaleups in the UK 2021 (Jan 2021). | https://www.beauhurst.com/ blog/fintech-startup-companies/ 179. Transferwise Ltd. | World, Meet Wise (Feb 2021). | https://wise.com/gb/blog/world-meet-wise 180. CBINSIGHTS. | The Complete List of Unicorn Companies (As at May 2021). | https://www.cbinsights.com/ research-unicorn-companies 181. CNBC. | Fintech firm Checkout.com crowned Europe’s top unicorn after tripling valuation to $15 billion (May 2021). | https://www.cnbc.com/2021/01/12/fintech-firm-checkoutcom-is-europes-top-unicorn-with-15b- valuation.html The Fintech adoption rate in China reached 87% 175 in 2019. Shanghai is consistently one of the top three cities with the most number of enterprises in the China Leading Fintech 50. 176 This is an annual list published by KPMG China that selects the top 50 Chinese fintech enterprises based on five core criteria including: (1) technology and data; (2) innovation and transformation; (3) popularization of financial services; (4) capital market recognition; and (5) industry development prospects. In January 2020, the Shanghai municipal government released a five-year fintech hub development plan. Overall, with a proactive policy and government support, as well as a large labor force in finance and huge market potential, it is expected that Shanghai will surpass some of its Asian counterparts soon, and be ranked at the top spots on different global indexes. Fintech Community and Networking Opportunities Partnership building is a key growth driver for the fintech industry. Partnerships between mature players and new entrants, between fintech and lifestyle industries or between competitors are common business strategies used by fintech companies. 177 Therefore, an extensive, resourceful, and relevant network is another important attribute of a hub’s business environment. The following focuses on the hubs’ local fintech communities and their roles in the global fintech community. The discussion covers: (1) the availability and accessibility of industry associations where fintech companies and startups can find assistance and support and where networking and collaboration begin to form; and (2) large-scale events and conferences that regularly take place to assess the availability of local, regional, and international networks and facilitation of insight exchange. In 2020, due to the pandemic, many events may have been affected, and online participation has been a common solution. The physical attendance figures before 2020 are used as the metric in the following section. London London had around 975 fintech companies as of 2020. 178 It has 11 unicorns: Checkout. com, Revolut, Blockchain.com, Wise (formerly known as Transferwise ), 179 Greensill, OakNorth, Monzo, Rapyd, Starling Bank, Zego and PPRO , 180 of which Checkout.com is currently the highest valued fintech unicorn in Europe and fourth globally, with a US$15bn valuation. 181 Other famous fintech unicorns include Revolut and Wise, two companies that created innovative products such as prepaid virtual cards and multi-currency accounts, respectively.