Earlier this month, Dr. Vivian Balakrishnan, Minister-In-Charge of the Smart Nation Initiative announced new goals for the country’s Smart Nation 2020 plan.
Launched in 2014, the updated plans seek to make e-payments the norm and create a National Digital Identity that allows citizens and businesses to ‘transact digitally in a convenient and safe manner’. Additionally, it remains committed to creating experimental spaces for technological innovation both within and outside of the fintech world.
Singapore has pushed hard to carve out a fintech advantage in the region after emulating the UK’s regulatory sandbox in 2015. Since then, Singapore has come out king in Southeast Asia, holding 52% market share in fintech deals. It now sets its sights on becoming the top fintech market in APAC with its ambitious Smart Nation 2020 plan spearheading its efforts
An old rivalry over Asia’s fintech market heats up as Hong Kong and Singapore vie for investors
Officials must have been vindicated when in July 2017, Lufax, China’s second largest P2P lender, pulled a coup, choosing Singapore over Hong Kong for its first overseas expansion. Lufax’s CEO, Gregory Gibb, said that Singapore’s well-established regulatory structure for fintech and its sole regulatory body were factors in its choice.
Hong Kong’s fintech VC investment for 2017 remains comfortably larger at US$545 million to Singapore’s US$229 million. Yet the loss of Lufax, whose Shenzhen headquarters are just twenty minutes away, has sparked suggestions that Hong Kong should emulate Singapore’s more liberal regulatory model. Fintech regulation falls under three regulatory bodies in Hong Kong, compared to Singapore’s one.
A recent Deloitte ranking of forty-four fintech hubs puts Singapore (along with London) as the world’s top fintech hub. Hong Kong sits at 5th place.
Small markets, big international outreach
With their small populations, domestic start-ups in both city-states can only be maximised so much. Neither city will ever be able to knock off China’s sheer volume, accounting for 88% of Asian-Pacific investment in 2017 (US$13.05bn).
However, with their international links, strong rule-of-law and progressive regulatory framework, the two cities can instead fight it out to attract regional fintech behemoths. Given China’s recent crackdown on fintech companies, it is likely that the more internationally attractive hub will win out.
By mid-2017, Singapore had taken a lead, with eleven bilateral fintech partnerships to Hong Kong’s three. Singapore shows no sign of slowing down, signing Memorandum of Understandings with India, Israel, Thailand and South Korea in late 2017 alone. Hong Kong is still attempting to catch up, signing agreements with Australia and Poland in 2018 so far.
Taking the fintech crown
The fight remains neck and neck as both cities attempt to outdo each other and bolster their fintech prestige. Hong Kong recently allocated US$64.1 million for financial services. Meanwhile, in November 2017, Singapore concluded the world’s largest fintech festival, with over 30,000 participants from over 100 countries.
While Hong Kong’s larger fintech investment gives it breathing room, Singapore’s more efficient regulatory model and internationalism may just give it the boost to give Hong Kong a run for its (virtual) money.
Interested in the APAC region? Join us to discuss fintech trends in APAC at AltFi’s Australasia Summit 2018 on 16th April in Sydney. Tickets are still available.