Hong Kong to create fintech 'sandbox' – Financial Times


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Hong Kong’s banking watchdog will allow banks to experiment with new financial technologies that do not meet compliance standards as the city steps up its competition with regional rival Singapore.

Hong Kong Monetary Authority chief executive Norman Chan announced the scheme, known as a fintech “sandbox”, on Tuesday.

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It comes less than three months after his counterpart in Singapore proposed a similar programme that would allow financial institutions to offer new products to customers, albeit “within a well-defined space and duration”.

Several other national regulators have launched similar efforts to spur technological experimentation by large financial institutions. The UK’s Financial Conduct Authority said last month that it was considering allowing companies to use the technology behind bitcoin, the cryptocurrency.

Hong Kong’s announcement comes at a time when the territory has been seen as struggling to catch up with Singapore on fintech innovation.

“There is also a quite commonly-held perception that the development of fintech in the financial services sector in Hong Kong has been slow,” Mr Chan conceded in his speech. “I do not subscribe to this view, at least insofar as the banking sector is concerned.”

The fintech sector has come to include a wide range of technologies, from small lenders that use homegrown algorithms to process quick and cheap lending decisions for small companies, to innovation by banks on how they conduct due diligence on deals.

By permitting banks in Hong Kong to launch trials with new technologies before meeting regulatory standards, the authority hopes to allow institutions to gather data and feedback on new products.

“Regulatory assistance, or breaks, is the next step that will be very welcomed by start-ups who are already often overwhelmed trying to raise funding and build a business,” said Adrian Seto, director of the FinTech Innovation Lab Asia-Pacific in Hong Kong. He added that Hong Kong had been supportive of a fintech incubator for start-ups.

The Singaporean government has become a clear proponent of fintech, and the Southeast Asian country has become a hotbed for fintech investment and hub for start-ups. The Monetary Authority of Singapore said last year that it would spend S$225m (US$166m) over five years to support the creation of innovation centres and technology projects within and across banks.

The sandbox announcement is the latest sign that Hong Kong is following in Singapore’s footsteps.

Last year, Hong Kong established a fintech steering committee, and in March, the regulator established an office to promote fintech by organising industry events.

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