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FinTech Hong Kong Market: 2020 Review and 2021 Outlook
- Anna Lau
- Apr 9, 2021
- 4 min read
Author: Anna Lau, Litigation Partner
FinTech in Hong Kong Market continues to play a central role in the city’s position as a leading financial hub in Asia. Technological advancements and digital transformation have accelerated rapidly in recent years, particularly during the period of global disruption caused by COVID‑19.
“Hong Kong has a thriving fintech scene: a highly integrated network of start-ups and investors, a large market of technology-ready consumers hungry for innovative solutions, and a host of conducive fintech initiatives. Besides, the city's connectivity with other Asian capital cities and proximity to Mainland China have made it the centre of Asia's vibrant fintech ecosystem…” —Nelson Chow , Chief FinTech Officer of HKMA
For many years, Hong Kong has sought to maintain its position as a regional FinTech centre. While 2020 was defined by the pandemic, it also marked a period of significant digital acceleration, making it essential to examine key developments and future trends.
FinTech Landscape of 2020
Hong Kong’s FinTech sector demonstrated resilience throughout 2020, supported by regulatory developments and innovation.
Regulation of Virtual Asset Exchanges
The Securities and Futures Commission (SFC) adopted a more proactive approach to regulating virtual asset exchanges, signalling a shift away from its previous opt‑in framework. Legislative developments were anticipated to follow.
Emergence of Virtual Banks
The launch and operation of virtual banks represented a significant milestone. These institutions leveraged technology to:
offer innovative financial products
streamline customer experience
partner with third‑party providers
This provided competitive advantages over traditional banking models.
Commercial Data Interchange
The Hong Kong Monetary Authority (HKMA) announced the development of the Commercial Data Interchange, a consent‑based infrastructure designed to enhance financial data sharing and improve credit assessment and financial intermediation.
FinTech Support Initiatives
The FinTech Anti‑epidemic Scheme for Talent Development (FAST Scheme) was introduced to support the sector by funding job creation and encouraging continued growth despite economic challenges.
Growth of RegTech
HKMA’s white paper on RegTech highlighted the importance of using technology to improve compliance and risk management processes, laying the groundwork for further development in this area.
Blockchain and Central Bank Collaboration
The Inthanon‑LionRock Project, a collaboration between HKMA and the Bank of Thailand, continued to progress, exploring the use of blockchain technology for central banking and cross‑border payments.
FinTech Outlook for 2021
Several trends were expected to shape the FinTech ecosystem moving forward.
Increased Regulatory Oversight
Regulation is expected to evolve alongside innovation, particularly in areas such as:
virtual assets
digital finance platforms
emerging financial technologies
Data Privacy and Compliance
With increased reliance on data, privacy regulation and responsible data use are expected to become more prominent, aligning with global developments.
Growth of Decentralised Finance (DeFi)
DeFi gained significant attention in 2020 and is expected to continue expanding, potentially leading to regulatory scrutiny as it becomes more mainstream.
Shift Towards Cashless Economy
The pandemic accelerated the move away from cash, driving:
increased adoption of digital payments
growth in alternative financial systems
Focus on AML and KYC
Regulators are placing greater emphasis on anti‑money laundering (AML) compliance and Know Your Client (KYC) processes, particularly in relation to virtual assets and cross‑border finance.
Regulation of Big Data
The use of big data in financial services is expected to attract regulatory attention, particularly in relation to:
data protection
ethical use of data
cybersecurity
Regional Competition
Hong Kong continues to compete with Singapore as a leading FinTech hub. Areas of competition include:
regulatory sandboxes
stored value facilities
open API frameworks
Conclusion
The FinTech in Hong Kong Market remains well positioned for growth, supported by strong infrastructure, regulatory development, and innovation.
Key considerations for businesses include:
preparing for regulatory changes
maintaining robust compliance frameworks
leveraging technology responsibly
exploring strategic partnerships
As digital transformation continues, FinTech will remain a strategic priority for Hong Kong.
How Ravenscroft & Schmierer Can Help?
Ravenscroft & Schmierer advises clients on regulatory and commercial matters relating to the FinTech in Hong Kong Market, including compliance, virtual assets, and technology‑driven financial services. The firm provides guidance to businesses navigating legal frameworks in an evolving financial landscape. Clients seeking further information may contact us.
FAQ: FinTech Hong Kong Market
What is the FinTech market in Hong Kong?
It refers to the use of technology to deliver financial services, including digital banking, payments and investment platforms.
How did FinTech develop in Hong Kong in 2020?
The sector grew through regulatory developments, virtual bank launches and increased use of digital financial services.
What are virtual banks in Hong Kong?
Virtual banks are digital‑only banks that provide financial services without physical branches.
What is DeFi in financial technology?
Decentralised Finance refers to financial services built on blockchain technology without traditional intermediaries.
Will FinTech regulation increase in Hong Kong?
Yes. Regulatory frameworks are expected to evolve as FinTech adoption continues to grow.
How can Ravenscroft & Schmierer assist with FinTech matters?
Ravenscroft & Schmierer provides guidance on regulatory and legal considerations relating to FinTech in Hong Kong.
Why work with Ravenscroft & Schmierer on FinTech legal matters?
FinTech involves evolving regulatory frameworks. Ravenscroft & Schmierer provides practical guidance to help businesses navigate compliance and legal risks.
This article is co-authored by Joshua Chu from ONC Lawyers
Disclaimer: Whilst every effort has been made to ensure the accuracy of this article it is general in nature and does not constitute legal advice of any kind. You should seek your own personal legal advice before taking legal action. We accept no liability whatsoever for loss arising out of the use or misuse of this article.
For specific advice about your situation, please contact:
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