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Friday, October 23, 2015, 10:19

The future is FinTech

By Oswald Chan

Positioning Hong Kong as a financial technology (FinTech) hub would fortify its status as an international finance center, but hurdles in the regulatory framework, venture funding and human resources fronts need to be addressed. Oswald Chan reports.

The future is FinTech

After six years of working in financial institutions in Hong Kong, banker Mukesh Bubna established Monexo in March this year to assist individuals and small- and medium-sized enterprises (SMEs) across Asia in securing much-needed funding, requests for which are often rejected by traditional banks. Cyberport-incubated Monexo found backers in angel investors to start its online peer-to-peer (P2P) lending business.

The Monexo platform connects potential lenders — who list loans to earn higher returns, as monthly loan repayments offer better returns than bond investments or bank deposits — with potential borrowers who own rental properties and want to pay lower interest rates on loans than offered by traditional banks. Borrowers’ credit ratings will be assessed based on the values of their rental properties.

All the money is kept in a third-party account held with the Hong Kong Trust Company, and services provided include legal documentation work, loan insurance coverage and anti-money laundering checks. The lenders must commit a minimum of HK$100,000 for at least six months to make a diversified loan portfolio that includes different borrowers to maximize target-risk returns.

Monexo’s income comes from a 2.5 percent commission it charges borrowers and a 1.5 percent commission from lenders. It plans to extend its product range to business receivables (loans based on assessing credit scores of borrowers based on their business receivables) later in 2015 and take on new markets across Asia, with India, and Singapore and other Southeast Asian countries all likely targets.

Time to step on it

“If Hong Kong cannot evolve from the status of a financial center into a financial technology hub, it will lag behind world development. See how London is striving to transform itself to become a financial technology hub to attract talents and capital from all over the world,” Bubna said in an interview with China Daily.

“As a metropolis without much land space and natural resources, the future of Hong Kong lies in taking advantage of its financial services sector to develop the FinTech industry and to make itself stay competitive.”

Ex-investment bank and hedge fund manager Riccardo Capelvenere established Currenxie in 2014 to provide cheap funding for SMEs across Asia. The company provides clients with same-day, spot and forward foreign-exchange (forex) services, complemented by a P2P forex platform that empowers companies to deal with each other anonymously, in real time and at a transparent mid-market rate, resulting in 50 percent forex transaction cost savings compared to traditional banking providers.

Currenxie currently has 20 clients and wants to expand the number to 2,000. The online forex trader estimates there are 300,000 SMEs in Hong Kong and a third of those have forex needs. Currenxie is bullish on market prospects as it believes it can compete with banks by providing cheaper forex services to clients.

“We need to develop the FinTech industry to reduce the city’s reliance on the retail and banking industry for economic development,” Capelvenere told China Daily.

FinTech refers to the application of technology within the financial industry and covers a wide range of activities, from financial data and analysis to financial software, digitized processes and payment platforms.

The government recognizes how the FinTech industry can change the city’s financial industry landscape. The first opportunity FinTech offers to Hong Kong is that companies in the sector can complement the city’s existing strengths as an international finance center. Second, FinTech development in Hong Kong includes crypto-currencies, data analytics, wealth management and alternative funding, and this can help diversify the city’s financial industry.

Based on a proposal in Financial Secretary John Tsang Chun-wah’s 2015-16 Budget, the Steering Group on Financial Technologies was set up in March this year to advise the government on the potential for, and gaps in, the development of Hong Kong into a FinTech hub; and the measures needed to promote Hong Kong as such a hub.

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