Hong Kong to launch fintech ‘sandbox’ as rivals pull ahead
Hong Kong on Tuesday said it would establish a regulatory regime known as a “sandbox” for financial technology innovation in the banking sector, amid fears the city is losing ground to China, Australia and Singapore in the fintech race.
The initiative would help maintain Hong Kong’s competitiveness as a financial hub by supporting the development of fintech in the banking sector, Hong Kong Monetary Authority (HKMA) Chief Executive Norman Chan told a conference.
“The sandbox allows banks to conduct tastings and trials of newly developed technology on a pilot basis. Within the sandbox, banks can try out their new fintech products without the need to achieve full compliance with the HKMA’s usual supervisory requirements,” Hong Kong’s top banking regulator said.
Chan said the financial center “must remain diligent all the time if we wish to continue to maintain our competitive edge”, although he did not believe Hong Kong was lagging rival fintech hubs.
Chan said the regulator would provide banks with “early advice” before implementing the new regulatory regime but did not immediately provide any further details on how it would operate or when it would come into effect.
Countries globally, including in Singapore, Australia and Britain, have established such regulatory incubators to allow fintech firms to experiment with new business models and products without falling foul of financial rules.
Although the approaches have differed in each country, they generally afford fintech firms temporary waivers or exemptions from rules such as capital requirements or management experience.
Despite a government push to promote Hong Kong as a fintech center, critics say the semi-autonomous Chinese territory has been slow to accommodate fintech firms, whose capital-light, online-focused business models struggle to satisfy traditional licensing requirements.
In July, Reuters reported that Hong Kong had fallen behind Singapore, which has deployed a combination of state-funding and light-touch regulation to become Asia’s leading fintech hotspot.
“As a top three financial hub, Hong Kong needs to plan for the new types of work that innovative technologies, processes and business models will bring,” said James Lloyd, Asia-Pacific fintech leader at financial consultancy EY in Hong Kong.
“The sandbox concept allows the regulators to observe new business models, while for fintech firms it can provide them with early validation that then allows them to raise capital and hire staff.”
Source: Reuters
