Date
21 November 2017
Alibaba's Yu'E Bao was a hit last year. The internet finance platform allows people to earn higher returns for their money than bank deposits. Photo: Yu'E Bao
Alibaba's Yu'E Bao was a hit last year. The internet finance platform allows people to earn higher returns for their money than bank deposits. Photo: Yu'E Bao

Why Hong Kong lags in internet finance

While mainlanders now use their smartphones to pay for taxi fares, Hong Kong people still settle daily transactions with cash, Octopus smart card or credit card.

And if Hong Kong people like to earn better returns for their spare cash by lending it out through online platforms, they can’t because the city still doesn’t have this kind of peer-to-peer channel.

Internet finance is a red-hot market in China and United States. China has Yu’E Bao and WeBank while United States has Lending Club and ZestFinance, financial products that offer better returns for people’s savings than bank deposits.

Despite being a global financial hub, Hong Kong lags behind in internet finance.

Lin Yong, chief executive of Haitong International Securities, gives three reasons why this is so in a commentary in the Hong Kong Economic Journal’s StartUpBeat.

First, Hong Kong is timid in overhauling its financial laws and regulations.

In mainland China, customers can open brokerage accounts through the internet. It has been reported that the People’s Bank of China is considering relaxing similar rules for bank accounts, too.

Such reforms are essential for the financial industry to develop and promote internet finance.

Hong Kong, on the other hand, is still emphasizing the “know your customers” model. If customers want to open a bank or brokerage account, they need to go to a branch in person and hand in the required documents.

Overprotecting individual investors also hinders the segment’s development.

In Lin’s view, protecting savers and investors is important, but imposing a lot of limits would cut off many investment choices.

Some individual investors understand financial products thoroughly. But overly tight regulations would simply block them from pursuing higher returns by bearing higher risks.

Finally, financial institutions, like local regulators, are too conservative.

Internet finance, by its very essence, is about eliminating the middlemen. It is understandable that industry players may feel insecure. However, internet finance is the future.

Instead of feeling intimidated and fighting the trend, Lin suggested that the financial industry should enhance its competitiveness by embracing the internet finance business.

Also, Hong Kong has lots of talents in the financial segment. The industry should make use of that expertise to launch innovative products by combining big data and cloud system technologies.

The city should step on the gas before it is too late.

[Chinese version 中文版]

– Contact us at [email protected]

CG

EJ Insight writer

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