December 29, 2015
Hong Kong is known to be one of the world’s major financial centers with a wide range of international financial industry giants having their Asian hubs in the city. Barclays, HSBC, Lloyds Bank, RBS, BBVA, UBS, Citi and Wells Fargo represent almost an endless list of international banks that have chosen Hong Kong as an Asian satellite location. It’s no surprise that some of the largest banks are represented in Hong Kong since it is the leading financial center in the Asia-Pacific region.
Moreover, according to BI, Hong Kong is leading the FinTech adoption market as 29% of the digitally active people in Hong Kong reported that they have used at least two FinTech services in the last month. The US and Singapore come next.
According to HK FinTech, in 2013, over $3 billion of investments in FinTech have been made worldwide and this is set to triple by 2018. In fact, within APAC, FinTech provides one of the most cost-effective methods of delivering banking services to the 1.2 billion people without a formal bank account.
Moreover, China's digital banking customers are expected to triple by 2020, reaching 900 million. China is the largest worldwide crowdfunding market with a potential of $47 billion. Global Financial Centers Index of 2014 placed Hong Kong among the world's big four—New York, London, Hong Kong and Singapore.
According to Hong Kong’s official government website, at the end of April 2015, there were 157 licensed banks (LB), 23 restricted license banks (RLB) and 21 deposit-taking companies (DTC) in Hong Kong, together with 64 local representative offices of overseas banking institutions in the banking sector. These institutions come from 36 countries and include 71 of the world’s largest 100 banks.
The daily turnover in the Hong Kong interbank market averaged $31 billion in February 2015. Hong Kong’s stock market was the fifth-largest in the world and the third-largest in Asia in terms of market capitalization as at the end of April 2015. Hong Kong was also one of the most active markets for raising initial public offering (IPO) funds; $29.8 billion were raised in 2014.
The variety of financial industry giants not only operating but also incorporated in Hong Kong is fascinating. There are at least 130 licensed international banks operating in Hong Kong along with a number of restricted license banks and deposit-taking companies.
FinTech Startups in Hong Kong
Hong Kong FinTech is a rich and rapidly evolving ecosystem with very promising FinTech startups striving to compete in the international arena. Here are some interesting examples of Hong Kong’s FinTech startups across sectors:
Even though the payments and financing sectors look denser, there are certainly more interesting examples in other sectors as well. Here are some of the interesting FinTech startups:
CoinSimple is a SaaS platform that allows e-commerce merchants to easily accept bitcoins using any of the existing bitcoin payment processors.
BitMEX (Bitcoin Mercantile Exchange) is a cryptocurrency derivatives trading platform. BitMEX is wholly owned by HDR Global Trading Limited.
Cashyou is a mobile app which allows P2P payment through NFC, QR code or online.
WeLab is disrupting traditional credit services in Greater China and operates WeLend.hk in Hong Kong and Wolaidai, a mobile app, in China.
Quantifeed provides online wealth management products to Asia’s mass affluent investors.
Tranwall is a fraud prevention company with a mission to build trust in the global payments industry by putting transaction control in the hands of every consumer.
Monexo is an online marketplace for P2P lending bringing together lenders with borrowers.
Investable is Hong Kong's first full-service equity crowdfunding platform.
8 Securities is a leading online & mobile investing service in Asia.
Cryptonator is an all-in-one online cryptocurrency wallet which supports multiple cryptocurrencies such as bitcoin (BTC), Litecoin (LTC), Dogecoin (DOGE) and others.
Mobexo is Vietnamese tech company that provides mobile payment services, replacing credit cards, paper money and coins. The company’s solutions enable paying, receiving and transferring money, along with currency conversion services.
FinTech Investors in Hong Kong
Hong Kong wouldn’t be one of the global financial centers if there was a lack of investment interest from international and domestic VCs. For FinTech startups from Hong Kong looking to raise funds, here are some of the active investors to look out for.
Bigcolors supports and grows startups to make them the next superstar companies. They invest in seed funds and early-stage startups. Bigcolors has invested in companies like Connect, Kisshugs, Crux and Oddup. They also help startups grow by providing them strategy business development, financing and M&A expertise.
500 Startups is a leading global venture capital seed fund and startup accelerator managing $200M in assets and having invested in 1300+ technology startups. Its early-stage seed fund and incubator program focused on consumer and SME Internet startups. The company’s areas of interest include financial services and e-commerce; search, social and mobile platforms; personal and business productivity; education and language; family and healthcare; and Web infrastructure.
Wavemaker Partners takes a co-investment approach to help startups bridge the post-angel and pre-venture gap, which was a challenging phase the fund experienced itself. Investments usually start with a $100K-$750K check and can follow on until $1M. Wavemaker Partners leads rounds in case it is in the best position to do so and likes to bring in co-investors who can add value. The combination of portfolio building and co-investment has enabled Wavemaker Partners to invest in over 180 companies and co-invest with over 120 early-stage investors. These form a powerful network, which supports pattern recognition, diligence, co-investment, customer acquisition and corporate development. Wavemaker Partners joined the Draper Venture Network and has 10 funds across four continents.
Alacrity Capital is a next-generation integrated venture capital firm based in Singapore that focuses on Pan-Asian-based startups which are passionate in developing commercially viable products and services encompassing new technology and innovation. For startups that are launched seed to Series-A stage, Alacrity Capital aims to provide key investment from a pooled funding of angel and corporate investors.
General Atlantic is a global growth equity firm providing capital and strategic support for growth companies. FinTech companies in GA portfolio are represented by Adyen, Avant and Klarna. GA is looking for promising FinTech startups in Mumbai, Singapore, Hong Kong, Beijing and a variety of other locations. GA invests in early-stage and later-stage ventures, and private equity.
TA Associates is one of the oldest and largest growth private equity firms in the world that invests in growing private companies across industries (particularly, FinTech, technology, financial services, healthcare and consumer businesses, communications). TA Associates operates in Boston, Menlo Park, London, Mumbai and Hong Kong. BATS Global Market, BluePay, BillDesk, Smart Stream, Yeepay.com and RGM Advisors are in the portfolio.
Warburg Pincus has invested more than $50 billion in more than 720 companies in more than 35 countries around the world. The firm has more than $35 billion in assets under management. Its active portfolio of more than 120 companies is highly diversified by stage, sector and geography. The company is looking to invest in seed, early/later-stage ventures as well as private equity across Beijing, Hong Kong, London, Mumbai, New York, San Francisco, São Paulo and Shanghai.
Silver Lake has over $26 billion in combined assets under management and committed capital and a team of approximately 100 investment and value creation professionals located around the world. Notable companies in the investment portfolio are represented by Alibaba Group, Cast & Crew, Global Blue, Interactive Data Corporation and Renovate America. Silver Lake operates in New York, Silicon Valley, London, Tokyo and Hong Kong. The company is looking to invest in startups across a variety of sectors, in particular, FinTech, financial services, e-commerce, IT & cloud computing, healthcare and mobile communications.
Green Visor Capital is one of the few venture capital firms focused exclusively on investing in FinTech startups. The company is headquartered in San Francisco, with partners in New York and Hong Kong. Cloud Lending, Credit Shop, Auditfile.com, FiscalNote, Clearserve and Simpl are part of its investment portfolio. GVC invests in early-stage startups.
First Eastern Investment Group is a venture capital and private equity firm that specializes in the expansion stage. The firm seeks to invest in manufacturing, construction, financial and real estate industries. It prefers to invest in China, Hong Kong, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand. The firm typically invests between $1 and $10 million and a minimum annual sale of $12 million is required for all portfolio companies. It also looks for a seat on the board of directors and a minor stake in the portfolio company. Monitise and Tamoco are in the investment portfolio.
1823 Ventures is focused on mentoring and incubating up and coming startups in Southeast Asia, Hong Kong and Korea as well as venture capital fundraising and investment. Headquartered in Singapore 1823 Ventures are actively looking for promising startups around the region including Singapore, Indonesia, Thailand, Malaysia, Vietnam, the Philippines, Hong Kong, China and Korea.
Arbor Ventures is actively partnering with entrepreneurs and investors who are developing next-generation transactional solutions and seeks to transform today’s finance and data landscape through a combination of ingenuity and pragmatism. Lufax and DemystData are some of the notable FinTech companies in the portfolio.
Fresco Capital is an early-stage venture investor supporting exceptional entrepreneurs to build remarkable businesses. Based in Hong Kong and Silicon Valley, Fresco Capital operates globally with the most common headquarter locations being San Francisco, Silicon Valley, Hong Kong, New York and Austin.
Monk’s Hill Ventures is a partnership of seasoned entrepreneurs who have built and backed global companies based both in Silicon Valley and Asia. Monk’s Hill Ventures invests in top entrepreneurs in post-seed companies in Southeast Asia. Typically, MHV invests in companies that already have had at least US$500k to US$1.5M of seed/angel funding, and have demonstrated significant progress in building a viable product (probably 1~2 years of operations) with some level of repeatability in the sales cycle.
This is surely not a complete list of active investors in Hong Kong’s FinTech startups. The Hong Kong FinTech industry has massive potential and a growing number of international VCs are looking for promising startups there.
FinTech Accelerators in Hong Kong
Being a highly competitive environment, Hong Kong is one of the global locations for globally oriented FinTech accelerators. Here are some examples of the accelerator programs oriented on nurturing the next generation of disruptors in the FinTech industry.
The SuperCharger Accelerator is the first program dedicated to both startups and more established global FinTech companies aiming to capture the Asian growth market. The program leverages on Hong Kong's traditional strength as Asia's finance and technology gateway. The SuperCharger has three strategic founding sponsors—Standard Chartered, Baidu and TusPark Global Network. The accelerator assists with company building, mentorship and advice in areas such as market entry, regulatory obligations and joint ventures opportunities. The program itself coincides during the peak time of financial and startup activity. Within the first three weeks of the program, teams will be exposed to the Asian Financial Forum and the InvestHK Startmeup week, providing a great opportunity for companies to get plugged into the global ecosystem and engage with world class decision-makers. Microsoft and Yodlee are among notable supporting organizations.
FinTech Innovation Forum 2015 which took place in Hong Kong in October gathered industry practitioners, advocates, detractors, futurists, analyst and thinkers. It examines new trends and show how financial services are being rewired for a new future. Some of the topics were around banks vs. nonbanks, social listening and analytics, new strategies to fight fraud, banking as a cloud service, omnichannel global e-commerce, the impact of mobile payment systems, social and P2P lending, cryptocurrency, FinTech Accelerator programs, and Hong Kong’s own FinTech stars.
The DBS Accelerator, powered by NEST, is a competing program accepting up to eight startups to come to Hong Kong to accelerate their FinTech businesses. Successful applicants receive mentorships from specialists in banking, technology and startups provided by DBS and NEST, additional support from leading industry experts, dedicated workspace in Wanchai, a state of the art co-working space well served by transport links and 24/7 secure access to suit any startup accepted into the program, access to the DBS & NEST innovation ecosystems and opportunity to pitch businesses at a demo day.
Venturetec Accelerator in Hong Kong is the first startup accelerator in the APAC region exclusively focused on disruptive enterprise technology solutions. The accelerator provides seed funding, mentorship and connections for startups to global Fortune 500 companies. During the six-month accelerator program, Venturetec assists startups to find a repeatable and scalable business model, build their product roadmaps, secure first revenues, and attract follow-on investment.
FinTech Innovation Lab is based primarily in NYC, but is also operates in Hong Kong. This 12-week mentorship program brings together young FinTech companies with senior executives from leading financial institutions across Asia. Inktank, BillGuard and Standard Treasury are among FinTech Innovation Lab’s alumni.
2016 FinTech Finals is a premier FinTech startup competition in Asia (Hong Kong) where 40 FinTech startups can exhibit for free in the Startup Village, and a selected 24 FinTech startups will present their business ideas and models in eight-minute demos to the brightest collection of bankers, techies, entrepreneurs, VCs and designers. In addition, startups will hear from leading global experts in banking design, innovation & entrepreneurship at the full-day conference. Visa, Nest, BBVA are among the notable partners powering the event.