BNY MELLON: Funds, Fintech and Hong Kong's Future

BNY MELLON: Funds, Fintech and Hong Kong's Future

Chamber Member News Post Date: 07/12/17 Source: BNY MELLON By: BNY MELLON

The rapid development of fintech solutions for fund management and distribution in mainland China contrasts with the traditional approach maintained by many fund managers in Hong Kong. While the city is bidding to become a fintech hub, asset managers wanting to use it as a base to access the mainland market may need to rapidly consider updating their systems and practices.

In a remarkable example of the speed and scale of the disruption of asset management by fintech platforms in mainland China, Alibaba’s money market fund has in only four years become the world’s largest. The Yu'e Bao fund, sold principally through Alibaba's digital wallet, Alipay, had US$165.6bn under management by April this year, larger than JPMorgan's US$150bn US Government Money Market Fund.1

The explosive growth of Yu’E Bao should serve as a wakeup call for Hong Kong. The territory’s preeminence in financial services is due in part to its position as a gateway to China, but fund management in the city has not kept pace with the speed of technological development seen on the mainland. With many fund managers looking to use Hong Kong as a base from which to access China’s rapidly expanding market, the contrast is increasingly apparent.

Two-Speed Tech Transformation

Competition to become the leading hotspot for fintech is heated. A recent Deloitte review of fintech hubs around the world ranked Hong Kong fifth in terms of its conduciveness to the growth of the sector, behind the UK, Singapore, New York and Silicon Valley. “Hong Kong will focus on its core competitive advantage as a B2B platform for regional expansion,” the authors wrote.2

The review noted the region’s high cost of living, aversion to risk and relatively small market. But the local fund management industry has other challenges that could hit its competitiveness. Compared to the mainland, the industry has seen less competition and innovation and in some respects remains reliant on long-established setup, settlement and distribution systems. Read Full Article