Innovation and entrepreneurship carry different meanings to everyone, but the recent Hong Kong Fintech Week showed how far the city’s entrepreneurship culture has become corrupted by decades of property speculation mania and diminished creativity. Trying to activate and emulate the wild creativity repeatedly demonstrated in Silicon Valley by government proclamation is a futile pursuit.
Every government tries to interpret and realise tech ambitions suitable for its local resources. Hong Kong’s traditional role as an entrepot and financial centre made financial technology seem like a natural fit for its assets. Yet, the city’s culture and talent have never looked so ill-suited for such an unconventional challenge.
Successful inventors and venture capitalists say that Hong Kong has come too late to the fintech game. Aggressive, serial innovators like Peter Thiel, a co-founder of PayPal, said in his book From Zero to One that digital payments were already invented in 1999. And none of its founders came from investment banking or finance.
Everything else after Paypal is largely derivative or only a marginal improvement. In the case of China, Alipay was an indigenised version of its Western peers. That the value of an online commerce platform lies in its payment and cash management function not trading products, is largely why eBay acquired it in 2002 for USD 1.5 billion.
There’s simply too much copying and derivative, me-too business plans in the Hong Kong fintech space. Local business plans fail to convincingly answer issues about global competition, go-to-market strategies and most of all, consider how their level of differentiation isn’t meaningful to the customer or technologically or economically defendable. An especially serious problem for HK startups is how do they achieve scale and revenues outside Hong Kong? There seem to be more payment apps in Hong Kong than those ubiquitous cupcake shops you find in every mall.
Expanding and funding a fintech into China presents difficult challenges as you can only operate a technology business in that country if you take on a mainland partner and submit to strict, nationalistic regulations. And China’s current tech industry reorganisation and national “common prosperity” drive only create almost intolerable challenges for any China business plan. While Hong Kong’s Greater Bay Area could solve some marketing jurisdiction problems, it is a long way from being ready for business.
In 2015, half the world was underbanked and 40% of millennials used more cash than electronic payments, yet the global digital payments market is expected to only grow at a CAGR of 13.7% over the forecast period 2021 to 2026. It’s being served by a massively fragmented market overpopulated with startups, somewhat aggregated by global players and regulated locally by government authorities. Yet, fintech conferences talk about the opportunity as if some new deus ex machina invention will descend from the sky.
The reality is that fintech represents the most regulated area of innovation and technology. And for good reason: currency and payment systems are important social and economic foundations. Privately, regulators and senior bankers have told me they believe that nothing significant, which isn’t already performed by financial institutions, will arise from fintech. Traditional asset managers have little interest in fintech developments.
The critical question local entrepreneurs and investors must ask themselves while seeking success is: would they have been capable of understanding and believing in an early and successful concept if they confronted one? Would they have “gotten” a rambunctious Mark Zuckerberg or a loquacious Jack Ma back then? Or even a seemingly trivial, but viral app like TikTok, whose roots date back to 2016? It’s a big chasm for Hong Kong mentality to bridge, given that the most of its successful citizens derived their wealth from property development and short-term speculation, which infects the rest of society.
Hong Kong’s startup aspirants can’t figure out the difference between real invention and merely establishing an independent business, or an entrepreneur versus a business person. For example, there’s a big difference between discovering coffee and bringing it back from the New World versus opening coffee shops. Hong Kong’ers are capable of applying or using technology, but have not proven they can actually create it.
Worst of all, the city’s tech participants are too focused on achieving an IPO rather than solving a problem or changing the world. An IPO is merely one form of an enterprise. An unhealthy, short-term mindset is ill-suited for the long and twisted road of innovation and adaptation.
It is perplexing why the organisers of Fintech Week invited Norman Chan to speak and inspire the audience. Chan is a lifelong bureaucrat and former head of the Hong Kong Monetary Authority – a role whose skills are very far removed from managing a tech startup as chairman of RD Wallet Technologies and RD ezlink. Only in Hong Kong would a civil servant, who has never developed a record of radical innovation in his entire career, would be considered a credible startup leader.
Hong Kong retreads too many retired corporate executives into startup leaders, as if startups were a fashion trend, rather than a uniquely risky venture unlike any other kind of business enterprise or endeavour.
When it can, Hong Kong corporate culture subverts every tech idea into a property development. Remember Richard Li’s controversial Cyberport in 1999 where he translated his tech posturing and ambitions into an excuse to procure a luxury residential development with an office complex tacked on as an excuse for a technology incubator. Exploitive and misguided government-sponsored tycoon projects like Cyberport only serve to discredit the city’s business culture and deters people from considering Hong Kong’s technology potential.
Technology public policy should create conditions to support the inventor and entrepreneur labouring alone in his or her garage or flat, railing against the prevailing established order, seeking to validate their grand ambitions through one insanely great product. The problem with Hong Kong Fintech Week is that it treats creativity and invention like a public relations exercise at a trade fair rather than the essence of free and open society.