The less obvious centre of finance and technology activity

Hong Kong has the benefit of being connected to China, which has been home to some of the most notable developments in the fintech world

The hub of the technology industry is Silicon Valley. In finance, the world capitals have long been London and New York.
 
But in the emerging industry that combines finance and technology, often called fintech, the centre of activity is less obvious.
 
The traditional centers, London, New York and San Francisco, are attracting substantial investment, but so are less-established capitals like Berlin, Singapore and Sydney, Australia. The lack of a clear winner has been apparent to executives like Chris Larsen, chief executive of the San Francisco company Ripple, which offers international payment processing services to banks. Larsen fields a steady stream of calls from representatives of foreign cities hoping to lure him and his company to their shores to bolster their fintech credentials.

 

“Everybody recognises that the capital of fintech has yet to be determined,” said Larsen, who founded the fintech companies Prosper and E-Loan. Several cities around the world are competing to become the capital, or at least one of the regional capitals, of fintech. If the young financial technology industry has the transformative effect that some have imagined, the contest could also determine the future capitals of finance as a whole.
 
At the recent Money 2020 conference in Las Vegas, the largest fintech conference in the world, government representatives from Dublin, Hong Kong, London, Luxembourg and Belfast, Northern Ireland, among others, were walking the floor looking to woo companies.

 
In the exhibition hall, Invest Hong Kong, a quasi-governmental agency, had a booth where start-ups could learn about the regulatory benefits and subsidies the government of Hong Kong recently began to offer fintech companies.
 
“The whole industry is waiting to be disrupted,” said Lawrence Tang, the agency employee at the booth. “We are at the right place to try to capture some of these high-flying fintech companies.”
 
Hong Kong has the benefit of being connected to China, which has, mostly in isolation, been home to some of the most notable developments in the fintech world. Chinese fintech companies like Alipay and Tencent have been processing more financial transactions than the largest Chinese banks. The four most highly valued fintech unicorns (companies valued at $1 billion or more) are based in mainland China, according to most recent surveys.

 
Early this year the chief executive of Hong Kong’s central bank, Norman Chan, announced a multipronged effort to become a “Fintech Innovation Hub.”
 
The city-state’s government is offering to put money into companies that locate in Hong Kong, and its regulators have a new “supervisory sandbox” where new companies can try their products without needing to fulfill all the normal regulatory requirements. Hong Kong brought in several foreign companies this month to attend its first government-sponsored conference.
 
Hong Kong has lots of competition from Singapore, which recently started its own aggressive effort to become a capital of fintech. Singapore has begun offering some of the same inducements as Hong Kong, including its first fintech week. Last year, more fintech companies in Singapore raised money from venture capitalists than did in Hong Kong, but the Singapore companies raised less money in sum than those in Hong Kong, according to data from Accenture.

 
Nowhere, though, has the competition been fiercer than in Europe, because of the British vote to leave the European Union.
 
Before the so-called Brexit vote, London had clearly established itself as the hub of fintech activity for the Continent. But if Brexit comes to pass, financial institutions in London are likely to find it harder to do business freely with European companies and financial institutions. Equally important for start-ups, young developers from outside Britain may not be able to remain in London.