Blockchain gets its claws into Hong Kong’s fintech scene
- The fintech sector in Hong Kong is experiencing tremendous growth in 2020
- Blockchain technology is seeping into the fast-evolving space
- 39% of new firms launched last year operate using distributed ledger technology
Blockchain technology has been around for years now, and while once frequently criticised for its hype, it is finally (if cautiously) being deployed in supporting various industries – including the growing fintech sector in Hong Kong.
As technology continues to disrupt the finance sector around the world, blockchain technology has added another layer of untapped potential which we could bringing significant changes to fintech business models in the coming years.
The promise of this application is such that the global blockchain in fintech market is expected to rise from US$231.63 million in 2017 to US$6700.63 million by 2023, at a tremendous compound annual growth rate (CAGR) of 75.2%.
North America is expected to be the market leader thanks to technical advancements and the presence of major players, but Asia Pacific (APAC) is looking to be the fastest-growing region in this sector, led by an increase in overall investments into blockchain technology solutions that will be used to impact business processes within the finance industry.
Blockchain in Hong Kong fintech
Since last year, blockchain firms have descended on Hong Kong’s burgeoning fintech scene, with around 39% of new startups in the country using distributed ledger technology within their operations. A new report from Hong Kong’s Financial Services and Treasury Bureau illustrates that blockchain is the fastest-growing segment in the island nation’s fintech market, followed by WealthTech firms with 20% of new firms using the tech.
Blockchain promises to correct inefficiencies in most banks’ back-office set-ups notably in procedures like clearing and settlement, but the most significant effect this technology will probably have is to reduce fraud and cyber attack in the financial world, significantly. Fraud is hugely expensive for banks – costing around US$3.44 in costs for every dollar of fraud loss – and continues to get worse with an increase in digital transactions.
Blockchain assists in curbing data breaking and other comparable fraudulent operations to enable fintech businesses to share or transfer safe and unaltered information through a decentralised network.
Of blockchain firms, distributed ledger solutions for enterprises represent the largest of the sub-segment, with 45% of Hong Kong’s blockchain startups being enterprise solutions. Cryptocurrency coin exchanges make up the second-largest sub-segment with 27% of blockchain firms, followed by trade finance settlement with 9%.
The Financial Services and Treasury Bureau’s report further highlights blockchain as one of a core collective of technologies bringing about “tectonic shifts” in Hong Kong’s virtual banking sector. Artificial intelligence (AI), big data, and cloud were mentioned as part of this transformational stack of technologies.
Both blockchain solutions and fintech firms have seen increased adoption in recent months, where the coronavirus pandemic underscored many of the efficiency and utility benefits of distributed ledger technologies.