Hong Kong is a mature financial services ecosystem with many players serving all aspects of the market. Not surprisingly, the foray that new technologies have made elsewhere have also played out here.

For the mass and core affluent market, the technological opportunity comes in the form of a fully automated platform proposition. There is a definite change in the narrative towards low cost robo investment platforms for the mass affluent, and this is something that goes beyond the Robinhood-type pure brokerage app to a one-stop-shop wealth management solution.

We see this development as having a democratising effect, and one that enables the core affluent segment to build a personalised wealth management strategy that reflects their individual risk tolerance levels, thematic focus areas, or financial goals. Pricing models are also evolving, with new players like Teyk charging only performance fees. Teyk is due to launch imminently and does not charge commissions, citing an advisory fee of 0.5% p.a., compared to a norm in Hong Kong of 1-2%+ per annum.

For the HNW segment, the technological opportunity lies more in the ability to support front-line relationship managers. This is because the further up the wealth ladder you move, the less relevant full robo propositions become – in short, you can only digitise so far up the client curve before customers reject self-service and want to retain the human relationship.

At this level the digital experience is about enabling an adviser, not bypassing him or her. The solution sits behind the scenes and enables advisers to do their jobs better and engage with clients in a more proactive and personalised way. Players like Quantifeed and InvestCloud, in particular, are making considerable strides in this area.

Covid-19
While many of these developments have been in play in recent years, Covid-19 has put digitalization high up on every wealth manager’s agenda. Wealth managers have realised that it is no longer tenable to have a faceto-face only proposition; they need to be able to properly service their customers remotely. This is not just with the behind-the-scenes tools – such as goals-based tracking, rebalancing, trade management, and risk adjustments, which free up the adviser to do the job of building the relationship – but also in providing a seamless experience for the customers themselves, backed by a human touch.

As customers old and new become more accustomed to a digital experience, there is also an opportunity for independent wealth management solution providers such as StashAway and AQUMON to challenge traditional wealth managers who are pushing to digitalise.

Collaboration
There has been a growing global trend of more collaborative approaches between incumbents and FinTechs, and Hong Kong is no different. As a primarily B2B market, many of the FinTechs operating in Hong Kong are in partnership with established players to enable a better conduit between advisers and customers.

As an organisation developed by the community for the community, the FinTech Association of Hong Kong works closely with the local financial services and FinTech community to drive three key agendas: advocacy, collaboration, and education (i.e. our ACE approach). All of our activities are guided centrally by our Board and executive team, as well as our 16 co-chairs who oversee our eight committee groups; Digital Banking and Payments, WealthTech, Regtech, AI and Big Data, InsurTech, Cloud and Cybersecurity, Blockchain, and Future Foundations.

One of our key roles is to influence the frameworks around which FinTech-related policy is developed, often via our policy response efforts. For example, we recently shared our views on the proposed changes to the regulatory regime for virtual asset service providers in Hong Kong. We have also recently supported a major industry report on HK virtual banks by Quinlan & Associates in an attempt to demystify Hong Kong’s virtual banking landscape and outline the opportunities and challenges that lie ahead. The report draws attention to the fact that the role of collaboration, partnerships, and ecosystems will be key going forward, with the idea of bringing an integrated ecosystem closer to the end consumers. No single player can do everything, and to build all the required components organically is an unrealistic task.

We expect to see the emergence of super apps that will make contact with customers across many facets of their everyday lives, built around the provision of a broad range of financial services; from payments and investments to insurance and end-to-end wealth management. The winners will be those that can identify key pain points across the full customer lifecycle through robust use of customer data. In this way, spending, saving, and ‘financial wellness’ will become a part of everyone’s daily routine.

We are likely to see consolidation on the cards in coming years in the FinTech ecosystem, with both incumbent and disruptor providers looking to plug product or service gaps and gain critical mass through acquisitions. This approach will make sense for a number of players in what is a very fragmented marketplace, and we are very much looking forward to being a part of this evolution and supporting our community in their future success.

This article was part of TWM's recent APAC Wealth Technology Landscape Report (2021). Click here to access the full report.