Everyone knows that Hong Kong is suffering
under its “Zero-COVID” policies of quarantines and controls, and from the
fallout of political unrest in 2019, especially around attracting and retaining
fintech talent.
The question for the fintech community and
the government is what to do about it.
For all the doom and gloom, fintech jobs
are in high demand. The city’s massive capital markets and finance sector ensures
a constant need for digital restructuring.
The consumer-facing side of fintech is more
challenging, because under conditions of isolation, Hong Kong is just a city of
7-odd million people – but consumer-facing businesses will resume growth once more
barriers are removed to doing business in neighboring Guangdong Province.
“I see people wanting to come back to Hong Kong,” said Warwick Pearmund, director of the Hong Kong office of search firm Madison Pearl. “There’s no shortage of people who would be happy to work here if the circumstances are right.”
Hiring heats up
Although the focus in the international business
community is zero Covid, Hong Kong’s challenges in serving as a tech hub (for financial
services and other industries) predate 2019. It’s always had a talent gap.
“Within fintech, there’s plenty of people who know the ‘fin’ but we need more attention paid to the ‘tech’,” said Neil Tan, chair of the Hong Kong Fintech Association. (Disclosure: DigFin’s Jame DiBiasio is on FTAHK’s board.)
The lack of techies was manageable for fintech companies because they had the labor market to themselves. The pandemic, however, has turbocharged the technology agendas of banks, asset managers and insurance companies.
“Fintech companies were the only ones hiring
digital designers and data analysts, but now the incumbents have come in,” said
Ben Quinlan, CEO of consultancy Quinlan & Associates.
Pearmund said banks, including the new crop of virtual banks, have a broader set of business needs: “They need risk managers and business-as-usual I.T. people, in addition to the front-facing app designers. On the other hand, there is less startup activity.”
The roles in demand
Quinlan & Associates and Google
recently published a paper looking at how Hong Kong can grow its fintech
industry. It found the areas where fintechs are struggling the most to hire
include product innovation, and in sales and marketing. The reason goes beyond
Hong Kong’s current political problems: there simply aren’t enough people with
the required skills and experience.
The paper finds the skills most in demand
over the coming two years are sales (79 percent of fintechs need to hire
salespeople), product design (68 percent), coding (62 percent) and digital
marketing (62 percent).
Product design roles include finding regulatory sandboxes, A/B testing products, wire-framing apps, and running focus groups. These roles require experience with technologies such as APIs, data visualization tools, artificial intelligence, workflow automation, and cloud.
Sales and marketing roles include digital
marketing (including search engine optimization and working with influencers), operating
customer-relationship management software, data analytics, and content management.
Quinlan says the biggest ask, though, is
old-fashioned salespeople who understand the tech, but who also know how to
navigate a bank’s bureaucracy, going beyond the digital labs to win over
procurement, human resources, and other box-tickers.
“But salespeople coming from banks are used to quick decisions and high volumes of sales,” he said. “They’re surprised by the long sales cycle for enterprise software.”
Demographic drain
The implementation of a mainland
China-inspired National Security Law in Hong Kong in 2019, followed by zero-COVID
restrictions, have hurt the city in multiple ways. It has led to an exodus of people,
prevented new blood from coming in, and shrunk the prospects of B2C fintech
businesses.
Beyond disgruntled expats departing for
other cities, the biggest loss in Hong Kong’s population is among young people:
the biggest demographic cohort that has emigrated are those aged 20 to 24: more
than 20,000 people in this bracket, or 7 percent of the total, have left this
year for destinations such as Canada and Britain. The numbers for teenagers are
equally dire.
That represents the kind of university graduates
who would normally be filling the ranks in entry-level jobs. Teachers have also
been quitting or emigrating en masse, jeopardizing the quality of the next wave
of graduates. Zero-COVID policies constantly disrupt school years, further
impacting educational quality.
Given this backdrop, fintech industry executives are looking at what can be done to revive the city’s attractiveness for skilled workers.
Tan of the Fintech Association says the government has a variety of recruitment and funding programs aimed at fintech. But it could do more to boost its overall competitiveness for highly skilled workers. “It’s all about time and money,” he said.
Time+money
One consideration is tax. Although Hong
Kong is already a low-tax jurisdiction, with no taxes on capital gains, Tan
says the government could do more to cut taxes companies pay on high-end
employment packages.
Another is to reform Hong Kong’s permanent
residency program. The longstanding rule has been to award PR status after
seven years. Hong Kong is generous in allowing spouses to also work (unlike
Singapore). But rival cities offer faster PR status or equivalent benefits.
“If there’s a comp-sci PhD from MIT, then give
them PR,” Tan recommended. “We should accelerate PR offers to people who fit a
certain profile.”
Third, the government should negotiate with
mainland authorities to ensure restrictions on labor movement come down within the
Greater Bay Area. This is currently constrained by China’s own, more strict zero-COVID
stance, but ultimately Hong Kong will need to leverage the huge number of
engineers across the border in Shenzhen.
“We need to find ways to bring in tech talent from within the GBA, and to fill the gap fast,” Tan said.
Pick your battles
Quinlan recommends the government pick one
or two segments within the fintech space that it wants to back to the hilt.
Various government agencies and departments
offer different funding or support programs but these are too widespread. The
Hong Kong Monetary Authority has been the most influential, with its “Fintech
2025” blueprint, which forced banks to build a domestic faster-payments system
and created licenses for virtual banks.
But other aspects of the HKMA blueprint are
more about general goals rather than a roadmap, Quinlan says. For example, the
open-banking principles leave decisions to the banking community, and adoption
has stagnated.
“The government talks about the same things
it talked about ten years ago: we have a lot of IPOs, a busy stock exchange, we’re
a gateway to China. It doesn’t talk about fintech,” Quinlan said. “Hong Kong hasn’t
picked its battles.”
Meanwhile some parts of the fintech
ecosystem are fading. The once-vibrant blockchain and crypto community has seen
many retail-facing businesses exit for Dubai or Singapore, as the securities
regulator has carved out licensing for services that only cater to wealthy
people.
B2C propositions in insurtech and wealthtech have also struggled to scale in Hong Kong, while eight virtual banks are fighting for market share without access to the GBA market.
There is clear demand for enterprise software, regtech, cybersecurity, wealthtech for private banks, and tools to improve operations (such as A.I.), but the government hasn’t thrown its efforts behind making Hong Kong the go-to market for any such niche.
GBA rides to the rescue?
There isn’t much Hong Kong’s administration
can do about mainland China’s Zero-COVID stance, which keeps the interior
border shut. Ultimately, accessing Guangdong as a market as well as a source of
talent should restore Hong Kong’s attractiveness as a fintech hub.
Pearmund says there will be plenty of people who have left Hong Kong who will eventually want to return – faced with higher taxes, cultural challenges, and, in the UK, soaring prices from an energy crisis.
Hong Kong’s fintech talent problems predate its current political situation, and the solution is ultimately in GBA integration. But mainland China could be closed for a long time, which means Hong Kong’s authorities will also struggle to open the international border. The city risks losing all of its opportunities – the GBA, being a regional or global international financial center – if its self-imposed isolation continues for much longer.
“I’m bullish on Hong Kong’s prospects, but
I’m getting worn down,” said Pearmund. “The GBA is a massive opportunity for
the services industry, but people are growing disillusioned because we don’t see
a desire by Beijing or Hong Kong to change anything. If they don’t get rid of
these COVID restrictions, Hong Kong is screwed.”
