Fintech industry groups in Hong Kong and Singapore are lobbying for support from their respective governments to protect startups at risk of collapse from the Covid-19 pandemic and lockdown.
On April 8, the Singapore Fintech Association (SFA) released a survey to support its efforts to win help to save jobs and fintech businesses.
The Fintech Association of Hong Kong (FTAHK) is proposing changes to the city’s government to both support startups now as well as look at how to bolster Hong Kong’s ambition to be a digital leader.
Startups in both cities face similar problems with cash flow. Some fintech companies are benefiting from the pandemic’s forced lockdown, such as online payments players and newly minted virtual banks. But most startups are seeing revenues plummet, B2B initiatives with banks grind to a halt, and venture capital evaporating.
The SFA surveyed its members to understand their needs during the crisis. It found 81% of members have implemented business continuity plans (to operate during a time of disruption), 48% say Covid-19 has had a “a significant impact” on their business, and that larger fintechs with more than 20 employees are coping better than smaller ones.
On April 1, the Monetary Authority of Singapore, along with other local industry associations, announced a package of financial support for small businesses, in the expectation that many individuals and SMEs will struggle with cash flows, repay loans, or cover insurance premiums. But this was aimed at SMEs in general, not fintechs especially.
SFA is requesting government help in three ways. It wants advice on available government grants, help with fundraising, and support to generate new business leads.
Chia Hock Lai, president of SFA, outlined ways to lower business costs to fintechs, with a new Financial Sector Technology and Innovation digital acceleration grant. Fintechs can now obtain up to S$120,000 for the use of digital solutions and services which will help to reduce business cost. SFA is also consulting with cloud vendors and others to provide financial assistance.
SFA is also trying to speed up B2B partnerships with financial institutions, by working with an external auditor to create a new framework based on guidelines promoted by both MAS and the Association of Banks in Singapore. This will lead to workshops for fintechs to better understand these, and to find leads through APIX, the cross-border API marketplace that IFC helped pioneer.
Finally it is working with MAS on a fintech relief fund for short-term funding gaps, with details yet to be released.
Hong Kong’s two-pronged approach
In Hong Kong, although the FTAHK has a close working relationship with government bodies, it isn’t integrated to the same degree as in Singapore, and the government agencies and regulatory bodies are fragmented.
This hasn’t prevented FTAHK from taking action. It is lobbying for immediate, practical steps, as well as looking ahead and thinking of ways to boost the city’s competitiveness post-Covid-19.
In a letter dated March 30 addressed to James Lau, secretary for financial services and the treasury, the FTAHK called for the establishment of a government-led “Fintech Vision 2025 Taskforce” that would identify the steps to assert the city’s leadership, and execute on them.
(Disclosure: DigFin editor Jame DiBiasio is a co-chair of FTAHK’s wealthtech committee.)
Henri Arslanian, chairman of the board of the Association, says FTAHK is also requesting specific, detailed changes to tackle impediments in existing programs for fintech companies. But the real opportunity amid the coronavirus pandemic is to think bigger.
“Our second request is bolder,” he told DigFin. “That is our call for a Fintech Vision 2025 Taskforce. How about a Marshall Plan for the fintech ecosystem?” he added, referring to U.S. economic initiatives after World War 2 that helped get Western Europe get back on its feet.
Arslanian says since 2015, when the Financial Services and the Treasury Bureau (FSTB) initiated its first steps to promote fintech, it has laid the groundwork to support funding and other measures.
Let’s get Hong Kong at a level it needs to be a global fintech hubHenri Arslanian, FTAHK
“Let’s really accelerate those things and reinvest in our community to get Hong Kong at a level it needs to be a global fintech hub,” he said.
Helene Li, FTAHK’s general manager, said the March 30 letter follows on previous communications with FSTB and other government bodies in reaction to the pandemic. “They are already taking this seriously,” she said. “The regulators have been very open to listening.”
The FTAHK is requesting FSTB and other authorities consider moves to tweak existing programs to make them work better, to help startups access capital. One suggestion is speeding up bureaucratic approval processes; another is changing inefficient practices such as requiring companies receiving money from the Hong Kong Innovation and Technology Commission to set up a new bank account.
“There are a lot of little pain points that can be addressed without reinventing the wheel,” said Arslanian, who is also a partner at PwC.
The regulators are already taking this seriouslyHelene Li, FTAHK
In the letter, FTAHK is asking for changes that would involve taxpayer money, including to subsidize some staff salaries among fintech companies, streamline ITC funding, and change to the tax code to encourage investment into loss-making startups.
When it comes to the proposed taskforce, the FTAHK’s letter is generic, suggesting a timetable for organizing industry stakeholders but not advancing specific ideas.
It is however proposing the government set an annual budget behind the taskforce to pay for dedicated staff, seconded officials from FSTB or other government bodies, and the hiring of external consultants.
FTAHK will hold a members-only video conference Wednesday, April 15, to discuss the initiative.