Despite optimum business conditions and strong mobile penetration rates, Hong Kong's small population is halting the adoption of various technologies.
Whilst business conditions in Hong Kong make it one of the best investment environments globally, its miniscule market presents a growing problem for the adoption of fintech, according to BMI Research.
The report suggests that there is less incentive to invest in and develop new technologies due to Hong Kong's limited market size, further aggravated by lack of manpower for R&D purposes.
With only 7.5m population, it comes as no surprise that global superpower China with its 1.42b population easily overtakes Hong Kong in its bid for fintech supremacy in North Asia. It also helps that the Mainland has strong local firms with global presence like Tencent and Alibaba spearheading fintech development, which is noticeably absent in Hong Kong.
“We expect China to be the fastest growing fintech market over the next five years with a compound annual growth rate (CAGR) of 5.2%, whilst Singapore comes in second with a CAGR of 3.6%,” BMI Research noted.
This puts Hong Kong down at fifth place for strong fintech contenders in the region, losing to close regional competitor Singapore and tech hubs South Korea and Japan.
Local fintech adoption in the form of e-wallets is also hampered as Hong Kongers still hold a general preference towards credit cards as more than half (64.3%) of the population aged 15+ possess a credit card for purchases and daily transactions. This figure is the second highest in North Asia with Japan beating Hong Kong by a slim margin at 66.1%.
However, Hong Kong unanimously puts all five countries out of the running in terms of mobile penetration at 237.4% due to high proliferations of smartphones. Singapore, for instance, only has 145.8% mobile penetration followed by Japan and South Korea at 133.3% and 124%.
But unless Hong Kong can make its market bigger, there will be less incentive for non-traditional players to enter the local scene to develop and encourage the adoption of new financial technologies.
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