Written by Tim Fu, Market Leader, Hong Kong, Korea, and Taiwan at PayPal
Start-ups are regarded as the seeds for economic growth around the world, and fintech startups in Hong Kong in particular are in the right place, at the right time. Amid the challenges of COVID-19, the city’s fintech sector proved itself to be a resilient, economic oasis, with companies continuing to hire and grow . Bucking the global trend, we’ve seen a thriving fintech sector in the city not least with the launch of multiple virtual banks and fintech startups. As a part of the ecosystem, we have also seen an acceleration in everyday fintech adoption which is an encouraging sign for the future of the sector.
Recently I had the honor to become a judge of a fintech startup pitching competition. This was a good chance to reflect on where the emerging opportunities are and what are the traits of successful startups.
Let’s take the payments space as an example. The move to online shopping was already a trend prior to 2019 but the pandemic has accelerated this. This has created new challenges, and therefore new opportunities for startups to address. One such challenge is the increasing complexity and choice in payment options. Hong Kong is unique in that it has a very diverse range of payment options, ranging from stored value card to digital wallets and QR payment codes. With even more payment methods expected to come into the market, there remains a need for a solution to integrate these payment methods and manage the increasing complexity across the payment ecosystem to provide consumers an enhanced user experience.
Another opportunity is addressing increasing growth demands. Brands and merchants are actively looking to expand into new markets. Last year our Hong Kong Merchant Survey found that 45 per cent of the merchants we had spoken to were actively looking abroad to expand their addressable market. Yet entry into new markets comes different challenges, such as language barriers, currency exchange issues and new regulatory requirements.
In both of these examples, fintech startups have the chance to turn challenges that have emerged from the pandemic into business opportunities. With this in mind, I am often asked what I look for when judging startups. Most startups I have had the honor of judging have had really strong propositions. However, here are some aspects that are apparently in those with the potential to truly scale up.
The first thing is passion. Founders should be starting a startup because they are passionate about the challenge they are solving, not simply because it is a hot sector. Startups should not be tempted to forcibly retrofit AI or blockchain into a solution or the sake of doing so. Not only will it not increase their valuation, but they are also likely to lose any competitive advantage they might have had prior. Start with the problem and look at the best solution, technology and approach to addressing it.
Next, everyone knows the fable of how David defeated the Goliath. In Hong Kong, smart startups are those that understand how David can harness Goliath to scaleup. Traditional financial institutions are increasingly open to working with startups, and indeed become their customers. In fact, this is where Hong Kong excels. Hong Kong’s financial institutions have proven to be progressive in their adoption of technology. According to an industry survey , the rate of fintech adoption in Hong Kong is higher than that of the U.S., Japan, or France. At PayPal, we see partnerships as growth opportunities. By allowing our partners and ourselves to focus on our unique values, as well as leverage each other’s strengths and assets, we are able to move faster and drive meaningful progress on fintech and digital payment adoption.
Another trait that I look for is how well the founders and their company build trust. It is possible to have a highly differentiated business model and technology supremacy, however without any trust, there isn’t a scalable business. In fact, a HKTDC survey on startups last year found that winning the trust of customers was the single greatest challenge Hong Kong’s startups faced, therefore it is not as easy as it would seem.
On the road from startup to scale-up, there will no doubt be a number of opportunities, challenges, and discoveries along the way. Fintech is a fast-paced sector which is evolving at the pace of markets and society, if not faster. Strong entrepreneurs are those that are not afraid to shift to a new strategy and pivot. If a company is always playing catch-up, if there is too much competition or the market has become saturated, then these are signs that a pivot might be required. It is all part of the problem-solving process to determine what’s needed to survive and thrive.
There has never been a better place nor time to be in fintech. Key to success is understanding these principles and harnessing Hong Kong’s fintech environment. And as a part of this wider ecosystem, we hope to nurture promising fintech startups and see even more success stories come out of our city.
To learn more about the success stories of innovators and entrepreneurs within the region, please visit: https://www.paypal.com/sg/webapps/mpp/innovationlab/innotopia?utm_source=google&utm_medium=social&utm_campaign=jumpstart.
