Fintech, in recent years, has become a buzzword in both the financial industry and the startup community, signifying an unstoppable transformation of the financial sector driven by technology. This word also has a natural affinity with Hong Kong, as the city is internationally known as one of the world’s leading financial centers. Hence, many people believe that fintech is in the blood of Hong Kong. When looking forward, one question that many people may have in mind is: will Hong Kong emerge as one of the world’s leading fintech hubs?
Simon Loong, the Founder and CEO of WeLab – a leading Hong Kong fintech startup with a near-unicorn valuation, is an expert in the Hong Kong fintech scene. Founded in 2013, WeLab operates WeLend, Hong Kong’s leading online lending platform, and Wolaidai (我來貸), one of China’s largest mobile lending platforms. They have secured a US$20 million A round from Sequoia Capital and Li Ka-shing’s Tom Group in early 2015. 12 months later, they closed an impressive US$160 million B round led by Khazanah Nasional Berhad – Malaysia’s state fund, along with ING Bank and Guangdong Technology Financial Group.
Simon has kindly shared his experience in launching a fintech startup in Hong Kong, his view on the strengths and limitations of Hong Kong as a fintech hub, and the challenges he faced in tapping into the China market.
Before launching WeLab, Simon’s last corporate role was Standard Chartered’s Regional Head of Northeast Asia, where he managed the personal loan and credit card businesses. With over 10 years of experience in retail banking, he discovered a once-in-a-lifetime opportunity to revolutionize the lending industry for the better.
From day one, WeLab’s vision is to democratize finance. Getting a loan through traditional lending institutions is expensive for the average customer. It takes a lot of time and the customer experience is quite poor. WeLab resolved these problems through launching WeLend – the first online-only lending platform in Hong Kong. Without the need to operate any branches and maintain a large sales team, those traditional costs are not passed to customers. Also, the customers are not required go to a physical branch and get in line to speak with a credit officer, because now, they can simply apply for their loan online, resulting in a much better customer journey.
WeLend also leverages AI technology to analyze unstructured mobile big data to make credit decisions for individual borrowers. This enables a rapid loan approval process that can go as quickly as 21 seconds. To date, the company has processed over US$1 billion worth of loan applications and recorded zero fraud losses.
Having chosen Hong Kong as WeLab’s home, Simon lists numerous strengths of Hong Kong. These include:
World-class business infrastructure: Hong Kong has a world-class business infrastructure, making it easy to start businesses.
Large pool of financial talents: As a traditional finance hub, Hong Kong has an abundance of financial talent.
Access to capital: Startups and incubators are surrounded by a plethora of global investors and financial institutions with the ability to lead funding rounds.
Proximity to China: Hong Kong is right next door to the biggest market in the world.
Perfect testbed: Launching startups is predominantly about product-market fit. Hong Kong’s highly concentrated population of 7 million makes it the perfect testbed for startups to test new ideas before expanding regionally.
But Hong Kong does have certain weaknesses that could hinder its ability to become a leader in fintech. Simon points out that the Hong Kong startup scene is still lagging behind as compared to its peers in the region, such as Singapore. There is also a limited supply of tech talent as there are too little tech companies, resulting in a weak ecosystem for tech talent. Nonetheless, Simon believes that such tech talents do exist in Hong Kong, and it is simply a matter of time before Hong Kong develops a strong tech community.
However, Simon emphasizes that while Hong Kong is an ideal place to launch a fintech startup, it is not the end game. “What is of ultimate importance is whether a company can scale beyond Hong Kong,” says Simon.
After the success of WeLend in Hong Kong, WeLab has expanded into China and has launched Wolaidai – a mobile lending app targeting high-income young professionals. Thus far, the platform has generated over US$20 billion in applications in China.
Simon points out that localization was one of the main challenges they faced. Being a Hong Kong company does not necessarily have an edge when it comes to blending in with the Chinese culture and understanding the China market. WeLab recognized early on that they would need to rely heavily on local talent to penetrate the market. They spent an extensive effort in building a separate China management team. “It is important to understand the similarities and differences between the two markets in order to craft the appropriate strategies,” stresses Simon.
That being said, Simon believes that Hong Kong still has its advantage of being a point of entry into China as compared to directly tapping into the China market from the beginning. “With its established and mature rule of law, Hong Kong is a great place as a launchpad into China. It is much easier to set up in Hong Kong and then expand into China,” says Simon.
Comparing the ecosystem of Hong Kong and China, Simon believes that it is meaningless to say which is better. For him, the most important thing is to find out how we can leverage the best that these regions can offer. Hong Kong has an edge in terms of financial talent and has a relatively easy-to-navigate landscape. China, on the other hand, has a huge consumer market and an abundance of tech talent. He believes that Hong Kong startups should seek to maximize the respective advantages from both regions.
The fintech scene in Hong Kong is fast growing. Currently, Hong Kong is home to around 160 fintech startups with active incubators and accelerators. Simon is optimistic about the future of Hong Kong as a startup and fintech hub. Hong Kong has a world-class financial infrastructure that makes it an ideal place to launch a fintech startup. He also observes that the Hong Kong government has stepped up a lot in terms of its support to the startup and fintech industry in recent years. There has been a significant increase in incubators, accelerators and funds. In other words, Hong Kong has what it takes to be a leading fintech hub. It is now up to the entrepreneurs to leverage these resources and build their companies.