Hong Kong ´s economic travails are an unwelcome guest in the city’s fintech party. Enthusiasm for online-only banks was palpable at the Fintech Week conference. Yet months of political unrest have hit small businesses, and the added risks may delay local launches by the likes of Standard Chartered and Tencent.
Yet just 40 kilometres away from sunny Lantau, Hong Kong ’s central business districts and elsewhere are reeling from broader malaise. The financial centre’s economy shrank by 3.2% in the third quarter, plunging it into recession for the first time in a decade, as increasingly violent anti-government protests took hold. Lenders now face lower profitability as risks of loan losses and higher credit costs rise, Morgan Stanley analysts warned in a recent note. The protest-battered city’s 340,000 small and medium-sized businesses, prime customers for online-only banks, have been hit the hardest. Virtual banks say they remain fully committed to Hong Kong.
The special administrative region’s embattled chief executive, Carrie Lam, has made fintech an important area of focus and investment for her government. And of course she is partly to blame for the deteriorating climate in the city. Lam’s administration, perhaps Hong Kong’s most unpopular one since reverting to Chinese rule, has repeatedly failed to defuse large-scale anti-government unrest. It’s an unfortunate own goal all around.