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Talent Managers Q&A: Growing Hong Kong into the world’s leading Fintech hubs

March 10, 2017
| Hong Kong

Asia Pacific investment in Fintech quintupled to US$3.5 billion in 2015, from only US$880 million in 2014, and is now the world’s second largest geographic market for Fintech investments after North America, driven mainly by mainland China1. The increased interest of financial services players in escalating their participation in financial technology announces the arrival of digital transformation, as well as the opportunities and challenges for the incumbents in the industry.

To respond to this irresistible wave, the Hong Kong Government recently announced in her latest Policy Address and Budget a series of initiatives that promote Fintech application, investment and development in Hong Kong. A supportive approach from the government can help organisations effectively balance opportunities and challenges, with the redefined talent strategy that will enable them to continuously compete for business and customers. In this article, our Talent & Rewards experts from Willis Towers Watson discuss the ins and outs of Fintech development and provide guidance for organisations.

Q: How effective do you see these additional measures introduced by the Government to developing Hong Kong into a Fintech hub?

A: Frances: Our recent research on Hong Kong banking industry indicates a growing trends of technology and data analytics related roles in banks. For example, Over the past five years, Fintech and analytics related positions have increased in head count by 27%, comparing with 18% increase in total population under our banking database. Total compensation spend to this group of employees jumped by 57% for the same period, much higher than the increase in headcount.

In respond to the rapid growth of technology sector, we see that Government has been taking positive approach to nurture Fintech community by introducing additional measures on regulation, facilitation, talent, promotion and funding. While we appreciate the intention, impact of those measures to address major challenges companies are facing today is yet to be seen.

Greg: Government’s introduction of policies, in the form of tax deductions, funding and infrastructure, will definitely expedite the development of Fintech industry. But back to the basic, our first step should be attracting companies to choose Hong Kong over other locations to establish Fintech organisations or to set up innovation labs, from the industry perspective. This has been such a great interest and no one single country in Asia Pacific can ignore.

Q: What are the most challenging issues to companies that are looking to build Fintech capability?

A: Frances: We see different challenges faced by the startups as compared to the established financial institutions when it comes to building fintech capabilities.

Number one challenge for small startups is the source of funding. Although the Government proposed to set up a HK$2 billion Innovation and Technology Venture Fund to encourage local IT startups, the application process is usually known to be very long and tedious, which requires heavy administrative efforts. It becomes a hurdle to the young and bright who are looking for faster and easier solution to their funding thirst – for example, by choosing Qianhai (前海) over Hong Kong, for wider pool of talents, lower operational costs and easier access to China’s angel investors.

On the other hand, government supportive policy is often not a major push factor when it comes to well-established financial institutions; instead they are motivated mainly by internal drivers – enhancing customer experience and bringing up efficiency. They are constantly looking to develop Fintech capabilities by ways of transforming the current traditional operation model to a more technology oriented approach. Such digital transformation touches upon many aspects of the organization and is potentially impacted by having the right human capital strategy.

Greg: In Hong Kong, there are organisations at all places along the spectrum of Fintech maturity, but compared to cities such as Singapore and Beijing, Hong Kong is slight behind due to a lack of digital talent, not only in Fintech specifically, but also in technology in general.

Singapore was deemed the capital of Fintech for Asia and as well a direct competitor for talent of all financial services roles, including Fintech roles. Unfortunately for Hong Kong, Singapore is today’s hot spot and has head start on Hong Kong when it comes to developing a Fintech ecosystem, in other words, a Fintech culture.

Q: What are some of the human capital implications in the new eco-system?

A: Frances: To facilitate the development of a Fintech ecosystem, companies should consider two important aspects:

  1. The right organisational structure – A flexible structure with clear talent strategy, with updated role and responsibility for technology function to ensure the business is nimble and agile enough to embrace disruptive change.
  2. The right culture – Digital transformation will bring in and be stimulated by changes of mindset. The right mindset helps promote a corporate culture that motivates technology change. Companies should consider not only the required funding for setting up technology function or Fintech capability, but also how they can embed the right mindset and build the right culture that encourages innovation.

Greg: The world is transforming, so as the customers and the employees. To compete for customers and talents, organisations must embrace a digital transformation. In addition to what have been discussed above, digital transformation also means strategically enhance training and people development, as well as talent wars with traditional and non-traditional peers.

In Q1 2016, total investment in Fintech companies hitting US$5.7 billion. Globally, venture capital backed Fintech companies drew US$4.9 billion in funding, rising from just US$1.9 billion in Q4 20152. Technology firms are increasingly attracting key talent away from the financial services industry, with less regulation and scrutiny in the high tech industry, more innovative, entrepreneurial work environments, and highly competitive total rewards packages.

Q: How to attract technology talents?

A: Frances: Latest findings from our Global Talent Management and Rewards Study showed that drivers for attraction and retaining technology talents are quite different from other industries in general.

Similar to general industries, “base pay” tops the list and becomes the most important driver of attraction to technology talents. However, driver ranked immediately after “base pay” is “challenging work”, which only ranked fourth for employees from general industries. “Flexible work arrangement” is also within top 7 drivers for technology talents, but not for general industries.

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Our study reveals that technology talents are looking for open communication and efficient response from employers and co-workers. Attracting technology talent is therefore not only about paying them well, but also about having the right environment or ecosystem which allows them to make a difference and succeed.

This starts from their talent selection process. Companies should aim to identify the right mindset and working style that helps employees to fit into the innovative culture, at the same time, to promote digital transformation. For example, by leveraging talent assessment tools, companies can design and put in place a more comprehensive yet sophisticated interview process in order to find the “best fit” talent with the right mindset.

To learn more about our survey findings and human capital strategy for Fintech or financial services organisations, please contact your local Willis Towers Watson consultants or Frances Wang.

Reference:
1 The Future of Fintech Banking, Accenture, 2015.
2 KPMG and CB Insights

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