The eight virtual banking licences issued by the Hong Kong Monetary Authority (HKMA) last year were hot tickets for the city’s fledgling fintech sector. They not only spawned a new generation of licensed digital banks to add to Hong Kong’s 150+ financial institutions but a host of auxiliary firms specialising in consumer- and business-facing payments services, AI and data privacy, and other institutional tools.
The regulatory move into fintech has been well timed. As Eddie Yue, Chief Executive of the Hong Kong Money Authority put it in his keynote speech at September’s HK Institute of Bankers annual conference, “the COVID-19 pandemic has given new impetus to the use of mobile banking and electronic payment services”, with “some 80% of payments under this year’s Cash Payout Scheme [the government’s coronavirus tax rebate program] … made through electronic registration.”
The announcement of the addition of Chinese bonds to the World Government Bond Index from October next year has also emphasised Hong Kong’s strategic role as the largest trustee for cross-border capital flows with the mainland which fintech innovators will be wise to capitalise on.
Bertrand Theaud, founder of STATRYS, a Hong Kong-based B2B payments service, spoke to #DisruptionBanking about his company’s partnership with one of the state’s new licensed digital banks, and their hopes for Hong Kong’s fintech sector going forward:
When and where was STATRYS founded, and what were its initial commercial and technological goals?
“As an entrepreneur myself, I was exposed to the difficulty of dealing with traditional financial institutions, especially in Hong Kong. When I realized the number of SMEs going through the same challenging experience, I decided to start Statrys.
“The Statrys project initially started in 2018 and we had a soft launch in November 2019.
We officially launched Statrys during the Hong Kong financial forum on the 18-19th of January 2020.
“Statrys offers an alternative to traditional banks for SMEs, entrepreneurs, freelancers, and small enterprises in Asia. The platform is 100% digital and cloud base, using the latest cutting edge technology to enable further development without a technological legacy holding it back.
How far does STATRYS engage with customers – beyond the advanced markets of Hong Kong and Singapore?
“Compared to the west, Asian, South East Asian, and South Asian markets share a similarity in that small businesses there are far more Family-run than their western counterparts. A small 2-person company in the US would likely be unrelated partners based on skillsets or resources, whereas a 2-person company in Thailand, China, India, etc, will be made up of family members or close friends regardless of skillsets one may bring to the company.
“Personal connections play a role as well not only in the formation of the companies, but also in the vendor-customer relationship. Obviously this is less so the situation in developed Asian markets like Hong Kong or Singapore, but even then, the majority of business accounts exist in these developed markets as these family-oriented entrepreneurs.
“So, in a nutshell, Hong Kong acts as a great collection point of these small family businesses in Asia, where banking and access to financial resources are difficult to acquire whether it be because these companies have such few associates or even just unstructured finances preventing them providing the right documents to open business accounts easily. Further, these businesses often trade with neighbouring countries or even in the west, and so they will also require FX services, something that Statrys also offers to help SMEs in Asia reach new markets easier.
“We are not yet operating locally in those neighbourhood markets but plan to in the future.
“On another note, the Statrys debit Mastercard is not yet available, but definitely one of our priorities. We’re working on the technology integration with our card partner and are expecting a release in Q1 2021.
Looking at the South- and East-Asian markets more broadly, where does STATRYS see the major market disruption emerging after the pandemic?
“There are more and more opportunities in the region as the GDP of the ASEAN region has intensified for a few years now.
“Also with current US-China relations, there is a shift in global trading in the area. Indeed, more and more manufacturers are relocating to SEA countries, and at the same time, more and more Chinese companies are willing to reach out and trade with. One way for them to do so is by starting with Hong Kong.
“The pandemic is already accelerating the shift. With global trade slowing, countries are reconsidering their logistic chains to manufacture closer to the consumer. Consequently, anything produced in Asia will be consumed in Asia, resulting in an increase in payment volume.
What limitations do corporate customers in Hong Kong and the region face when dealing with licensed banks? How will technology – data privacy improvements, KYC, and changing regulatory requirements – change this landscape?
“One common thing we hear from our clients is that opening a business account with traditional banks in Hong Kong is overwhelming. Which is indeed the case. Opening a business account in Hong Kong requires time, and possibly money without any guarantee that the bank account will be opened in the end. The two most cited struggles are administrative requirements and physical visits. whereas at Statrys we make corporate customers’ life easier by simplifying the process – with only 10 minutes of time required – and being 100% online, so if you have access to the internet, you have access to Statrys.
“Contrary to what people may think, KYC regulations in Hong Kong are as rigorous as in Europe. So we identify and verify corporate customers similarly as if they were applying for a business account in Europe.
“The fintech industry in Asia was initially a bit behind compared to other markets only because opening of the banking industry to fintech happened later in Asia.
“Now in Hong Kong, the industry is booming and catching up with the EU and UK market service offering. Regarding other countries, regulations are gradually opening which is a good sign of opportunity to come. That was the case in Singapore in January 2019 when the Monetary Authority of Singapore announced the passing of the payment services act.
Where does STATRYS expect the major threats to its market position to come from in the next five years?
“The biggest threat to Statrys’s growth is the ease of financial regulations around Fintech.
“There are promising signs in the South Eastern Asia. However, countries like Thailand, where we also have an office, have seen some small strides in the right direction, but not exactly reaching the answer.
“Until financial institutions are open to fintech, the current compliance measures will haunt every fintech seeking cross-border growth.
The company has seen some exciting investments including with UK-based Railsbank this year. How does STATRYS hope this partnership will shape its activities going forward? Does this partnership also signal a turn toward UK and European markets going forward?
“Statrys aims to serve each and every local market, as I already mentioned.
Nonetheless, corporate customers from Asia are still interested in doing business with the EU/ UK markets, so we’re thrilled with our partnership with UK-based Railsbank to help serve these customers.
“Among our clients, 47% of the payments are made to the EU and UK markets, and 53% of payments are made locally.
“One of the features of a Statrys business account is the Local EUR account (the GBP account is being released next month). With this feature, we’re facilitating our customers to receive and make payments in the local currency of their suppliers/clients.
“Thus, we have no future development plan in the UK and European markets. The reason is simple as the market is mature with lots of players like Revolut, Monzo or N26.
“Our Core business focuses on SMEs, entrepreneurs, freelancers and small businesses in Asia or those that want to expand their business in the area.”
STATRYS’ partnership with Railsbank reminds us: global institutions of various stripes are forging connections in Hong Kong – including Visa.
Next month over 25,000 global investors, entrepreneurs and techies will meet for Hong Kong Fintech Week 2020, where further outreach is expected.
#HongKong #Statrys #Platform #FX #KYC #DataPrivacy #SME #Fintech
Author: Oliver Rhodes