Playing in the "Sandbox

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Two rival Asian cities reduce regulations for fintech firms—but still face talent challenges.

Whether they are based in Silicon Valley, Austin, Texas, or Mumbai, tech entrepreneurs tend to be a breed unto themselves. And this particular breed is no fan of government—at least not government regulations or bureaucracy that can dampen the start-up culture.

But leave it to the competitive spirit of two longtime rival cities—Hong Kong and Singapore—to put those budding Steve Jobses at ease. In a move that has raised some eyebrows but seems to have had a successful impact, both cities have created a sort of digital safe space where would-be financial technology moguls can try out new ideas—everything from Bitcoin-like payment systems to crowdfunding—under relaxed regulatory constraints. In the lingo of the day, these so-called sandboxes are aimed at encouraging innovation and facilitating access to precious seed capital.

Both cities see an opening here because the Internet finance industry has been mushrooming in Asia, with giants like Tencent, Alibaba and Baidu offering to the enormous population there a host of new ways to bank, invest or shop that have been common in the West. The result: China leads the world in fintech users and market potential, according to one study, with a market size of over $1.8 trillion in 2015 alone. That has spurred global interest in the region and convinced Hong Kong and Singapore to look for ways to open their doors to fintech entrepreneurs.

Sandboxes are not new, of course, but the idea contrasts with the generally strong regulatory regimes that govern banking in Singapore and Hong Kong. For its part, Singapore last year began allowing banks to try out their new fintech products without needing full government compliance. Not to be outdone, Hong Kong a few months later introduced similar rules, allowing banks to pilot new technology, provided it has been tested and remains subject to risk management controls.

Such moves, of course, are tricky because they can scare off consumers expecting airtight protections. But observers say that’s turning out to be a secondary issue. The problem—one facing Asia in general—isn’t on the customer side, but more on finding the right talent to match this new order.

“Both cities are competing to be the fintech capital of Asia, but both are having a hard time,” says Matthew Blume, director of client technology for ASEAN at Thomson Reuters in Singapore. The shared challenge: “There’s quite a shortage of technical talent such as developers with domain knowledge in financial services.”

Not surprisingly, one of the key challenges for candidates moving into the fintech world is the cultural fit, says Ed Zheng, senior client partner at Korn Ferry and leader of the Global Technology Markets & Digital Practice, China. The average age of tech employees is 25 to 30 years, compared with 35 to 50 at traditional financial firms, which drives a very different pace and style of day-to-day work compared with banks. What’s more, Zheng says, “at tech firms the leaders are usually visionaries,” requiring other executives to respond with actionable strategies.

According to Serina Wong, a global sector leader for Wealth Management at Korn Ferry International in Hong Kong, the critical leadership attributes for such talent include “extremely strong and polished communication skills,” coupled with “the ability to deal with ambiguity.” What’s more, she adds, “especially when they go global, they need the ability to deal with regulators.”

Ultimately, the battle for talent may partially be decided by whichever city seems “hotter” in fintech. This fall, Singapore got some attention for holding its inaugural fintech festival—but Hong Kong already had its own conference, which it held just days before. The race is so tight that some surveys put Singapore ahead, others Hong Kong … all of which may mean reducing more regulations for newcomers—more sand in the sandbox, if you will.