Letters | How Hong Kong could take the lead in instant payments

Readers discuss the potential for the city’s fintech sector to distinguish itself, and a way to help keep recession at bay

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Hong Kong FinTech Week held in October 2024 had a greater emphasis on artificial intelligence. Photo: Matt Haldane

Published: 11:30am, 28 Jan 2025

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Hong Kong’s dual-track payment architecture – combining the Faster Payment System (FPS) for instant retail transfers and the Clearing House Automated Transfer System (CHATS) for multicurrency wholesale settlements – has positioned our city at the forefront of financial innovation. To maintain this leadership, we must address challenges in banking access and regulatory frameworks that hinder fintech advancement.

While other financial hubs still rely on slow and costly Swift transfers, Hong Kong’s CHATS handles US dollar, euro and renminbi settlements in Asian hours, complemented by renminbi FPS capabilities. This infrastructure reduces settlement risk and costs for multicurrency investments in Asia-Pacific time zones, making Hong Kong an attractive global wealth management and booking hub.

However, significant challenges remain. Before payments are even made, the arduous process of opening bank accounts for businesses stifles growth. Start-ups and small and medium-sized enterprises face lengthy paperwork, in-person visits and high fees. Compare this to some banks in jurisdictions such as Australia which offer streamlined online set-up.

Payment operators could have stepped up to fill the void. However, their supervision under Customs rather than the Hong Kong Monetary Authority creates regulatory uncertainty and asset safety concerns. This deters broad adoption of fintech innovation. Singapore has successfully integrated multi-tier payment licensing under its financial regulators, and Australia is working towards a similar goal

Major banks sometimes cite anti-money-laundering concerns to justify delays in clients’ transfers to smaller financial institutions. Regulator-mandated whitelisting of licensed institutions can help level the playing field, enabling smaller fintech firms to compete effectively with established banks.

To accelerate the transition from cheques, Hong Kong should leverage its December 2023 implementation of Unique Business Identifiers to integrate Business Registration Numbers (BRN) into FPS proxy addressing, following models such as Australia’s PayID and Singapore’s PayNow.