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Tuesday, October 22nd, 2019

Singapore licenses first Chinese fintech firm, heating up competition with Hong Kong

by July 17, 2017 General

China’s second-largest peer-to-peer lending platform, founded by the Ping An Group, has been granted a licence to operate in Singapore, giving the city a leg up in its competition against Hong Kong in attracting investments to nurture financial technology and innovation.

Lujiazui International Financial Asset Exchange, or Lufax, the P2P lender that Ping An established in 2011, was given the green light to launch an international wealth management platform by the Monetary Authority of Singapore, which will launch next month.

Gregory Gibb, co-chairman and chief executive of Lufax Holdings which owns the platform in Singapore,said regulation was a key reason the group had opted for Singapore instead of Hong Kong for the development.

“Singapore has developed fintech regulation for a long time so that it has a clear and established regulatory regime on what it wants from the fintech company on platform and product development,” Gibb told the Post before the launch ceremony on Monday in Singapore.

Lufax is in the business of matching borrowers with lenders, collecting a 4 per cent fee on every loan. Since it began in 2011, Lufax said it has arranged more than 200,000 loans valued at a total of US$2.5 billion.

Gibb said initially the new platform will offer simple fund products aimed at Chinese customers with assets overseas before eventually gearing its products towards international clients. The licence is an offshore one, which means it could not sell to domestic Singapore customers.

The target clients will be those with investments ranging from US$5,000 to US$1 million. The platform will sell fund products offered by Ping An and other financial firms.

It is the first time that the Monetary Authority of Singapore has granted a licence to a Chinese fintech company and it piles pressure on Hong Kong as the two cities compete to be Asia’s leading hub for the sector.

Regulators in both cities have issued different policies to encourage their banks, insurance companies and stock exchange operators to come up with new and innovative incentives for financial firms to use new technology to lower costs, enhance efficiency and reduce fraud.

“Singapore has a single regulator – the Monetary Authority of Singapore – that regulates banks, securities and asset management, and that makes it easy for Lufax to deal with just one regulator at a time,” said Gibb. Meanwhile Hong Kong, he pointed out, has a system of multiple regulators – the Hong Kong Monetary Authority for banks, the Securities and Futures Commission (SFC) for securities and funds and the Insurance Authority overseeing insurers.

“In Singapore we only need to deal with one regulator, while in Hong Kong there are different regulators. There is no single regulator in Hong Kong taking the lead in fintech development in the different financial sectors,” he said.

But Gibb said Lufax still considered Hong Kong important and it would take products from Hong Kong to be sold via the Singapore platform.

“Hong Kong is always an important financial market with many international fund houses. We would like to bring these wealth management products to the Lufax platform,” he said.

James Lau, Hong Kong’s secretary for financial services and the treasury, said the multiple regulator model would not make the city less competitive because all the different watchdogs had adopted a flexible approach to the development of the fintech industry.

Singapore is a key financial hub of the Belt and Road Initiative, Beijing’s grand plan to establish road, railway and other infrastructure projects in 65 countries across Asia, the Middle East and Europe to re-establish ancient trade links.

Peter Ma Mingzhe, the founder and chairman of Ping An Group, cited this as another important factor in deciding to base the platform there.

“The establishment of Lu International in Singapore, an important financial hub of China’s belt and road initiative, means that Ping An’s successful and unique business model in China will be operating within Singapore’s well-developed financial system and regulatory framework and tested by global investors,” he said.

Leong Sing Chiong, the Monetary Authority of Singapore’s assistant managing director, said the regulator is very keen to foster fintech development.

“We hope to see more Chinese fintech companies setting up in Singapore. We are looking forward to having more cross-the-border co-operation in banking, insurance and fintech development,” Leong said in a speech at the launch ceremony.

Ma, who founded Ping An Group in 1988 as a life insurer, has in recent year focused on expanding into fintech. Lufax is a peer-to-peer lending and online financial platform which stockbrokers said planned to go public this year or next year, probably listing in Hong Kong. The company, however, declined to comment on a potential listing.

After securing the licence in Singapore, Lu International can provide international investors who have offshore bank accounts with a range of financial services including securities trading and asset management.

Lufax is Singapore’s first wealth management platform to provide account opening and investment procedures accessed entirely through mobile facial recognition, which allows investors to use their smartphone or other device to trade. The platform also uses big data and other technologies to help customers choose the products that best match their risk appetite.

Lufax’s chairman Teh Kok Peng, said China’s extensive experience in fintech could contribute to markets outside the mainland. Initially, Lu International will focus more on Asian markets, and will gradually tap other markets.