Hong Kong’s banking industry—like the rest of the world’s—has become a lot less exciting, more closely scrutinized and often less lucrative for its one-time rainmakers. As a result, executives from the cloistered confines of banking are doing something that would have been unthinkable, even horrifying, just a decade ago: starting their own businesses.
Banking is a “very different field” than it was before the 2008 financial crisis, said Simon Loong, an ex-Citibank and Standard Chartered manager who founded the peer-to-peer lending platform WeLend in 2012. Banks are less generous about compensation, have reined in their spending and growth plans, and are not encouraging bankers to innovate: “It’s not as fun as before.”
Rather than leaving Hong Kong in search of the next banking hot-spot, a growing number of finance pros like Loong have started businesses, from last-minute hotel booking websites to crowd-funding groups to organic farms. The career-hopping has helped push start-ups to 16% of new investments in Hong Kong last year, from 11% in 2010, Bloomberg reported today.
In many cases, they’re going directly after their old employers’ business. WeLend, which aims to cut out the “expensive middlemen” in lending (aka banks and bankers), now has over 3,500 members, and has made over HK$195 million in loans with a team that includes former bankers from HSBC, Goldman Sachs and Bank of Montreal. James Giancotti, a former Goldman Sachs and JP Morgan banker, has attracted more than 900 backers for his crowd-funding company BigColors. Often, these funders are other bankers still at big financial firms he said, looking for their “ticket out of banking,” he told Bloomberg.
These finance-focused start-ups help explain why despite several ho-hum years for banking in Hong Kong, jobs in the broader finance sector accounted for 19% (pdf, pg 2) of Hong Kong’s overall employment in 2012, up from 16% (pdf) in 2007—an increase of 151,000 jobs.
Hong Kong is rich with foreign bankers who arrived with a multinational corporation and then stayed on after the job disappeared or became less appealing, in thrall with the easy climate, high quality of life (pollution notwithstanding) and the low tax rates. “I thought I’d be here for three years, but it has been 15,” is a common expat refrain; many parents even send their kids to boarding school in their home country while they stay in Hong Kong.
Jumping to a start-up means forgoing the fancy hotels and business class flights of the banking industry, but in Hong Kong it doesn’t always mean taking a massive pay cut. WeLab pays “competitively,” in part because it is hard to lure talent in Hong Kong with astronomical rents otherwise, Loong said—though he admits pay is “not our top attraction.” Bankers who make the jump are looking for an opportunity to “impact the future, and make a change in the field they know, which is finance,” he said.