FSI Fintech

Powered by :

Fintech – a portmanteau of financial technology – is an industry that has seen extraordinary growth in recent years, and Singapore is positioning itself to take full advantage of this emerging new market.

As the term suggests, financial technology utilises technology, such as the internet or apps, to provide financial service. According to a recent study, investment in Asia-Pacific fintech more than quadrupled in 2015 to US$4.3 billion, making it the second-biggest region for fintech investment after North America. Singapore has instigated a range of measures designed to boost its fintech industry, many of which are aimed at encouraging new business ventures.

However, recently, the total number of online crime cases reported for the top four types (e-commerce scams, loan scams, credit-for-sex scams, and internet love scams) increased by almost 60%. To augment its scam-fighting efforts, the Singapore Police Force set up the Anti-Scam Centre (ASC), a dedicated unit within the Commercial Affairs Department (CAD) to tackle scam-related crimes.

With its streamlined investigation and prosecution processes, the Police are now able to intervene at a much faster pace. By collaborating with the three major local banks, suspicious bank accounts that are linked to scams can be frozen within a few days as compared to the previous two weeks to two months waiting period before the setting up of the ASC. In addition to the collaboration with banks to disrupt the scammers’ operations, telecommunications companies will also be engaged to swiftly terminate phone lines used by scammers, further crippling their operations.

In the first three months of the ASC’s operation, 1,286 bank accounts that were linked to scams were frozen, with about S$1.25 million of S$3.84 million scammed recovered from such cases.

The Assistant Director of the Specialised Commercial Crime Division, Deputy Assistant Commissioner (DAC) said that the Police would like to thank these banks for their partnership and commitment to swiftly freeze scam-related bank accounts to mitigate victims’ losses; and provide bank account holders’ particulars and statements promptly to allow the Police to carry out investigations against these money mules and suspected scammers.

To further its anti-scam outreach efforts, the ASC continue to engage and work closely with online marketplaces to introduce anti-scam measures. E-commerce scams have seen a significant increase in the number of victims falling prey to bogus transactions as well. Online marketplaces worked closely with the Police and introduced their anti-scam measures such as publishing scam advisories on their platform, via a form of escrow payment that will only release the money to the seller when the buyer acknowledges through the platform, that the item has been received in good order.

Additionally, one online marketplace introduced a ‘My Info’ page developed by the Government Technology Agency which allows its users to verify the identity of another account user, thus preventing scammers from creating multiple fake accounts.

With the strong support and commitment from these strategic partners, the ASC will continue to strategise and leverage technology to implement more measures and work towards realising the CAD’s vision of making Singapore the safest and most trusted place for business and finance.

Furthermore, Prime Minister Lee Hsien Loong announced plans to make the city-state the world’s first ‘smart nation’ by 2030, using technology to improve the economy and enhance the standard of living. The Monetary Authority of Singapore, Singapore’s central bank and financial regulator, is also helping create a ‘smart financial centre’ where technology is used to increase efficiency and create opportunities.

Migrant workers face many challenges in sending money from abroad. Starting from the language barrier when they want to use the country’s banking services, up to 77% of migrant workers have bank accounts but do not use them. Besides, many of these migrant workers are not used to using financial technology to manage their money.

Now, a startup engaged in financial technology (fintech) in Indonesia facilitates migrant workers and their families to manage and send money. The tech start-up said the problems faced by Indonesian migrant workers in managing and sending their money home are real.

Many of these workers are family breadwinners with both elderly parents as dependents and, children who live in homes, most of whom do not have bank accounts.

Moreover, migrant workers are often used by multiple intermediaries regarding remittances or third-party relatives which generally expose them to high risks or must pay high cash handling fees. All the existing limitations limit them from complete control of their income and the difficulty of making direct transactions for various necessities of life in their hometown.

Therefore, the tech start-up developed an app, intending to be the leading IDR electronic money service serving Indonesian people abroad, especially the migrant worker community. The tech developers aim to give migrant workers the flexibility to take full control of the money they earn, with a more transparent approach.

With the platform, migrant workers can deposit their salaries through official outlets in the countries they work for to top-up balances. Users also have access to funds in electronic money and can make various cross-border transactions without cash to send money to their families in their home country, and make daily payments such as buying credit, paying monthly bills, and buying various necessities. Withdrawing cash from the platform will only cost IDR 2,500 (around US$ 0.5), which is up to 10 times cheaper than similar services. Meanwhile, users can make transfers to fellow users for free.

Since its launch in June 2020, the digital money platform has received a total gross transaction value (GTV) volume of IDR 90 billion from 45,000 users. The platform has also acquired 37,261 agents throughout Indonesia, Taiwan, Singapore, and Hong Kong. Through the app, migrant workers can now plan their finances digitally, in real-time, and flexibly with better security and efficiency, anytime and anywhere.

Accordingly, reports say that Fintech is expected to become a major driver of financial inclusion in Indonesia. The country is preparing itself to embrace future disruptions with the government’s 2020 Go Digital Vision to boost overall growth, improve workers’ skills, and create jobs.

Fintech is at the core of plans to meet the target of 75% of Indonesians gaining access to a formal bank account by 2019 set out in the National Strategy for Financial Inclusion. Being less homogeneous than banks, fintech companies can create a more diverse, secure, and stable financial services landscape.

Also, unburdened by legacy systems, fintech companies have greater scope to reduce costs and improve service quality. For example, by leveraging big data, machine learning and alternative data, fintech firms can develop innovative risk assessment models to generate credit scores for customers with limited credit histories. Shaping a stable and cost-efficient ecosystem for fintech in Indonesia is a significant but manageable challenge. Fintech offers a veritable gold mine of insights and applications that can transform governance, and support Indonesia’s efforts in planning for a future with smart solutions

The United Payments Interface (UPI) has broken a new record, crossing IN₹5 trillion (US$68.8 billion) in value in March across 2.30 billion transactions. UPI is an instant real-time payment system that facilitates inter-bank transactions. It was developed by the National Payments Corporation of India (NPCI).

According to a news report, the March numbers come after a marginal dip in February. Over the past year, UPI has seen exponential growth. Data from the government’s DigiDhan dashboard show that the Bharat Interface for Money (BHIM UPI) was the most popular means of digital payments amounting to 38.77% of all such payments in 2020-21.

Over the year, NPCI is looking to cap each company’s market share in UPI. An official statement explained that UPI transactions on third-party payment apps cannot exceed 30% of the overall volume of transactions processed in UPI during the preceding three months. Although the cap became effective at the beginning of January, existing third-party operators like Google Pay and PhonePe, who have a 40% market share, have been given until 2022 to comply with the new rules.

Regarding digital payments infrastructure, in February, NPCI said it was upgrading the IT systems of all its key payment channels, including the UPI. The modifications would focus on enhancing capabilities to process increased volumes, improving resilience to external outages seen at banks, and will include an architectural revamp of IT systems to better process credit return pile-ups. NPCI also announced it is working on a digital payment product for feature phone users and those who do not use mobile applications.

NPCI was incorporated in 2008 as an umbrella organisation for operating retail payments and settlement systems in India. It brings innovation to the retail payment systems through the use of technology and is working to transform India into a digital economy.

As per the latest data, India’s fintech is a US$100 billion opportunity and UPI has had a major role to play in that. From large payments players to upcoming RegTech startups, India’s public digital infrastructure has significantly boosted FinTechs in the country. On top of Aadhaar and UPI, several layers like the Bharat Bill Payment System and Aadhaar Enabled Payment System have been built.

A report explained that the country’s financial technology companies are poised to become three times as valuable in the next five years, reaching a valuation of US$150-160 billion by 2025. India’s dynamic FinTech industry has over 2,100 FinTechs of which 67% have been set up over the last five years alone. The total valuation of the industry is estimated at US$50-60 billion.

The industry’s growth has been undeterred by the pandemic, as it has seen the emergence of three new Unicorns since January 2020. Another media report noted that India had the highest number of real-time online transactions in 2020. The country processed around 25.5 billion real-time payments transactions, followed by 15.7 billion in China, 6 billion in South Korea, 5.2 billion in Thailand, and 2.8 billion in the UK. Among the top ten countries, the US was ranked ninth with 1.2 billion transactions. The transaction volume share for instant payments India, among real-time transactions, was 15.6% and 22.9% for other electronic payments in 2020.

The Hong Kong University of Science and Technology (HKUST) signed a Memorandum of Understanding (MOU) with one of the “big four” banks in the People’s Republic of China (the Bank) on 1 April 2021 to co-organize a master program in Financial Technology (MSc in Fintech) in the new academic year – the first such program in the Greater Bay Area.

The collaboration – which also includes a mini-MBA program targeting micro, small and medium enterprises (SME), and the Bank sharing financial cases and data with HKUST for relevant joint research projects – sets a new model for youth exchanges and financial connectivity between Hong Kong and the mainland.

According to the agreement, the Bank will recommend qualified candidates – not confining to the Bank’s staff, to join HKUST’s MSc in Fintech program every year.

Meanwhile, the Bank will also open some of its practical financial courses and facilities at its South China Campus to all HKUST students of the MSc in Fintech program, who can apply for elective courses there and participate in exchange visits and internship training.

Candidates who complete the master program will receive a certificate of completion, while those who meet the graduation requirements will be awarded a degree certificate from the HKUST.

The signing ceremony was conducted via video conference in Hong Kong and Beijing in light of the COVID-19 pandemic. Under the witnesses of the Deputy Director of the Hong Kong and Macau Affairs Office of the State Council; the Deputy Director of the Central People’s Government Liaison Office in Hong Kong; the Chairman of the Bank; the Vice-President of the Bank; the President of HKUST; and representatives of the Ministry of Education.

The HKUST Vice-President for Institutional Advancement and a representative of the Bank signed the agreement.

The HKUST President stated that the University welcomes the partnership at the ceremony. He noted that this collaboration marks forward-looking and open cooperation between academia and enterprises. As a leader in the banking sector, the Bank has been actively promoting the development of Fintech.

“We will leverage this opportunity and make good use of HKUST’s substantial strength in Fintech related expertise to further promote [the] implementation of the technology, as well as nurturing more Fintech professionals with diverse background and experiences to advance their innovative ideas and relevant expertise,” he said.

The Chairman of the Bank stated that the cooperation seeks to set an example of bank-university cooperation between Hong Kong and the mainland and to drive innovation in the cross-border integration of youth, enterprises and academia.

Apart from nurturing high-calibre financial talents and showing them the latest trends in Fintech, the scheme will also facilitate Hong Kong students to have a better understanding of the mainland, and vice versa.

Meanwhile, the collaboration will also enhance the financial knowledge of SME owners as well as our ability to provide better full-lifecycle financial services for them.

Apart from the program, the parties have also planned to launch wide-ranging collaboration including a mini-MBA program for SME owners as well as other short-term training courses. The mini-MBA program aims to open in September 2022, will focus on the exploration of an effective model that could help SMEs to solve their operational and financing obstacles.

Meanwhile, the Bank will provide HKUST students with internship opportunities, entrepreneurial mentorship and financial support. The two parties will also launch activities such as entrepreneurship competitions.

HKUST has stepped up cooperation with the Bank since signing a framework agreement on cooperation in October 2018. One of the landmark projects was the “Certified Fintech Practitioners Training program” – an accredited training program co-developed among HKUST, the Bank, the China Banking Association and Shenzhen University, which has trained and certified more than 6,000 Fintech professionals to this date.

People in Indonesia are turning to digital services during the COVID-19 pandemic, one of which is non-cash payments. Financial technology (fintech) payments companies saw a 267% increase in the number of users.

Growth marketing experts of these companies said the number of users in Indonesia was more than 10 million per month during the fourth quarter of 2020. Companies recorded an increase in the number of users. According to them, there is a substantial addition of new users throughout 2020.

In total, the application for a specific fintech service is already used on 115 million devices. They believed that the number of users increased because people switched to digital services during the pandemic. They also recorded an increase in the number of partner merchants by 95% on an annual basis (year on year/YOY) last year.

As digital payment platforms, these fintech companies encourage MSME players to digitise, especially adopting digital payment methods. They said that their companies saw that there was a great potential for MSME players to enter the digital realm.

These companies also revealed that the efforts they made are in line with the targets of the Ministry of Cooperatives and SMEs. The Ministry is targeting 30 million MSMEs to enter the digital market by 2023.

Accordingly, an Indonesian bank’s research team conducted a survey involving more than 500 respondents in Java, including Jakarta and several small regions outside Java, entitled “Indonesia Consumption Basket”. The survey found that the number of e-commerce customers in Indonesia rose to 66% after the COVID-19 pandemic hit the country as a direct impact of the Large-scale Social Restrictions (PSBB). On top of that, since 2019, 90% of internet users in Indonesia have made purchases via e-commerce platforms, making Indonesia the country with the highest rate of e-commerce use in Southeast Asia.

The survey also revealed that online shopping increased by about 14% while conventional shopping fell significantly by 24% since the pandemic. Before the pandemic, 72% of respondents chose conventional shopping over online shopping. According to a report, Indonesia’s e-commerce Gross Marketing Value (GMV) increased to US$10 billion in the second quarter of 2020 as people switched to online platforms to buy daily needs such as health and beauty products, groceries, and fast-moving consumer goods (FMCG). This has also caused activities in traditional markets to plunge to 30% from 52%.

The high interest in online shopping has not only benefited large companies that sell their products via e-commerce platforms but has also supported the growth of MSMEs. By purchasing MSME products online, people meet their daily needs while maintaining economic sustainability as well as social distancing during the pandemic.

Although the number of e-commerce shoppers rose sharply during the pandemic, Indonesia’s e-commerce has evolved and stood out in Southeast Asia even before the COVID-19 pandemic and served as one of the most prominent driving forces of national economic growth. The Gross Market Value (GMV) of Indonesia’s e-commerce stood at US$21 billion in 2019 and is expected to hit the US$40 billion mark by 2022.

Furthermore, to support the growth of e-commerce in Indonesia, the government has strengthened internet networks in all regions across the country. Minister of National Planning and Development Bambang Brodjenegoro said in the annual Organisation for Economic Co-Operation and Development (OECD) Ministerial Meeting that the Indonesian government continued to improve communication and information technology services for internet users in Indonesia to increase economic productivity and open new job opportunities.

Disruptive technologies have been revolutionising traditional financial services for some time now, providing opportunities for digital innovators and e-commerce entrepreneurs.  Online offerings allow wider coverage and access to underbanked demographics and ensure remote transactions in general.

Beyond a doubt, the COVID-19 crisis has accelerated the role of fintech in the banking landscape. The coronavirus has also significantly affected the New Zealand financial sector and the economy accordingly to New Zealand fintech experts. While the impact has started to be felt, it is not known in what way and for how long these effects will last. There are a plethora of ways the virus could change the fintech landscape across industries.

Some sectors are fairly obvious – like insurance. The pandemic has generated a keener awareness of the need for insurance, increasing demand for health and life coverage, business interruption and cancellations of sport, music, conference and events.

But the main transition is the way the financial sector is going to be affected by fintech and online offerings. Companies with digital products are already doing well during this time and online banking is likely to be the new normal. Traditional banks transform as well as be prepared to support their customers that may not be familiar with digital products and procedures – and, in some cases, not even have the right devices, like smartphones.

Disruptive technology has given rise to new avenues of funding and access to resources that traditional banks did not offer and may not have encouraged. New Zealand’s peer-to-peer lending (P2P) and equity crowdfunding sectors experienced steady growth in the last year, according to data from the Financial Markets Authority (FMA).

In its fourth statistical report on the sectors for the latest fiscal year, there are now more than 34,000 registered investors on P2P platforms. While the number of investors with open investments increased slightly to 12,800, the total amount of outstanding loans on the lending platforms books was A$ 624 million, up 8% over the year from 2019-20. These numbers have increased substantially since 2017 when there were 8,000 open investments and approximately $360 million in outstanding loans.

Meanwhile, equity crowdfunding providers raised $16.5 million from retail investors in the year to June 2020, a 20% increase from 2019. Licensed crowdfunding platforms introduced 25 successful offers, compared to 19 in the previous year. About 5,300 investors used licensed service in 2020. The total money raised by crowdfunding platforms was $34 million, including from retail and other wholesale investors.

With such trends and growth, the question is should the Financial Markets Authority think about removing regulations to help drive and scale fintechs? One of the main intentions of the Financial Markets Conduct Act is to promote innovation and flexibility in New Zealand’s capital markets. Peer-to-peer lending services provide an alternative form of borrowing and fixed-income investment, while equity crowdfunding services provide an alternative pathway for companies to raise capital in a cost-effective manner.

According to FintechNZ, fintech investment in New Zealand quadrupled to NZ$ 4.3 billion , making the sector the second biggest in the region for growth. Instead of its physical remoteness acting as a deterrent, it has created conducive conditions for the nation to serve as a tech incubator. Combined with the government’s investment in infrastructure, incubators and its investment funds, fintech has been able to flourish. With one of the earliest fintechs that started in growing to a bn NZ$ 8.15 billion company, many other fintechs are looking to take the reins in New Zealand.

As the world leader in internet and social media usage, the Philippines also aims to become the leader in digital banking, as it welcomes its first digital-only bank. Branding itself as Southeast Asia’s first digital-only bank, the new player formally launched as the “first neobank” in the country.  A neobank is a type of bank that operates exclusively online without traditional physical branch networks.

The company said that the fact that 70% of the Filipinos remain unbanked shows that the tedious onboarding process of traditional banks. The company also believes that banking should be easy, fun, and – like most services these days – right there, in the palm of your hand. The digital bank uses technology to dramatically cut operating costs, which allows them to offer low-interest rates and not to charge additional fees to its customers.

The digital bank said it aims to disrupt the Filipino retail banking industry by bringing to the market a branchless way of banking on a secure mobile platform.  The platform is supervised by the Bangko Sentral ng Pilipinas (BSP) and its deposits are insured by the Philippine Deposit Insurance Corporation (PDIC). The bank also said that its cloud-based solution is powered by several global financial technology firms.

The company said customers can open a functional banking account in under five minutes using the app, an ID, and a selfie. Users’ accounts can then be topped up in various ways, including interbank, debit card, or in cash at different retail agents across the country.  Immediately upon onboarding, the customer is issued a virtual debit card that can be used at a variety of e-merchants.  The product offer will soon be expanded to include a physical debit card or take out an all-digital consumer loan.

Although aiming for a friendly personality, one of the things that the digital bank said it takes seriously is the security of the client’s funds and transactions on its systems. The company said that it is the first bank in the Philippines certified as compliant with the Payment Card Industry Data Security Standard (PCI-DSS), considered as one of the highest standards in payment card security.  The digital bank’s systems are also certified by the Certified Information Systems Auditor (CISA), the authority in global IT security audits. The digital bank also added that their client’s access is protected by the highest level of safety through server-based biometrics, while all passwords and OTPs are subject to military-grade encryption.

Moreover, the digital bank said it offers deposit interest rates of up to 6% per annum.  To make saving more relevant and social, the company said it also offers unique Stash and Group Stash features, as well as traditional Term Deposits.

Furthermore, more Filipinos are encouraged to open accounts with digital-only banks, or so-called neobanks, as online banking’s popularity is seen to be increasing in the country, according to a study. The study by Backbase Asia-Pacific Pte. Ltd. and International Data Corp. (IDC) noted that 60% of the bankable customers in the country are willing to shift to more digital banks. 80% of the customers in the country is also expected to open new bank accounts with other banks by 2025, according to the study titled “Fintech and Digital Banking 2025.”

With the increasing presence of neobanks and financial technology, the report said that the unbanked and underbanked segments in the Philippines are anticipated to be reduced by half to around 20% in five years.

The National Payments Corporation of India (NPCI) is working on a digital payments product for feature phone users and those who do not use mobile applications. The product is currently only at the proof of concept (POC) stage.

A news report quoted Praveena Rai, the chief operating officer of NPCI saying, “We need to move into the market which is feature phone-based. Moving towards voice-enabled payments will be the trend of digital payments that we should see and India will be a clear innovator there.”

In 2020, NPCI, CIIE.CO, and the Bill and Melinda Gates Foundation launched a hackathon looking for a feature phone-based payments solution. The new product, set to be launched in the coming months, is an outcome of that hackathon, where fintech groups Gupshup, Minkville and Tonetag were adjudged the top contestants.

The report further noted that while NPCI initiated an SMS-based payment solution called Unstructured Supplementary Service Data (USSD) in 2016, it fell out of use following the launch of the Bharat Interface for Payments (BHIM) app in late 2017.

NPCI is also running another hackathon on payment authentication, which was launched last month. Rai said that this particular competition is aimed at looking for better ways of authenticating UPI transactions while making the security systems stronger than they presently are. The solutions should be UPI-integrated, which showcase the end-to-end onboarding of customers and authorisation of transactions. They must also provide parameters to enable the risk scoring of users and transactions.

The organisation continues to explore the possibility of making the country’s transit systems digitally enabled. The Delhi Metro’s Airport line has a QR code-based ticketing system. The solution is now being extended to bus services, with Canara Bank already running the project in Bengaluru. NPCI plans to make this a pan-India solution, the report mentioned.

In February, NPCI said it was upgrading the IT systems of all its key payment channels, including the Unified Payments Interface (UPI), Immediate Payment Service (IMPS), Aadhar-Enabled Payment System (AePS), and the National Automated Clearing House (NACH).

The modifications will focus on enhancing capabilities to process increased volumes, improving resilience to external outages seen at banks, and will include an architectural revamp of IT systems to better process credit return pile-ups, as OpenGov Asia had reported.

The move was made as the organisation anticipates online transactions to soon hit a billion a day. NPCI aims to complete these system migrations by the end of FY21. The upgrades will not only deal with current concerns but will also consider the scope for future growth and the related complications.

More recently, last week, in continuation of the Reserve Bank of India’s vision for a customer-friendly and transparent dispute redressal mechanism (ODR), NPCI announced it was going live with ‘UPI-Help’ on BHIM-UPI, a part of Digi-Help stack. The redressal mechanism will create a superior and hassle-free experience on issue resolution for BHIM UPI app users.  The UPI-Help will enable BHIM UPI users to use their app for the following:

  1. Check status for pending transactions.
  2. Raise complaints about transactions that have not been processed or money that was not credited to the beneficiary.
  3. Raise complaints about merchant transactions; UPI-Help can resolve complaints online for person-to-person (P2P) transactions.

Additionally, in case of pending transactions where the user does not take any action, the UPI-Help shall also proactively attempt to auto-update the final status of the transactions on the app.

NPCI was incorporated in 2008 as an umbrella organisation for operating retail payments and settlement systems in India. It is focused on bringing innovations in the retail payment systems through the use of technology and is working to transform India into a digital economy.

OpenGov TV Speaker Panel – Open Banking

Part 2 of our OpenGov TV Speaker Panel series with OneConnect. Listen to experts talk about Open Banking and how it can impact the banking world!