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Singapore FinTech Journey 2.0 is about a diverse ecosystem, open architecture, international links, talent, conducive regulations, cybersecurity

Singapore FinTech Journey 20 is about a diverse ecosystem

Speaking at the Singapore FinTech Festival, Mr. Ravi Menon, Managing Director, Monetary Authority of Singapore (MAS), outlined six strategies Singapore is following to foster a thriving FinTech hub.

Ecosystem of Diverse Players

The Singapore Government wants to create an ecosystem for innovation, where established financial institutions and FinTech start-ups compete as well as collaborate.

Mr. Menon said that financial institutions are no longer lagging behind in terms of innovation and almost every major financial institution has an active innovation agenda to strengthen its business by harnessing technology.

“Singapore wants to be the place where these financial institutions test, develop, and apply new technology solutions,” he said.

Over the past few years, global MNCs have set up more than 30 FinTech innovation labs or research centres in Singapore. In addition, over 400 FinTech enterprises have set up base in Singapore, who are experimenting with new ways to pay, save, invest, buy insurance, plan for retirement and more.

Physical spaces are required to facilitate experimentation and collaboration.

Last year, LATTICE80, Singapore’s first FinTech innovation village, was launched occupying two floors of 80 Robinson Road. Now the entire building is being converted into a FinTech innovation hub. Named 80RR, it will have 100,000 square feet dedicated to housing FinTechs, in the heart of Singapore’s financial district.

Open Architecture

“A Smart Nation needs an “open API economy”,” Mr. Menon commented. APIs act as “connectors” that allow systems to talk to one another and enabling service providers to harness information from multiple sources and produce holistic solutions for customers.

MAS has been encouraging financial institutions to develop and share their APIs openly, so that they can work with other service providers to give customers a richer and more seamless experience.

The Finance-as-a-Service API Playbook provides a common guide for banks to identify and develop APIs.

While MAS’ Financial Industry API Register, provides a one-stop shop for FinTech start-ups to explore the open APIs that have been made available.

Banks in Singapore have been opening up their APIs. To-date, over 270 open APIs have been made available by the Singapore financial industry.

OCBC (Overseas Chinese Banking Corporation) Bank has 43 open APIs on its platform that are actively been tapped on by FinTech players, as well as government authorities, such as the Inland Revenue Authority of Singapore.

DBS Bank has launched the world’s largest banking API developer platform with more than 170 APIs and over 50 successful collaborations. For instance, customers looking for properties on the PropertyGuru platform can instantly find out if they are eligible for a property loan and even apply for the loan online.

UOB (United Overseas Bank) has also recently put in place its regional open banking API platform.

Network of International Links

By the end of this week, MAS will have signed 16 FinTech cooperation agreements [1] with governments and authorities around the world. These agreements facilitate information sharing on FinTech trends and regulatory issues. They also have a referral mechanism that support Singapore FinTech start-ups in overseas markets, and facilitate overseas start-ups to set up in Singapore as a gateway to Asia.

Some of the co-operation agreements also include joint innovation projects. For instance, MAS and the Bank of Thailand have agreed to work together to link PayNow and PromptPay, their respective real-time, 24/7 payment systems for making payments from one bank account to another.

Talent and Research

A strong pipeline of talent and research capabilities will be required to sustain Singapore’s FinTech efforts.

As part of initiatives in the area, MAS announced a FinTech R&D collaboration with the Massachusetts Institute of Technology (MIT). This will enable local FinTech talents to work alongside researchers at the MIT Media Lab to come up with technology solutions to real-world use cases. They will run pilots using distributed ledger technology, cryptography, quantum computing and big data, artificial intelligence, and machine learning.

MAS is also launching a S$27 million Artificial Intelligence & Data Analytics Grant. This is part of the S$225 million Financial Sector Technology & Innovation Scheme.

Conducive Regulation

The key challenge is regulation is to make it conducive to FinTech innovation, while ensuring that the system remains stable, key players are sound, and consumer interests are safeguarded. MAS has been striving to strike the right balance.

For example, MAS does not regulate virtual currencies and welcomes them as an innovation that can potentially reduce the cost of financial transactions. But MAS regulates the activities that surround virtual currencies if these activities pose specific risks, such as the use of virtual currency for money laundering or terrorism financing. Therefore, intermediaries in virtual currency services will be subject to anti-money laundering requirements. Similarly, if a digital token in an Initial Coin Offering (ICO) is structured like a security, then the ICO must meet the requirements of the Securities and Futures Act, so that investors are protected.

“FinTech developments are forcing regulators to review the way regulation is done. If FinTech is unbundling the financial services value chain, then regulators may have to “unbundle” their regulations too,” said Mr. Menon.

He expressed his view that most probably regulators will have to take a more risk-specific and activity-based approach in the future with respect to FinTech.  This would mean setting thresholds for when regulation kicks in; calibrating regulatory requirements to specific risks; and applying these requirements to activities rather than entities.

MAS will attempt to do this with the new Payment Services Bill, which will be published for public consultation next week. Licensees will be regulated according to the activities they conduct, because different activities pose different risks.

The regulatory sandbox helps to deal with areas where regulators will never know enough, by facilitating experimentation in a contained environment.

Cyber Security

Robust cyber defences are essential to capitalise on the benefits of digital technology. Hence, cybersecurity constitutes a key component of Singapore’s FinTech strategy.

FS-ISAC (Financial Services Information Sharing and Analysis Centre), a global intelligence gathering and sharing initiative for the financial sector with over 7000 members worldwide, has launched its regional centre in Singapore. The new centre in Singapore will facilitate the sharing of cyber threat information across 49 financial institutions in 9 Asia-Pacific countries in a timely manner, and enable a rapid and coordinated response to emerging threats.

MAS is also partnering with the Association of Banks in Singapore to reviewing its Technology Risk Management Guidelines and to establish guidelines for “red-teaming’. Red-teaming is a covert penetration test conducted on a financial institution’s live environment – its people, processes and technology – to assess their ability to respond to infiltration attempts.

 [1] Abu Dhabi, Australia, Denmark, France, Hong Kong, India, Japan, Malaysia, Philippines, Poland, South Korea, Switzerland, Thailand and the United Kingdom, the Association of Supervisors of Banks of the Americas

Featured image: Zairon/ CC BY-SA 4.0

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