Financial technology’s (FinTech) purpose was increasingly evident during Singapore’s Covid-19 “circuit breaker”. Although economic activity slowed, FinTech kept parts of the economy ticking. All sorts of transactions — including ecommerce, banking, wealth management and contactless payments — could all be undertaken remotely using financial technology. In addition to supporting economic development and a post-pandemic recovery, FinTech has been used for the good of mankind.
“Having a deep focus on themes, such as in the area of sustainability, green technologies and financial inclusion, remains a core part of the SFF’s agenda. Sustainability is a key priority for MAS, and we encourage banks, financial institutions and FinTech to leverage on technology in their sustainability efforts,” says Jacqueline Loh, deputy managing director of Monetary Authority of Singapore (MAS).
No surprise then that MAS and Enterprise Singapore continued to pursue plans for the SIngapore FinTech Festival (SFF) 2020 x Singapore Week of Innovation and TeCHnology (SWITCH) 2020 (SFFxSWITCH2020). But unlike SFFxSWITCH2019 — which drew a record 60,000 visitors to the Lion City — borders are now closed. For the FinTech festival to succeed this year, the format had to be different.
“In view of Covid-19, we knew that we would not be able to host the 60,000 participants here physically in Singapore. Fortunately, the second important element of skipping a year was never an option, as the team strongly believed that the FinTech Festival is needed now more than ever, to help create valuable connections and drive business activities, drive collaborations, to support pandemic recovery, and importantly embrace valuable opportunities for the global economy and for the global community,” Loh says.
The SFF is in its fifth year, and has helped create new companies, new jobs, spurred investment, boosted assets under management through FinTech deals, including the SFF’s regular Deal Fridays.
“In 2015, we embarked on the journey to develop the FinTech ecosystem in Singapore. Today, Singapore is consistently ranked amongst the top FinTech hubs globally,” Loh says. “We have more than 1,000 FinTechs in Singapore, and 40 innovation labs in Singapore, that form a critical part of our broader FinTech ecosystem. The innovation labs have created about 500 high value jobs, of which more than half have been taken up by locals,” Loh notes.
SFFxSWITCH2020 will be in a hybrid format — partly digital and partly physical. It will be anchored by an interactive online Singapore city where attendees can visit exhibitors and pavilions by exploring buildings and sites in the online city. Singapore is partnering with 40 partners globally for SFF2020. The festival, which takes place from Dec 7 to Dec 11, will be broadcast through three channels for 24 hours a day. It will feature over 600 speakers representing over 50 countries, delivering their speeches and fireside chats, either digitally or at the SFFxSWITCH2020 studios.
Earlier this year, MAS launched the Global FinTech Innovation Challenge with prize money of $1.75 million. The competition comprises the revamped MAS FinTech Awards and the MAS Global FinTech Hackcelerator. MAS has announced 20 finalists for the 2020 Global FinTech Hackcelerator, and 40 finalists for the 2020 MAS FinTech Awards. The winners will be announced on Dec 10. The competition is looking for innovative solutions that can help financial institutions respond to two global challenges: Covid-19 and climate change. The theme for the competition is “Building Resilience, Seizing Opportunities, Emerging Stronger”.
Through the competition, MAS aims to promote FinTech solutions that will help financial institutions adapt effectively to the new operating environment precipitated by Covid-19 and apply FinTech capabilities to spur the development of green finance in Asia and globally. Loh says the challenge received a record number of submissions, of close to 600 submissions from more than 50 countries.
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FinTech’s role in the post Covid economic recovery
Digitalisation has accelerated with Covid-19. As we move into a post-pandemic economy, FinTech is likely to play an increasingly outsized role. During Covid-19 in Singapore, the nation’s digital infrastructure continued to support the economy despite large parts being shut down because of constraints on physical contact. Financial institutions were able to serve customers because of innovations in artificial intelligence, machine learning and biometrics.
“Investments in national digital infrastructure in recent years have been instrumental in enabling digital finance to expand to many segments of customers and businesses, bringing about greater accessibility and inclusivity. For instance, financial institutions have been progressively using MyInfo since 2017. This allows non-face-toface customer identification and verification. It also improves the customer onboarding experiences and increases business efficiency. This benefit was very evident, and certainly amplified during the circuit breaker as customers could continue to be on boarded by financial institutions without disruption,” Loh points out.
Business sans Borders (BSB) — an initiative by MAS and Infocomm Media Development Authority — serves as a meta-hub for business and digital services that enables enhanced domestic and international trade opportunities for small and medium-sized enterprises (SMEs), interoperability between SME ecosystems, access to digital services, and a sandbox environment to test new services and products.
“BSB will be AI (artificial intelligence) enabled to help SMEs and FinTechs accelerate their post pandemic recovery. By connecting domestic and international platforms, BSB can help SMEs improve their discovery and matching of buyers, sellers, and service providers across different platforms, across different industries and across different countries, thereby increasing trade opportunities and deepening the financial inclusion of SMEs,” Loh explains.
BSB will utilise merit based AI to enable SMEs to discover prices and transaction or seal opportunities in a much larger global marketplace, as well as to build business resiliency by access to multiple supply chains, and allow for easier sourcing of relevant financial and business solutions that will be important for SMEs, she adds.
MAS continues to support local financial institutions’ innovation. “We have introduced several grant schemes that encourage financial institutions to embrace innovation and adopt digital solutions in even more significant ways. In April this year, we launched a $125 million support package to sustain and strengthen capabilities in the financial services and FinTech sectors,” Loh says.
Payments and digitalisation
As part of Singapore’s digital infrastructure, PayNow — which enables people to link their bank accounts to a mobile phone number and transfer funds seamlessly — has seen an increase in usage as contactless payments become a norm for consumers. PayNow Corporate is one of a range of solutions that help corporates move more towards accepting digital payments as part of their strategy as they transform their businesses and move more towards online and ecommerce opportunities. Four out of five Singaporeans are already on PayNow, and three out of four active businesses are on PayNow Corporate. Monthly transactions have exceeded $3.5 billion which is three and a half times the amount compared to July, when PayNow first crossed the $1 billion mark.
MAS has also taken steps to encourage greater adoption of epayments and other digital tools by banks customers. “We partnered ABS to run an adoption campaign. As a result, more than 40,000 merchants requested for PayNow or SGQR codes to be deployed between April to July 2020 alone,” Loh says.
Besides payments, which is an important enabler of digital businesses, there is the rise of marketplace platforms that enable businesses to connect to one another digitally in the wake of travel restrictions which threatened Singapore’s connectivity with the region and the rest of the world. “Thankfully we have in place digital platforms to allow businesses and financial institutions to connect and reach out to other businesses, in support of their broader objectives and business expansion,” Loh says.
Going green
Greentech (green technology) and sustainability were important themes in SFF2019 and are likely to remain important themes for innovation, investment and a source of jobs for the next several years. Already, local banks have committed to green loans and have announced their own sustainability programmes. For instance, Oversea-Chinese Banking Corp (OCBC) has a “25 by 25” theme — that is to disburse $25 billion in green loans by 2025.
“We announced our Green Finance Action Plan in 2019, which has four key thrusts — building resilience; encouraging the growth of markets and solutions to support green finance; leveraging technology and innovation; and developing knowledge and capabilities,” Loh explains. “MAS is consulting with the industry on a set of environmental risk management guidelines, which sets out sound practices on governance, risk management and disclosure for financial institutions to manage environmental risks,” she continues.
MAS is also working with the financial sector to encourage more green financing options for companies and investors, and is also looking at ways to reduce some of the barriers for firms to embrace green finance. On Nov 24 this year, MAS launched its Green and Sustainability-Linked Loan Grant Scheme (GSLS).
“In the green finance solutions space, it is not just about issuing bonds. Banks and their customers are working on green and sustainability-linked loan solutions, as loans remain an important financing channel across Asia,” Loh says. “We are very keen to encourage the leveraging of technology and innovation to support the green finance agenda. To support the building of talent and capabilities, we are anchoring green finance centres of excellence.”
In October this year, MAS launched its Green Finance Centre of Excellence, in collaboration between Singapore Management University (SMU) and the Imperial College School of Business, to encourage research and talent.
Deal Fridays and Singapore’s hub status
The FinTech Festival helps to showcase innovative ideas from start-ups and to match them with investors. And the festival has put Singapore on the FinTech map. According to FinTech Magazine, Singapore ranked fourth as a FinTech hub in 2019 based on the value of deals, after San Francisco, London, and New York. In a Global FinTech Index developed by Findexable and its partners, Singapore ranks fourth as a city, and third as a country (see sidebar).
Undoubtedly, the SFF acts as an impetus for investments into FinTech companies. Deal Fridays, organised by Enterprise Singapore and MAS is a platform for deal-making opportunities leading up to this year’s FinTech Festival. Deal Fridays 2020 aims to deliver year-long, end-to-end support for global start-ups, investors and corporates to maximise commercial success in forging investment deals, co-innovation opportunities and business partnerships.
Specifically tailored to sectoral themes, Deal Fridays consists of a series of carefully curated and targeted investor and corporate start-up matchmaking sessions. Shortlisted participants will benefit from complementary assistance such as pitching workshops, and exclusive access to alternative financiers such as family offices and angel investors.
SEE:FinTech finds a home, finally
Job creation
Ultimately, the purpose of government is to improve lives and provide good paying jobs for the population. On this score, FinTech is a gift that keeps giving. The financial sector has performed creditably this year. In the first three quarters of the year, growth in the finance and insurance sector averaged 4.7%. On the jobs front, for the year as a whole the financial sector is expected to remain net creative for jobs, even though this is likely to be at a rate much lower than in previous years.
On the people front as the adoption of technology and solutions increase, demand for tech related job roles is expected to increase. Job roles from UI (user interface) and UX (user experience) to data analytics and machine learning and cybersecurity — these are all new roles — will continue to increase in a more digitally focused economy and digitally enabled financial sector. This will help the creation of new job roles in the job market.
An estimated 10,000 people are employed by FinTech firms in Singapore. And many of these FinTech firms and innovation hubs are still hiring, despite current more challenging macroeconomic conditions, as seen on the Singapore FinTech Association jobs portal.
Challenges remain
While FinTech has been a great enabler of financial services, challengers remain and none more evident than in the area of trade finance. Digitising trade finance is proving to be more complicated that initially envisaged. This is because trade finance involves several processes with numerous players across different geographies connecting diverse players. These include shippers, freight forwarders, buyers, sellers, customs, banks, insurance in different jurisdictions.
A common standard — like Society for Worldwide Interbank Financial Telecommunications (SWIFT) for cross border funds transfers — is absent in trade finance. “Trade finance is a highly manual process which relies heavily on paper documentation, with added complexity from legal requirements across jurisdictions that differ. One of the challenges is in bringing parties onto a common platform where there is no natural central party that can be trusted by all the diverse market participants,” Loh says.
Some organisations have attempted to digitise these processes. A Singapore based trade finance network, Contour, is attempting to digitise letters of credit (LoC). The organisation trialed these digitised LoCs with more than 50 banks and corporates and succeeded in reducing the LoC process from five to 10 days to less than 24 hours. “This is just one example of a promising use case. And we’re eager to see this go live,” Loh says.
Pros and cons of CBDCs
Another area that central banks are running trials on are central bank digital currencies (CBDC). MAS along with many other central banks are following the technology and economic use case developments of central bank digital currencies closely. The focus and priority of central banks is on improving efficiency and user experience in epayments for institutions.
“We already have the ability to transact money through digital means safely, securely and seamlessly, through a wide range of service offerings by banks and FinTechs. [Our] efforts extend to active collaboration with other countries in the area of cross border payments, in an effort to reduce costs that are associated with cross border transactions,” Loh explains.
However, retail CBDCs bring a number of challenges. In particular, a retail CBDC poses significant risk to financial stability, where a frictionless retail central bank digital currency could exacerbate bank runs by allowing consumers and firms to shift out of any vulnerable financial institution very quickly into retail central bank digital currencies. This could present vulnerabilities to the entire banking system.
“Even outside of stress periods, we also have to consider the potential negative consequences from the issuance of retail CBDCs to the flow of credit to the economy,” Loh cautions. For instance, if banks could transfer deposits to CBDCs, this could also lead to increased funding costs which could ultimately result in reduced credit supply to the economy.
CBDCs can also assist capital flight from certain economies during periods of stress into CBDCs issued by other countries. There is currently no universal case for issuing retail CBDCs. Instead, it depends on country-specific circumstances.
“We will continue to follow developments in retail central bank digital currencies, bearing in mind that we are already able to transact digitally, and efficiently across a range of swift and secure payment solutions,” Loh reasons.
SFF is here to stay
With all the advantages of collaboration, innovation, high level jobs and investment the FinTech sector brings to Singapore, the Lion City looks set to continue hosting FinTech festivals. With a Covid-19 vaccine on the horizon, Loh and her team are looking at a resumption of a physical event.
“It is too early to tell but we certainly hope to be able to host a large physical event in Singapore, for the global financial services community to meet in person. Nothing beats the physical connection and buzz from bringing in people and businesses from around the world, as a convening platform for innovation and technology. We will take on board the learnings from SFF2020, including the global FinTech experience with more than 40 cities hosting FinTech events, into SFF2021,” Loh concludes
