(Nov 13): The Monetary Authority of Singapore is planning for the second edition of the Singapore FinTech Festival to be even more successful than the first as it sets its sights on Singapore maintaining its position as a leading global fintech hub. MAS is the organiser of the Singapore FinTech Festival 2017, which will be held from Nov 13 to 17.

“The Singapore FinTech Festival is a platform for the global finance and technology community to share knowledge, generate ideas, collaborate and network. The Davos of Fintech, we think, would be in line with that,” says Jacqueline Loh, MAS deputy managing director, monetary policy and investment; development and international; fintech and innovation, in an exclusive interview with The Edge Singapore. Davos in Switzerland is the venue for the annual World Economic Forum, attended by global political and business leaders. The forum has become known as Davos. The Singapore FinTech Festival will bring together fintech companies, regulators, financial institutions, programmers and engineers. It aims to make the activities and events accessible to all fintech players, including programmers and engineers, who would not normally attend a conference such as Sibos (an annual event organised by the Society for Worldwide Interbank Financial Telecommunication) or Money 20/20 (a networking event for people in the payments, fintech and financial services sectors). And, of course, the festival fits in with MAS’ goal of making Singapore a Smart Financial Centre, which in itself is part of the country’s ambition to be a Smart Nation.

In the first edition last year, the festival had 13,000 attendees. MAS is hoping that this year’s numbers are north of that.

The aim of the FinTech Festival is manifold, but its four main objectives are to build an ecosystem of fintech players; provide regulation, including new rules for fintech; set up infrastructure to facilitate the implementation of new and useful technological innovations; and nurture skills and knowledge.

Two years ago, MAS set up an innovation group and committed $225 million over five years under the financial services technology and innovation scheme to support the development of fintech. Last year, MAS and the National Research Foundation set up a fintech office to serve as a onestop virtual entity for all fintech matters and to promote Singapore as a fintech hub.

Singapore is now home to more than 400 fintech companies that address different parts of the financial services chain, such as payments, wealth management, insurtech, regtech and artificial intelligence (AI). “Many of these companies have chosen to locate their regional headquarters in Singapore, given our close proximity to customers, investors as well as talent in the region,” Loh says.

The initial focus on fintech by the regulator raised concerns about disruption and competition. In a survey published in April this year, PwC Singapore said 80% of respondents from financial institutions see fintech as a threat. Yet, collaborations between fintech companies and financial institutions have enabled banks to widen their product suite, improve services and achieve scale more quickly. For instance, DBS Group Holdings rolled out digibank, a completely mobile bank, in India, where it has garnered 1.6 million retail customers in 18 months, and recently introduced digibank in Indonesia.

Over the past two years, more than 20 financial institutions have set up innovation labs to serve different parts of the financial services value chain. The innovation labs also specialise in areas new to financial institutions such as data science, machine learning, user experience and design thinking. “These innovation labs are important touchpoints between the financial institutions and fintech start-ups, providing opportunities for these two groups of players to collaborate on solutions for Singapore and abroad,” Loh says.

The local fintech ecosystem is being further supported by MAS’ fintech agreements with 14 counterparties. These include entities in the UK, Switzerland, France, the Americas, Thailand, Malaysia, Australia, Japan, Korea, India and Abu Dhabi.

The latest agreement was signed with the Hong Kong Monetary Authority in October. As part of the agreement, MAS and HKMA have committed to work on a strategic project on trade finance cross-border infrastructure, based on distributed ledger technology (DLT). More details will be announced this month. The two central banks will collaborate on other fintech initiatives, facilitate referrals of innovative businesses, share information and exchange expertise, to boost financial innovation in Singapore and Hong Kong. Interestingly, HKMA held its own fintech festival in October.

What to expect at this year’s FinTech Festival Similar to last year’s FinTech Festival, this year’s will include knowledge sharing and networking. It starts with a lab crawl, during which attendees will be able to visit some of the 20 innovation labs. Most of the conferences run from Nov 14 to 16 and will be held at the Singapore Expo Convention Centre. They will focus on nine themes: global market insights, beyond proof-of-concept, inclusive fintech, applying fintech, fintech future, sustainable fintech, data analytics, regtech and tech risk.

The highlights of the festival are the Global FinTech Hackcelerator on Nov 16, where startups will demonstrate their solutions to problem statements contributed by the global fintech community and the financial services industry; and the FinTech Awards on Nov 16, during which $1.15 million of prize money will be given away.

“There will be an added component for this year, which is the Investor Summit or ‘Deal Day’. Deal Day will showcase investment-worthy Singapore-based start-ups and technologies to local as well as global investors, with a view to facilitating fintech investment deals. The FinTech Festival will be an important event to bring together regional as well as global players,” Loh says.

Contender for global leader in fintech “Singapore is a leading international financial centre and a serious contender for the global No 1 spot in fintech,” says Deloitte in a report titled Connecting Global FinTech: Interim Hub Review 2017. According to Deloitte, 44 cities are aspiring to be fintech hubs; Singapore and London are tied at No 1 and Kuala Lumpur is ranked No 6 in Asia-Pacific, which includes Australia.

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Deloitte took the combined scores of each hub from three prominent business indices — the World Bank Doing Business Index, the Global Innovation Index and the Global Financial Centres Index. These indices were used to provide a consolidated “Index Performance Score” to assess the hubs on a quantitative basis. A lower Index Performance Score indicates an environment that is more conducive to the growth of fintech. London and Singapore had a score of 11, the lowest among the 44 hubs in the review.

Singapore has evolved in the past 200 years from being a trading hub to a transport hub and a global financial centre. In the past 15 years, the city state has become a private banking and wealth management hub that rivals Switzerland. On Oct 30, MAS formally announced its Financial Services Industry Transformation Map, a strategic plan for the future of the sector that shows Singapore’s determination to stay ahead. “This ITM paints our vision for Singapore’s financial centre and our action plan to achieve it. It is an evolving blueprint that will help us stay on top of the game,” said Ong Ye Kung, minister for education and second minister for defence, as well as board member of MAS, at the launch of ITM on Oct 30.

Ong made two important points. He pointed out that there are two areas in which Singapore plays a global role: foreign exchange and asset management. “In the next phase of our transformation, we want to become a global FX pricing and liquidity centre in the Asian time zone. We will encourage key FX players to anchor their e-FX matching and pricing engines in Singapore,” he said.

Undoubtedly, the government wants Singapore to remain the largest Asian hub for fund management and domiciliation. “Through its external fund management programme, MAS will engage key fund managers to deepen asset management capabilities in Singapore, particularly in specialist and alternatives strategies. MAS will also introduce a new corporate structure — the Singapore Variable Capital Company — by end- 2018, which will position Singapore to become a key fund domiciliation hub,” Ong said. A second major thrust of ITM is to spur innovation in the financial services sector, he added.

Source of job growth In a statement on Oct 30, MAS announced that ITM aims to achieve growth in financial sector real value-added of 4.3% and productivity of 2.4% annually, faster than the overall economy. ITM also aims to create 3,000 jobs in the financial services sector and 1,000 jobs in the fintech sector annually. The financial services sector accounts for 13% of GDP and provides jobs for 200,000 people in Singapore.

MAS says there will be an active SkillsFuture programme to help the financial sector workforce build world-class skills and maintain a strong Singapore Core. Job roles will evolve with digitalisation and automation. Hence, MAS will continue to collaborate with financial institutions, the tripartite partners and institutes of higher learning to build a strong local pipeline of specialised talent, particularly in information technology; reskill and redeploy professionals into job growth areas through professional conversion programmes; and facilitate job placements through enhanced career advisory services.

“It’s a question of how we upskill our financial sector professionals so that they can employ technology, and embrace technology, which will enable them to do their jobs better, manage processes better, and that will free them up to focus on the higher-value-adding parts of their jobs,” Loh says. In addition, new jobs will be created in new areas such as cybersecurity, data analytics, user experience and design. Outside of financial institutions, the broader fintech community will also be a source of job growth over the medium term, she adds.

“Admittedly, the impact on jobs is uncertain. We think, over time, many jobs in the financial sector will stay, but mostly, jobs will be transformed by technology. MAS places significant emphasis on growing skills and talent in the financial industry, and an important initiative for us is to partner with the industry in deepening skills in technology and promoting a culture of innovation,” Loh says. The Institute of Banking and Finance has also set itself to think about how to widen its suite to include technology, she adds.

At any rate, banks have been investing in their tech teams for a long time and the local banks have set up their own innovation labs. DBS Group Holdings has DBS Asia X, Oversea-Chinese Banking Corp has The Open Vault and United Overseas Bank, The FinLab. Elsewhere, Standard Chartered has eXellerator Lab; HSBC, Innovation Lab, and Australia and New Zealand Banking Group, ANZ BlueSpace.

Evolving regulation Regulators have to tread a fine line between providing a regulatory environment conducive to innovation and ensuring safety and security. “One important consideration is establishing the right degree of regulation at the appropriate juncture. It’s a challenge ‒ not only understanding these technologies and their benefits and risks, but also assessing whether there should be a regulatory response, especially when the risks posed by the new technology become material,” Loh says.

“We have to pace ourselves alongside innovation and be always aware of, and sensitive to, technological developments and their possible risks, with a view to letting developments evolve or regulating at some stage if needed,” she adds. “We are mindful that the premature introduction of regulation could stifle innovation and stymie the industry’s adoption of potentially useful technology.”

Minister Ong said in his speech that encouraging innovation does not mean the regulator takes a laissez-faire, hands-off approach. The regulator needs to maintain a close watch on emerging developments and risks, and stand ready to intervene or adjust. “New and emerging activities that pose systemic risk or endanger consumer interests will need to be regulated. At the same time, the landscape for existing regulated activities may have changed, necessitating a relook at rules,” he pointed out.

For instance, new technologies are helping banks with risk management as banks themselves develop KYC (know your clients) and AML (anti-money laundering) technologies. Yet, these in themselves are not risk-free.

“We recognise that many new technologies alleviate existing risks, but they could also introduce new risks. We focus on the balance of risks posed by these new technologies so as to capture the risk mitigation aspects while being aware of and reining in these risks,” Loh explains.

An example is the new regulatory framework for payments that MAS proposed last year. Singapore has two existing acts on payments and they are being merged into one. “The new regulatory framework of payments will include new payment activities that have evolved over time. The framework will be modular where we are targeting to rightsize our regulation for the risks in the payment space,” Loh says.

Encouraging digital payments in the business and corporate space is an important component in the broader digitisation process. “If payments are digitalised, it will facilitate end-to-end business processing, which will in turn boost efficiency and productivity,” Loh says. Digitising will also enable companies to collect data on customer spending and payment patterns and that will enable companies to plan and strategise better, she adds.

Ong said the new regulation will streamline the regulatory treatment of payment services and remittance services that used to be regulated separately. Instead of an entity-based approach, MAS will take an activity-based approach that will allow it to regulate in a more targeted manner new business models that might offer one or only some parts of the payments value chain. The remit of the new framework will also be expanded, to cover some activities that are not currently regulated, such as virtual currency intermediation services.

Regulatory sandbox Singapore was one of the first countries to introduce a regulatory sandbox. This is where fintech companies, financial institutions and regulators can experiment with new technologies and models to see whether they are viable and to determine what regulations should be introduced, if any. “We introduced the sandbox to enable and encourage experimentation. Given the increasing sophistication of financial products and services that utilise fintech, there can be a lack of clarity on whether certain innovations or experiments meet our regulatory requirements. Financial institutions and fintech companies could be starting out with new models they would like to test. The sandbox allows firms, as well as regulators, to experiment with these solutions, and within boundaries, so that the risks ‒ should there be failure ‒ can be manageable,” Loh elaborates.

Some of the experiments will succeed and some will fail. At some point, the sandbox experiments could become commercially viable and be adopted by financial institutions.

In August, Singapore had its first graduate from the sandbox — PolicyPal, which uses technology to help users manage their insurance policies, as well as identify duplicate or missing coverage. Kristal Advisors, which provides AI-powered online investment advisory and management strategies, is currently operating in the sandbox.

The FinTech Festival’s regulatory sandbox is open to all participants. Sandboxes are interesting to regulators because they can learn alongside the financial institutions. “We have different engagement points with the fintech community. Whether it’s a start-up or a financial institution, it’s very important to improve our understanding, inform our thinking and shape our regulatory responses, if needed,” Loh says.

The second part of understanding new technologies is proof-of-concept. The most wellknown, forward-looking pilot is Project Ubin, a collaboration between MAS, the Singapore Exchange, 10 banks, six tech companies and six academic institutions. Project Ubin demonstrated that banks were able to transact with each other on an Ethereum-based prototype (a distributed ledger) without going through MAS for interbank settlements. MAS issued Digital SGD and placed it on the distributed ledger for this purpose.

Although the central bank is not needed in Project Ubin, MAS believes DLT has the added advantage of enhancing risk management and improving efficiency for banks, which can only be positive for them. Some observers expect MAS to throw open its DLT process into the regulatory sandbox and let programmers and the fintech community experiment with it, in a demonstration that truly defines Singapore as an open economy.

“We are one of four or five major international hubs, open to the world in every sense, with well-regarded regulatory regimes,” Ong says. “We will strengthen that position and ensure that the financial sector will continue to be a key pillar of future economic growth.”

But can the FinTech Festival be the Davos of fintech? To qualify as such, the festival would need to be held annually. Will there be a third edition? “This is not a formal announcement, but we expect the third edition of the festival next year,” Loh says. “We want to be a global fintech hub, a leading one, a very important, purposeful one. For that, we’ve seen good progress and we will continue to grow the fintech community ecosystem for innovation acceleration here.”

Positioning Singapore as a global fintech hub

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