Why is Singapore Backing the Fintech Revolution? Because it Can
Expect more experiments from Southeast Asia’s premier fintech laboratory
PHOTO CREDIT: Getty Images
Fintech is becoming a buzzword, and in Southeast Asia, it's Singapore that's generating most of the buzz.
Why? Because it can. The wealthy nation state has the most advanced financial services in the region, a necessary prerequisite for creating a fintech infrastructure, and is ahead of most of its neighbors in terms of online banking and other tech-enabled services. Innovation is also state sanctioned: The Monetary Authority of Singapore (MAS), its de facto central bank, launched a fintech regulatory sandbox last year to allow ideas to be tested without having to comply with too much regulation. This year, the MAS even announced support for one of the most disruptive, not to mention least understood, fintech verticals: distributed ledger technologies (DLT), more popularly known as blockchain or the technology behind Bitcoin.
MAS explores how blockchain can improve financial services
Speaking at the inaugural Singapore FinTech Festival held in November 2016, MAS managing director Ravi Menon detailed how the MAS is helping foster a vibrant fintech ecosystem in the country by making sure that regulation and infrastructure are conducive to innovation.
In 2015, a dedicated Fintech and Innovation Group was established within MAS. In early 2016, it partnered with the National Research Foundation to set up a one-stop point-of-contact office for all fintech matters. It also committed $160 million over five years to support the development of the country’s fintech ecosystem, and set up Looking Glass, an innovation lab to “spur collaboration among MAS, [financial institutions], start-ups, and technologists; and facilitate consultations for start-ups by industry experts on legal, regulatory, and business-related matters.”
In the blockchain space, MAS is collaborating with several big players. It's working with IBM and the Economic Development Board to open the IBM Center for Blockchain Innovation, and with R3 – a financial innovation firm that leads a consortium of over 50 of the biggest financial institutions worldwide – on a blockchain research and development center, as well as a Centre of Excellence.
Not just for start-ups anymore
Menon says the MAS is also working with the Singapore Exchange and several banks on a proof-of-concept project to explore the use of blockchain in interbank transactions, including cross-border transfers in foreign currency. Such a system, which involves creating an MAS-issued digital currency, would make interbank payments significantly cheaper and faster.
This follows a recent trend among banks and financial institutions becoming involved in blockchain. For instance, in China, Russia, the UK, Australia, and Canada, there have been efforts to examine the possibility of utilizing blockchain and issuing their own digital currencies, reports the Financial Times. The fintech space had previously been dominated by start-ups disrupting the financial industry, but, these days, with traditional institutions joining the blockchain bandwagon, it looks like collaboration is the name of the game.
B2C services with a blockchain backbone – such as digital wallets, remittance services, mobile payments with Bitcoin – is still the more popular use case for such technology, but if recent developments are any indication, then blockchain may play a more official, state-sanctioned role in the future.
As Menon remarked at the Fintech Festival, “To be sure, many of these technologies are disruptive to existing jobs and existing business models… But if we do not disrupt ourselves – in a manner we choose – somebody else will – in a manner we will not like.” Or as Chairman Mao put it, “A revolution is not a dinner party.”
If you can't beat ‘em, join ‘em, that is Singapore’s wise strategy.