What is FinTech and how does it have the capacity to affect or change a nation’s financial landscape?
Even to the learned and ardent followers of technological breakthroughs, FinTech is a foreign language. We have experienced it, but we may not appreciate the depth and breadth of the whole financial technology space. It spans all the way from mobile payments to crowdsourcing (gathering funds for business.)
FinTechWeekly describes it simply as a line of business based on using software to provide financial services. Fintech companies are startups founded with the purpose of disrupting incumbent financial systems and corporations that rely less on software. Read: the goal is to break from the traditional way of doing things – touchscreen instead of keypads that require hard presses; automated instead of manual; technological programs that utilize software to make life easier versus the hard and set ways of businesses of old.
To mention a few out of the multitude of the FinTech arena: money transfers, mobile payments, fundraising, data collection or research, exchanges and asset management.
This piece would be incomplete without the mention of this stark rise in interest broadcasted by Accenture which aims to put the sheer scale of FinTech’s growth into context: “FinTech increased to over $3 billion dollars last year from $930 million in 2008. This sector promises to disrupt the way all types of business entities operate, from multinational corporations to small-scale businesses, and we can even include the way we manage our personal finances.” The birth of FinTech has immeasurably changed the way companies do business.
According to a joint study published by KPMG and H2 Ventures, FinTech financing has risen seven-fold in the last three years, reaching an estimated US$20 billion in 2015 (66% from 2014). Governments of countries with established FinTech hubs like Singapore embraces new ideas and updates guardian laws of old that is regulating the industry. This clearly shows the extent of its influence and the manner in which it plays an integral role in nourishing the FinTech movement. They are illustrating the interest in promoting the boom of FinTech.
Singapore is considered the most innovative thinker among its peers. The country created a new body and appointed a Chief FinTech Officer, an ex-Citibank executive, whose primary task is to support the local FinTech community (financial assistance included.) Even though the central focus is really to encourage and strengthen competitiveness in the sector as a united front, MAS (Monetary Authority of Singapore) is levelling up its bar with the mission to set wiser policies and be abreast with the rapidly evolving radical market.
This means that projects and professionals with expertise on the subject matter in the FinTech space are more valuable to the business and highly sought after. This naturally translates to rendering higher value and significance to the country where they hail from.
Conquering being clingy to institutional inertia and gaining the public’s trust will be instrumental to being consistent in ensuring widespread adoption of new financial technologies. Almost all major stakeholders like banks and financial services firms are actively incubating or facilitation the development of start-ups and their technology in the FinTech space.
It is critical for cybersecurity to move alongside the innovation as we see new technologies surfacing. “We will see more comprehensive risk management for the digitalisation that we see in the banking industry. We are going to see more of fraud detection and identity proofing technologies … Security approaches are going to innovate and provide you with better solutions,” according to Gartner research analyst, Anmol Singh.
The central bank is placing the responsibility to drive innovation to the banks. Financial firms are at liberty to explore and experiment fresh ideas without seeking regulatory endorsement because the time to market is highly critical.
“MAS will most likely follow through with the approach that (MAS managing director) Ravi Menon pointed out – that we are very supportive of banks partnering with FinTech companies but it’s ultimately the responsibility of banks to make sure that everything is in order, they are compliant, they assess the risk properly that comes from such a solution,” words from Mr Thomas Zink, a research manager at IDC Financial Insights.
MAS is open to provide guidance where necessary, but they do not want to give some form of approval just to a specific vendor for a specific solution. This might cause banks to forego due diligence to a certain dangerous degree.
MAS has formed a new arm, the Fintech & Innovation Group, aimed at creating a conducive ecosystem for innovation. The central bank has also committed S$225 million over the next five years under its Financial Sector Technology and Innovation Scheme, to support this innovation ecosystem.
Singapore has some compelling advantages as a processing hub: world-class telecommunications and physical infrastructure, a stable political environment, a sound and progressive regulatory framework, a large number of global bank regional headquarters, a strong culture of process efficiency, an educated English-speaking workforce, and a vibrant IT sector. Given this profiling, Singapore should actively retain and pursue high value-added, technology-intensive processing activities.
Changes, in whatever form, is challenging. Completing and delivering projects in large, complex and complicated organizations are especially mind-boggling. With the rise of many new areas of disruption, the financial institutions of Singapore are working double time to meticulously address cybersecurity issues, comply with regulatory requirements and inculcate new channels and ways to interact with customers.
The road ahead is challenging. The traditional businesses that have driven Singapore’s success as a financial centre have matured and evolved. It is not only Singapore’s but Asian and global financial landscape that has substantially changed. An in-depth analysis recommends the further strengthening of these regional or global niches so Singapore could continue to be at the forefront of the Asian region’s financial players: Wealth Management, Processing, and Risk Management.
It will make a lot of sense for Financial Institutions to continue to have access to new ideas, new businesses, new concepts that will help them to transform their business in light of the digital change Singapore is going through and continue to anchor itself as a center that is attractive to financial professionals to research, study, work and live.Recommend0 recommendationsPublished in