FinTech, the love affair that sprang to life between venture capitalists and geeks in T-shirts over cans of coke-zero. It originally referred to computer technology applied by back offices of banks/trading firms. This suite of software has now evolved to include a broad variety of technological interventions that provide financial services such as digital banking (DBS digibank, OCBC OneTouch, UOB Mighty), mobile payments (Samsung Pay, Apple Pay), stock trading money transfers (Robinhood), loans (Lending Club, Prosper), fundraising/crowdsourcing (GoFundMe, Quora), biometric authentication (MasterCard’s pay-by-selfie and pay-by-fingerprint, HSBC’s Voice ID) … the list goes on.
You may already have some of those apps in your smartphone. Welcome aboard the FinTech rocket, where everything is instantaneous, intense and cruelly, to be rendered outdated after you are done with this article.
Why the fuss?
Global investment in FinTech exceeded US$19 billion in 2015. The iPhone/Samsung Note 7 in your hand has perhaps elevated you to be part of the always online generation. Every duly smartphone is a powerful point of sales system. When was the last time you made payments to a traditional cash register? Through predictive behaviour and analytics, FinTech has created insane opportunity for businesses to hungrily study the habits of smartphone users and have made data driven marketing even more accurate and personal.
There are generally low barriers to entry for FinTech related businesses and successful start-ups have typically been adapting to the exit strategy of going public or being bought over by larger institutions. Big corporations are buying over companies with disruptive and/or enabling technology. These acquisitions enable start-ups to exit (read: create a successful business, cash-out, buy an island, repeat) and big corporations to shake-off slow organic growth by grafting a new branch into old oak trees. Cross border acquisitions provide opportunity for countries that are falling behind the technology race (for one reason or another) to keep up with global trends.
For example, in September 2016, Ant Financial Services Group (formerly “Alipay”, an affiliate of the Chinese Alibaba Group), acquired EyeVerify Inc. for $70 million USD. EyeVerify Inc. is in the business of providing biometric authentication technology for securing consumers’ online data and transactions. The acquisition of an American company with American expertise for authentication technology is deemed to help boost the reliability of the acquirer with non-Chinese users and thereby increase the global use of Alipay.
FinTech at home
Back home in Singapore, the number of smartphone users in Singapore is estimated to reach 4.2 million in 2016, which is a very high penetration rate. However our smartphone usage belies our relatively low influence in FinTech innovation and adoption. We are still waiting for more sophisticated waves of FinTech news to originate from our shores.
If only there were more instances such as that in April 2016, where SoftPay Mobile International, a Singapore based mobile point of sale (“mPOS”) company, acquired a majority stake in Vietnam MPOS Technology JSC which will allow SoftPay Mobile to realise its vision to be the leading mPOS payment facilitator company in Southeast Asia.
What is Singapore’s FinTech strategy?
The regulators are also doing their part. The Monetary Authority of Singapore (“MAS”) has formed its FinTech & Innovation Group (“FTIG”) which is responsible for regulatory policies and development strategies intended to facilitate the use of technology and innovation; to better manage risks, enhance efficiency, and strengthen competitiveness in the financial sector.
FTIG is also organising the inaugural Singapore FinTech Festival which will bring together a series of distinct FinTech events in the week of 14-18 November 2016. Activities during the FinTech Festival are aimed at bringing together the FinTech ecosystem, building relationships, sharing knowledge, and creating business opportunities.
A balance must be made between the regulators’ legitimate concerns about risks involved in digital money flows and the need to embrace and encourage new technologies. As Singapore strives to maintain its position as a vibrant financial hub, we will need to assure our stakeholders that adequate controls are in place and yet create an environment that is suitable for growth.
The rigour and control of MAS has built integrity and confidence in the Singapore financial ecosystem but it is also this very caution that may be resulting in barriers to acceleration of FinTech in Singapore. With tasteful and guided responses to divine discontent, one is hopeful that Singapore’s time may come to be a key player in the global FinTech market.