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Singapore FinTech Journey 2.0 is about a diverse ecosystem

Singapore FinTech Journey 2.0 is about a diverse ecosystem, open architecture, international links, talent, conducive regulations, cybersecurity

Speaking at the
Singapore FinTech Festival, Mr. Ravi Menon, Managing Director, Monetary
Authority of Singapore (MAS), outlined six strategies Singapore
is following to foster a thriving FinTech hub.

Ecosystem of Diverse Players

The Singapore Government wants to create an ecosystem for
innovation, where established financial institutions and FinTech start-ups
compete as well as collaborate.

Mr. Menon said that financial institutions are no longer
lagging behind in terms of innovation and almost every major financial
institution has an active innovation agenda to strengthen its business by
harnessing technology.

“Singapore wants to be the place where these financial
institutions test, develop, and apply new technology solutions,” he said.

Over the past few years, global MNCs have set up more than
30 FinTech innovation labs or research centres in Singapore. In addition, over
400 FinTech enterprises have set up base in Singapore, who are experimenting
with new ways to pay, save, invest, buy insurance, plan for retirement and more.

Physical spaces are required to facilitate experimentation
and collaboration. 

Last year, LATTICE80, Singapore’s first FinTech innovation
village, was launched occupying two floors of 80 Robinson Road. Now the entire
building is being converted into a FinTech innovation hub. Named 80RR, it
will have 100,000 square feet dedicated to housing FinTechs, in the heart of Singapore’s
financial district.

Open Architecture

“A Smart Nation needs an “open API economy”,” Mr. Menon
commented. APIs act as “connectors” that allow systems to talk to one another
and enabling service providers to harness information from multiple sources and
produce holistic solutions for customers.

MAS has been encouraging financial institutions to develop
and share their APIs openly, so that they can work with other service providers
to give customers a richer and more seamless experience. 

The Finance-as-a-Service
API Playbook
provides a common guide for banks to identify and develop
APIs.

While MAS’ Financial
Industry API Register
, provides a one-stop shop for FinTech start-ups to
explore the open APIs that have been made available.

Banks in Singapore have been opening up their APIs. To-date,
over 270 open APIs have been made available by the Singapore financial
industry.

OCBC (Overseas Chinese Banking
Corporation) Bank has 43 open APIs on its platform that are actively been
tapped on by FinTech players, as well as government authorities, such as the
Inland Revenue Authority of Singapore.

DBS Bank has launched the
world’s largest banking API developer platform with more than 170 APIs and over
50 successful collaborations. For instance, customers looking for properties on
the PropertyGuru platform can instantly find out if they are eligible for a
property loan and even apply for the loan online.

UOB (United Overseas Bank) has
also recently put in place its regional open banking API platform.

Network of International Links

By the end of this week, MAS will
have signed 16 FinTech cooperation agreements [1] with governments and
authorities around the world. These agreements facilitate information sharing
on FinTech trends and regulatory issues. They also have a referral mechanism
that support Singapore FinTech start-ups in overseas markets, and facilitate
overseas start-ups to set up in Singapore as a gateway to Asia.

Some of the co-operation
agreements also include joint innovation projects. For instance, MAS and the Bank of
Thailand have agreed to work together to link PayNow and
PromptPay
, their respective real-time, 24/7 payment systems for making payments from one bank account to
another.

Talent and Research

A strong pipeline of talent and research capabilities will
be required to sustain Singapore’s FinTech efforts.

As part of initiatives in the area, MAS announced a FinTech R&D collaboration
with the Massachusetts Institute of Technology (MIT). This will enable
local FinTech talents to work alongside researchers at the MIT Media Lab to
come up with technology solutions to real-world use cases. They will run pilots
using distributed ledger technology, cryptography, quantum computing and big
data, artificial intelligence, and machine learning.

MAS is also launching a S$27 million Artificial Intelligence & Data
Analytics Grant. This is part of the S$225 million Financial Sector
Technology & Innovation Scheme.

Conducive Regulation

The key challenge is regulation is to make it conducive to
FinTech innovation, while ensuring that the system remains stable, key players
are sound, and consumer interests are safeguarded. MAS has been striving
to strike the right balance.

For example, MAS does not regulate virtual currencies and welcomes
them as an innovation that can potentially reduce the cost of financial
transactions. But MAS regulates the activities that surround virtual currencies
if these activities pose specific risks, such as the use of virtual currency
for money laundering or terrorism financing. Therefore, intermediaries in
virtual currency services will be subject to anti-money laundering
requirements. Similarly, if a digital token in an Initial Coin Offering
(ICO) is structured like a security, then the ICO must meet the requirements of
the Securities and Futures Act, so that investors are protec
ted.

“FinTech developments are
forcing regulators to review the way regulation is done. If FinTech is
unbundling the financial services value chain, then regulators may have to “unbundle”
their regulations too,” said Mr. Menon.

He expressed his view that
most probably regulators will have to take a more risk-specific and activity-based
approach in the future with respect to FinTech.  This would mean setting
thresholds for when regulation kicks in; calibrating regulatory requirements to
specific risks; and applying these requirements to activities rather than
entities.

MAS will attempt to do this with the new Payment Services
Bill, which will be published for public consultation next week. Licensees will
be regulated according to the activities they conduct, because different
activities pose different risks.

The regulatory sandbox helps to deal with areas where
regulators will never know enough, by facilitating experimentation in a
contained environment.

Cyber Security

Robust cyber defences are essential to capitalise on the benefits
of digital technology. Hence, cybersecurity
constitutes a key component of Singapore’s FinTech strategy.

FS-ISAC (Financial
Services Information Sharing and Analysis Centre), a global intelligence gathering
and sharing initiative for the financial sector with over 7000 members
worldwide, has launched its regional centre in Singapore. The new
centre in Singapore
 will facilitate the sharing of cyber threat
information across 49 financial institutions in 9 Asia-Pacific countries in a
timely manner, and enable a rapid and coordinated response to emerging threats.
 

MAS is also partnering with the Association of Banks in
Singapore to reviewing
its Technology Risk Management Guidelines and to establish guidelines for
“red-teaming’. Red-teaming is a covert penetration test conducted on a
financial institution’s live environment – its people, processes and technology
– to assess their ability to respond to infiltration attempts.

 [1] Abu Dhabi, Australia, Denmark, France, Hong Kong, India, Japan, Malaysia, Philippines, Poland, South Korea, Switzerland, Thailand and the United Kingdom, the Association of Supervisors of Banks of the
Americas

Featured image: Zairon/ CC BY-SA 4.0

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