Where Are We in Fintech? Some Answers in Singapore for CFOs

The inaugural Singapore FinTech Festival was held from November 14 to 18, a few days after Hong Kong Fintech Week, which was also being held for the first time.

It’s evidence of how serious Asia’s two leading financial centers have become with regard to the emerging financial-technology tools and start-ups (and reinvented incumbents) that aim to supplement, enhance or replace the services currently offered by established banks and other financial services companies.

Indeed, regulators in both cities (as well as in Australia, Indonesia, Malaysia and Thailand) are creating ‘regulatory sandboxes’ to allow fintech firms to test next-generation products, services, business models and delivery mechanisms in a live environment without immediately incurring the normal regulatory consequences.

All this tells us that fintech is on track to become mainstream sooner rather than later across Asia. And that means many new opportunities for CFOs – and also risks.

The Singapore FinTech Festival opened with a bombshell announcement by the Monetary Authority of Singapore that it was going to launch its own blockchain with a digital currency

CFO Innovation attended the Singapore FinTech Festival to get a sense of where fintech services are in Asia, and what’s in store for chief financial officers and other senior finance executives. Here are our observations.

Regulators are coming onboard

We asked Gavin Raftery, partner at law firm Baker & McKenzie in Tokyo, his thoughts on the future of fintech and what it means to the CFO. “The idea behind fintech is to try and improve the value of services beyond that offered by financial institutions and make [those services] easier to access,” he said.

Fintech also allows countries that have yet to fully develop their banking sector and those isolated areas around the world to leapfrog current technologies and obtain the means to deliver full-service banking.

Already, said Raftery, Chinese e-commerce companies such as WeChat and Alibaba are offering financial services to their huge online customer bases – WeChat is estimated to have 806 million users, while Alibaba has 434 million users across its various platforms.

The regulators are scrambling to catch up. Piyush Gupta, CEO of Singapore bank DBS, recalled asking Chinese regulators why they were not regulating Alibaba and Alipay, its online payments arm. “Before, they were too small,” was the somewhat tongue-in-cheek answer. “Now, they are too big.”

One important development is the advent of regulatory sandboxes. On November 16, the Monetary Authority of Singapore (MAS) issued guidelines for fintech experiments (Hong Kong issued similar guidance in September). “The guidelines reflect MAS’ commitment to building a smart financial center where innovation is pervasive and technology is used widely,” said MAS Deputy Managing Director Jacqueline Loh in a statement.

“The regulatory sandbox provides a conducive environment where regulatory requirements will be relaxed to enable firms to experiment with promising innovations within boundaries.”

Singapore’s central bank is adopting blockchain

The Singapore FinTech Festival opened with a bombshell announcement by MAS, the country’s central bank. Managing Director Ravi Menon said MAS was going to launch its own blockchain with a digital currency for direct, blockchain-based interbank clearing.

The first phase would involve eight Singapore banks that would settle accounts directly on the MAS blockchain. In the second phase, MAS will partner with another central bank for cross-border clearing.

The announcement electrified the 11,000 festival attendees because blockchain has been associated with Bitcoin, a cryptocurrency that has been linked to criminal activity. That one of the world’s most conservative central banks is going out on a limb on blockchain says much about the potential of this fintech creation.

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