Speech by Minister S Iswaran at the SMU SKBI FinTech Conference

KEYNOTE SPEECH BY MR S ISWARAN, MINISTER FOR TRADE AND INDUSTRY (INDUSTRY), AT THE SMU SKBI FINTECH CONFERENCE, THURSDAY, 18 AUGUST 2016, 9.00AM

Professor Arnoud De Meyer, President, SMU

Mr. Piyush Gupta, Chairman, SKBI Advisory Board

Mr. Changyong Rhee, Director, Asia and Pacific Department, IMF

Distinguished Guests,

Ladies and Gentlemen,

1.            Good morning.  I am very happy to join you this morning at the SMU SKBI FinTech Conference.  I want to start by congratulating SMU on hosting the 6th edition of this annual conference that brings together industry professionals, investors, financial innovators, regulators and academia to better understand the opportunities brought about by FinTech.

FinTech’s growing importance globally and to Singapore

2.            FinTech has been a transformative and revitalising force for the global financial services industry.  From the Committee on the Future Economy (CFE)’s perspective, we see this as an important horizontal. A horizontal, in the vertical sense, that’s going to have a profound impact on the financial services industry. But because financial services is a horizontal that affects many other sectors, we see this also as a key enabler in terms of what we call as “capacity enhancement”.  This year, global investment in FinTech grew by more than 70 percent from 2015 to US$22 billion.[1]  Over the next 3-5 years, cumulative global investment in FinTech is expected to exceed US$150 billion.[2]  This is unsurprising given the promise and potential of FinTech.  FinTech has enabled new means of conducting financial transactions, and it has fundamentally changed the ways in which we save, borrow, invest and spend money.  From alternative payment solutions to peer-to-peer lending, FinTech has helped shape a more innovative and inclusive financial system. And I think in the context of Asia, it has particular relevance and significance because when you consider the increasing dimension of Fintech, and the fact that it will make financial services more accessible, I think we can truly appreciate the potential.

3.            FinTech is also a critical differentiator for Singapore to remain a leading financial hub in the region.  Our finance and insurance sector has been a key growth contributor in recent years, and the future outlook for this sector will be driven in part by the growth of FinTech.  Hence, we want Singapore to be a leading global FinTech hub and, to this end, the Monetary Authority of Singapore (MAS) has been exploring ways in which Singapore can establish positions of leadership in this space.

Singapore strives to be a thought leader on FinTech regulation and development

4.            The right regulatory environment is central to making sure that FinTech innovations can thrive.  Here, we need to find the balance. The balance between ensuring the stability and security of the financial system, and being able to provide an environment that is conducive for Fintech innovation. And that is a tension, but an important tension that we must navigate to ensure that the benefits of Fintech innovation accrue the entire system. We have therefore sought to strike an optimal regulatory balance between ensuring the financial system’s safety and stability, and providing an environment conducive for FinTech innovation.  This is one of the main reasons why Singapore’s FinTech scene has been so vibrant, with the number of FinTech start-ups in Singapore more than doubling, from around 140 in 2015 to more than 290 today.

5.            Singapore has sought to be at the forefront of regulatory thinking on FinTech, even before the term was coined as such.  Take the example of mobile payments.  With the recent introduction of Samsung Pay and Apple Pay, mobile payments are now a feature of everyday life for consumers.  Yet, as early as 2002, MAS had already issued a consultation paper on security guidelines for mobile banking and payments.  In subsequent years, this was followed by guidelines and regulations to ensure that the widespread benefits of mobile payments would not be overwhelmed by risks such as terrorist financing and money laundering.

6.            Regulation has to be calibrated to be in proportion to the risk posed to the financial system.  In line with this approach, MAS recently announced a regulatory sandbox to provide companies with a safe testbed to experiment with innovative FinTech solutions.  This is an example of the kind of balance that we seek, and also an example of the living laboratory that Singapore can serve as. This will allow firms to provide actual products or services to customers within a well-defined space and duration.  While such a sandbox would not prevent product failures, it would contain the consequential impact on customers and allow us to learn, experiment and iterate our solutions.  In doing so, the sandbox will reduce regulatory friction and give innovations a better chance to take root in Singapore and beyond.

7.            Besides a sound regulatory environment, the Government will also support Singapore companies in the adoption of FinTech, particularly e-payments.  E-payments confer on our SMEs – whether digital or traditional in their business model – significant productivity gains through the digitisation of business processes and greater efficiency of e-payments. Indeed, the digital economy in its broader sense is going to be a key feature of the way Singapore economy evolves and beyond that, the way we integrate across the region. We want to facilitate the entry of our businesses into the space because that means they can scale up and access broad markets almost instantaneously. In other words, companies can in fact be born global, and it means that if we have the supporting fulfilment services and payment systems, then the process of that transformation can take place much more quickly.

8.            We are helping our SMEs digitise their existing business processes like paper invoice reconciliation, so that they can fully benefit from e-payments.  Such digitisation requires certain levels of investment that may not yield immediate dividends.  So, one of the ways in which we are helping our SMEs is through SPRING Singapore’s Capability Development Grant (CDG).  This grant allows our SMEs to take on large scale upgrading projects in, among other things, digitising their business processes.  Moreover, the inter-agency Electronic Payments Committee has set up a taskforce to work closely with SMEs to better understand the hurdles to the digitisation of their business processes and integration with e-payments.

9.            Adopting e-Payments will also help our businesses participate more actively in e-commerce, which has become pervasive in B-to-B and B-to-C transactions.  The Singapore Government also hopes to be able to take the lead in developing a regional e-Payments strategy, so that companies can tap on the region’s growing middle class and large consumer base through e-commerce. This will empower individuals and small businesses across the entire region who seek to serve the broad population base in ASEAN and beyond.

10.         First, we will help our Singapore merchants establish strategic partnerships with major payments players with the potential to reach out to a wide network of ASEAN cities.  For example, IE Singapore has been helping NETS facilitate the link-up to Alipay to enable e-NETS as the first overseas debit payment mechanism for e-commerce giant Alibaba.  Second, we will support the development of payment solutions for the unbanked in the region.  This is a very important objective. Given the size and need of this segment of the population, we believe this will have both economic and social ramifications. Riding on the high levels of internet and mobile penetration in ASEAN, we aim to enable e-commerce with those who continue to be unbanked.  These initiatives will help enable e-payments in the region and create new opportunities by driving the growth of e-commerce.   

11.         On top of such initiatives, we recently established a dedicated FinTech Office to serve as a one-stop virtual entity for all FinTech matters as well as to promote Singapore as a FinTech hub.  Besides aligning and enhancing FinTech-related funding schemes across various government ministries, the FinTech Office will propose policies to deepen industry infrastructure, talent development and manpower to meet the needs of our growing FinTech sector.  Doing so will also help maintain our attractiveness as a FinTech hub to investors and entrepreneurs.

12.         Such moves have given firms like local start-up FundedHere, a crowdfunding platform, the support needed to grow.  We must continue to innovate and adapt our regulatory environment and overall ecosystem, so as to ensure that Singapore remains a trusted and attractive financial hub.  The Government continues to keep its eye on the future, and I understand that MAS will share further details tomorrow on its plans for the next phase of development in Singapore’s payment landscape.

Singapore’s FinTech ecosystem

13.         While the government ensures that the regulatory environment and ecosystem is conducive for FinTech innovation, industry participants also play a key role in building our ecosystem by collaborating with each other.  This is a nascent space, a space that is diverse and has its challenges but also opportunities. The ability to come together to collaborate across dimensions is key. Our FinTech industry will be enhanced by the cross-fertilisation of ideas, co-ordinated implementation and testing, and a smooth route-to-market by bringing together the strengths of an entire ecosystem of industry participants, including: technology providers, finance players, start-ups, investors, and researchers.

14.         One key way in which industry participants can collaborate is in sharing their latest research, insights and ideas.  Indeed, in the course of our work in the CFE, what has become apparent is we are in an area where innovation will drive growth across every sector. And yet, when you look at the innovation models, open innovation is one that is only now beginning to take hold. The reason is because innovation is inherently risky, the nature of the challenge is complex, and yet the pay-offs can be significant if it’s done right. So a collaborative approach, even among competitors, makes a difference.  Open innovation and collaboration even among competitors has become a defining feature of many sectors today.  Even more so, in an industry as wide-ranging and multi-disciplinary as FinTech – one that spans technology, banking, insurance and many other sectors – the bringing together of fresh perspectives can catalyse cross-sector collaboration and strengthen the overall ecosystem.

15.         It was with this in mind that MAS launched the inaugural Singapore FinTech Festival, which will take place from the 14th to 18th of November this year.  The festival will comprise a series of back-to-back events to facilitate knowledge-sharing, networking, the making of pitches, and the sharing of ideas. This collaborative dimension and fostering of environment to bring together, even unorthodox partners in order to seek out unorthodox solutions, is a key driver in the Fintech space and in many other verticals we are looking at.

16.         I would therefore encourage FinTech and financial services companies here to continue to deepen and broaden their collaborations.  This applies not just to knowledge sharing, but also to other industry-strengthening moves like setting common standards and enabling the seamless sharing of data.  We need our companies to consider not just the value to their individual businesses, but also to keep in mind the broader system-wide benefits that can result from industry collaboration. In doing so, we will raise the value proposition for the entire sector.

Developing FinTech talent and capabilities

17.         Another focus of our work in this sector has been to develop talent and capabilities relevant to FinTech.  We must nurture a strong pool of such talent to meet the new and constantly evolving needs of the FinTech industry.  In particular, it calls for individuals with cross-disciplinary expertise who can catalyse innovation in the FinTech space.    

18.         We are therefore looking into creating schemes to promote the development of multi-disciplinary skills through the school curriculum, work placement programmes and mid-career retraining opportunities.  To this end, we must foster close collaboration between industry and our institutes of higher learning to help ensure that our graduates acquire the skills and knowledge that are relevant to FinTech.  In this regard, MAS has been actively engaging our universities and polytechnics to sharpen their academic curriculum and achieve greater alignment with industry needs.  For example, in 2013, the National University of Singapore and IBM launched the NUS Centre for Business Analytics, which offers a one-year Master of Science degree programme that marries business strategy and data analytics.

19.         To boost the FinTech proficiency of our workforce in the financial sector, MAS is partnering IDA, the Institute of Banking and Finance (IBF) and the Financial IT Academy (FITA) to equip financial professionals with greater digital skillsets.  For example, FITA is delivering a digital transformation series that touches on various topics like artificial intelligence.  In addition, MAS is working with IDA to engender good placement outcomes for IT professionals in the financial sector through the Finance Committee of Technology Skills Accelerator (TeSA) programme. 

20.         We have also worked to equip professionals with the right sets of infocomm skills to thrive, especially in the important cybersecurity sector.  Cybersecurity is already a critical issue in FinTech, with the cost of cyber-crime expected to exceed US$2 trillion by 2019.  Cybersecurity capabilities are therefore critical to our FinTech players.  In collaboration with the Infocomm Development Authority of Singapore (IDA) and the Cyber Security Agency of Singapore (CSA), Singtel participated in the Cyber Security Associates and Technologists (CSAT) Programme to train infocomm professionals in cyber security.  Under this programme, Singtel will train fresh infocomm technology professionals and equip them with basic cyber security skills.  It will also provide experienced cyber security professionals with the opportunity to enhance their skills by training with leading cyber security experts.  This is part of trying to meet a need in this space because there is a global shortage, and Singapore is no exception. All these efforts will help ensure that Singapore’s FinTech ecosystem gets the talent it needs to flourish.

Closing remarks

21.         So let me conclude by saying that our efforts in Singapore have a few key dimensions – certainly, in the space of developing the ecosystem and fostering the collaborations; in the area of regulatory environment and other initiatives, where we create an enabling and conducive environment for Fintech innovation; and in the area of manpower development – ensuring that we have the people with the appropriate skillsets. It is a role that Government can play, but for success that is sustained and lasting in this space, we will need the private sector and industry participants to be actively engaged. We have to complement the close collaboration that we already have with tighter coordination between the public and private sector, and also the involvement of international partners. I think this is an area where there is rich promise, but considerable work needs to be done. As we’ve already heard, we really can’t be sure which are going to be the winning technology or winning pathway, but we do know that there is a focus to it, in terms of inclusivity and the ability to reach out to much wider unserved customer bases, and also the enhancing of competitiveness of financial services systems.    

22.         I urge all of you to engage fully during this forum to forge new collaborations that can take us further in the Fintech space. Government will be a strong partner in that regard, and I urge you to take full advantage of what you see here in Singapore and to give us your ideas on how we can do more in collaboration with the private sector. I wish all of you a fruitful conference, and once again congratulate SMU on a successful event.  Thank you.

[1] Accenture Report

[2] PWC FinTech Report