SINGAPORE: Helping FinTech start-ups to venture abroad is the next big focus in Singapore's push towards becoming a smart financial centre, according to Monetary Authority of Singapore’s (MAS) Chief FinTech Officer Sopnendu Mohanty.
In an interview with Channel NewsAsia on Monday (Nov 14), he outlined priorities for the coming year – including improving global market access for Singapore start-ups, building up talent, and giving FinTech developers better access to funds.
Mr Mohanty said the main initiative so far has been around defining the parameters of a smart financial centre and identifying the various roles of different industry participants.
“We can’t expect the Government to be doing innovation,” he said. “That’s not our job. Our job is to facilitate innovation.”
To do just that, policy frameworks have been simplified, said Mr Mohanty. He cited efforts by MAS to update outsourcing guidelines, open up the use of cloud services and provide "sandboxes" to experiment with technology.
Looking ahead, he said a big focus next year will be on helping start-ups access markets abroad. “You cannot have a sustainable FinTech industry if you do not have access to the market. Singapore is not the market. The market which exists is outside of Singapore,” he said.
He added that there will continue to be a focus on developing talent and skills at every level, as “the world is moving from analogue to digital, (and) the kind of people you need to support are going to be different”.
As various industry stakeholders – regulators, industry and FinTech developers – deepen their collaboration with each other, Mr Mohanty said ultimately, he expects to see a more sustainable ecosystem in Singapore, where new ideas are experimented and incubated, and start-ups will have access to capital, and they can take their products overseas.
“That will be the big Singapore story going forward,” he said. “A centre of excellence for idea nurturing, access to risk capital, and growth to the Asian market.”
About 11,000 participants from more than 50 countries are expected to be participating in MAS’ inaugural Singapore FinTech Festival, which takes place from Nov 14 to 18.
Mr Mohanty’s full interview with Channel NewsAsia:
Q: In your view, how has Singapore’s FinTech landscape been shaping up in the past year?
MOHANTY: At a macro level, it’s a compelling place for innovation to happen. People are collaborating. If you compare with other markets, it is a disruptor story there, here, people are trying to help the banks to succeed. They’re writing solutions to help the incumbents to do better what they’re doing today. That’s the macro story for Singapore.
At the micro level, if we look at our portfolio of start-ups here, they’re kind of skewed to the enabler market, trying to help the same set of incumbents and incumbents also opening up their system. They’re making open APIs available, they’re willing to put their innovation labs to work jointly with the start-ups.
From a policy point of view, we’re also helping the banks to open up their innovation labs so we’re working together with the industry. With those deep collaboration and engagement, you’ll see a much more sustainable ecosystem and it’ll become the centre where the new ideas are experimented, incubated and start-ups will have access to capital, and then they can take their products overseas. They’re looking at a hinterland of two billion people who need a lot of FinTech solutions. That will be the big Singapore story going forward. A centre of excellence for idea nurturing, access to risk capital and growth to the Asian market.
Q: Looking at how the ecosystem is developing, how do you see the relationship between large incumbent banks and newer smaller FinTech players? Can industry disruption take place in a way that’s sustainable and ultimately better for consumers?
MOHANTY: I always say that the consumer is the biggest disruptor. They decide what’s good for them, and they will change the paradigm. Consumers are going to be the single biggest factor of the disruption. So everything starts with disruption. They’re at the centre of the story.
Now, we start evolving the start-up ecosystem around that. If they’re doing what is good for consumers, it’s sustainable. Then they’re going to go back to the banks who are historically blamed for providing not very consumer friendly solutions. They’re realizing it. They think, yes, we need to do that. And this start-up, because they do what is good for consumers, they will turn around and work with the banks. Then the ecosystem becomes highly sustainable, self-driven, very organic in its growth. And that’ll become a long term value proposition for, at least, from Singapore’s perspective.
Q: What has MAS done so far in developing Singapore as a smart financial centre?
MOHANTY: There are three things we’ve done this year. First thing, very important, is to define what is a smart financial centre: The architecture.
We’ve clearly articulated what exactly FinTech means to a financial centre. So we’ve painted that picture, we went around the globe, spoke about it, got the global mindshare. People started appreciating what MAS has done, painting the macro picture. There are a few things in that architecture: Whom are we going to target, who are the constituents of our innovation, are we going to only focus on innovation, are we going to only focus on B2C, or on broader financial sector?
We separated - what as a policymaker, as a Government agency - what we should do, what the industry should do. We can’t expect the Government to be doing innovation. That’s not our job. Our job is to facilitate innovation. Within the Government definition, what we should be doing, we had policy simplification, come up with digital identity, things like incentive streams, that’s what we’ve focused on on the policy side.
Within broader industry architecture, go and build microservices, open APIs, because that is the heart of an enabler market. If the banks do not open their services, we cannot get FinTech to work with those banks. So that’s a big part of the structural shift we’ve pushed this year. The second piece is cyber security. Secure, non-negotiable, we’ve got to get it right. The last piece, is how do we bring it altogether? That’s how the architecture was built, we made a blueprint, we shared it with everybody.
The second thing we start focusing on – policy simplification. Things like outsourcing guidelines, opening up the use of cloud services, opening up experiments, sandbox, so those are policies to help industry to experiment more. Lastly, we started looking at the early talent piece.
Q: What are the next steps?
MOHANTY: Next year the narrative is going to shift. The big part of next year’s focus is getting market access. You cannot have a sustainable FinTech industry if you do not have access to market. Singapore is not the market. The market which exists is outside Singapore - nearest two billion people in ASEAN, plus India. If you take the globe, very good news, but we want Singapore-based start-ups to connect to the global ecosystem, and that will be a big focus next year.
Second, get the talent piece right. That’s a concern for us. We’ve got to get it right. We need people to be skilled entry level, university level. Researchers working on technology, we’ve got to upskill, reskill existing financial sector workforce, because things are shifting, the world is moving from analogue to digital, the kind of people you need to support are going to be different. So we have to upskill a lot of existing manpower. Lastly, access to funds. We need to give oxygen to the start-ups, they need to have access to VC and investors’ money.
Q: Going back to the point on market access, how ready are Singapore FinTech players to venture abroad?
MOHANTY: Start-ups are very smart people. They will do whatever is good for them. They may start thinking about Singapore when they do the first idea. The minimal viable product, because you need to start somewhere, and Singapore is a good incubator or kind of good experimental base. You take an idea and experiment in Singapore. But they also know, that’s not the only market they’re targeting. They’ve got to find a way to fine tune the product and deploy it outside Singapore.
There are challenges, I must admit. Because unlike other products you build in Singapore, and you sell in other markets, it’s straightforward, but this is the financial sector. Every market has their regulatory variations. The nuances are different. So these financial products have to be fine-tuned to other markets. So they’re thinking about it, it’s in their business plan, but they need a lot of support so they can take what’s being done in Singapore and bring it to other markets ... That way they’ll be a lot more global in their thought process, their product will be more scalable. And at the end of the day, we strongly believe the winners will be those that have more globality in their product.
Q: MAS formed a Financial Technology and Innovation Group last August, to formulate regulatory policies and develop strategies. What are the main priorities for the central bank in terms of updating policies to adapt to changes in the industry?
MOHANTY: Cybersecurity is very important for us because consumers have still lingering doubt around the safety of a digital economy. And while consumers demand digitisation in everything they do, they also expect the same robustness of a physical economy where security is kind of given. So they want same level of that assurance in a digital world. That means a lot of effort from the community, which means start-ups have to start writing software where the security is by design, policymakers will be more and more proactive in ensuring the industry is thinking about it, banks are thinking about it, we’re going to be putting a lot of capabilities around Singapore – either tools, or access to data, or research around cybersecurity. Huge focus on cybersecurity. Non-negotiable.
Q: Lastly, what are some of the latest developments and innovations you’re most enthusiastic about?
MOHANTY: Technology will be enabling different business models. If technology is not visible to consumers, that’s the best innovation. So use technology to bring a new way of doing financial services. I would be more focused on what is the end game, what is the end output. Of course there are latest technologies that excitement on a broader sense, the distributed ledger, big data, artificial intelligence, all are cool stuff, but end of the day, they have to translate to something of value to consumers. We got to stay focused on that.