Blending finance and technology has become Singapore’s forte, with more than 470 Fintech ventures based in the city-state and over 30 Fintech innovation labs or research centers set up by multinational corporations.
With a tech-savvy population, high smartphone penetration and support from the regulatory authorities, Singapore is among the countries leading the rest of the world in its residents’ attitude towards digital banking alternatives, according to a recent report from tech firm Oracle. And the country’s forward-looking attitude is reflected in the actions of its financial sector, which has embraced digital disruption both through the digitalization of traditional banks as well as through promoting Fintech solutions.
Banks break ground on the digital future
Singaporean bank DBS is a pioneer in this space. Named ‘World’s Best Digital Bank’ by Euromoney as well as ‘Best Bank in the World’ by Global Finance for its innovation and capabilities, the bank has long entrenched an entrepreneurial, tech-led culture which pervades its entire organization.
“We set up a goal for the company in 2015 to run a thousand experiments,” says Piyush Gupta, CEO of the bank. “We told people to just do the experiment; it doesn’t matter if it works or not. We learned to experiment. The next year, we created a goal for the company to run three hundred journeys. It doesn’t matter what kind of journey. Once you start getting over the inhibition of taking risk, you see a massive change.”
In 2015, DBS introduced digital account opening services for wealth management customers in Singapore, and expanded this to SMEs in 2016. DBS has also innovated in artificial intelligence, such as by creating a virtual bank recruiter to help with hiring.
As part of the country’s drive to become a smart nation, the Singaporean government has pushed for the growth of areas such as electronic payments. While usually the preserve of non-bank players in markets such as East Africa, where mobile payments first flourished, in Singapore it is traditional banks which have taken up the charge. DBS PayLah! is Singapore’s fastest-growing personal mobile wallet with more than 1 million users. It was the first e-wallet in Singapore to enable QR code payments and now processes more than 40,000 peer-to-peer transactions a day.
“The NETS system in Singapore – the local switch and clearing – has been around for 20 years, but notwithstanding, in the last mile, the consumer point of sale was still a big challenge for us to overcome. The take-up of PayLah has been remarkable. We’re seeing that the transition is happening very rapidly,” says Mr. Gupta.
DBS has now exported its digital know-how across ASEAN and beyond, with the launch of digibank – which it calls “an entire bank squeezed to fit into your smartphone” – in India and Indonesia.
Partnerships drive innovation
As banks around the world grapple with the challenges brought to their business model by the new digital revolution, many are partnering with or even acquiring tech firms, in order to bring in the nimbleness and agility required to transform the way they do business.
One success story in this respect is United Overseas Bank Limited (UOB). In July this year, it announced an investment in Israeli Fintech firm Personetics to boost its use of artificial intelligence across its markets in Southeast Asia. “When they came to us, they looked at our footprint and they were eager to partner with us because of the way we reach out to the different markets in the region,” explains Susan Hwee, the bank’s managing director and head of group technology and operations. The bank’s local knowledge, coupled with the Fitch’s technological might, has enabled the creation of a truly local service – across ASEAN.
A conducive start-up environment
While Singaporean banks have become leaders in digital banking in ASEAN, support from the Monetary Authority of Singapore (MAS), which has been actively promoting the establishment of clear, digital-friendly rules, has led to the launch of a flurry of Fintech startups.
“Fintech can change every aspect of interaction within the financial sector – the way you create, sell, distribute and support insurance; the way you do consumer banking, asset management; the way you do pension plans, corporate banking or investment banking. It can also affect the way public infrastructure is built around financial services and changes the way regulators interact with the industry in terms of monitoring and supervising. That has been the big picture of our strategy for the last three years,” says Sopnendu Mohanty, chief Fintech officer at MAS.
Currently, activity in the Fintech sector is centered on areas as diverse as payments and remittances, crowdfunding, wealthtech, marketplace lending and insuretech. “There is something very unique about Fintech,” says Mr. Mohanty. “The bigger the constraint, the more likely new ideas will come. Once you find out what the bigger barriers are, you build a product and from there you expand.”
Collaborate not compete
Although in many markets around the world Fintech is seen as a competitor to banks, the Singaporean authorities are keen to create an environment where the two sides can collaborate for a digital future. “Start-ups usually approach large banks but these large banks are not designed to interact with small companies,” says Mr. Mohanty. “Three years ago, we started making banks rethink their own architecture. It is what we call free and open API architecture. It allows small multiple products to be plugged in and at the same time, to experiment and be integrated without creating systemic risk.”
For DBS’s Mr. Gupta, this has created a wealth of opportunities. “One of the big changes that’s happening is that banking used to be what I call a pipeline business. You went from the bank to the customer – it was a singular monolithic pipe. That’s changing to being a partnership business. You’re moving from pipelines to platforms,” he said. “If you want to be a platform business then you have to partner with a lot of different people. You have to partner for acquiring customers, for creating value propositions, for new forms of credit underwriting. You have to learn to be a partner organization, an ecosystem organization.”
Today, Singapore is taking the lessons it has learned in financial sector digitalization to the rest of the region. The ASEAN Financial Innovation Network, built on the premise of bringing the best financial and technological minds together for the region, is a vehicle to do this. “If the market comes together and if we build a collaborative platform, then together we can start upgrading our financial infrastructure,” says MAS’s Mr. Mohanty.
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