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FinTech’s role in the post Covid economic recovery Digitalisation has accelerated with Covid-19. As we move into a post-pandemic economy, FinTech is likely to play an increasingly outsized role. During Covid-19 in Singapore, the nation’s digital infrastructure continued to support the economy despite large parts being shut down because of constraints on physical contact. Financial institutions were able to serve customers because of innovations in artificial intelligence, machine learning and biometrics. “Investments in national digital infrastructure in recent years have been instrumental in enabling digital finance to expand to many segments of customers and businesses, bringing about greater accessibility and inclusivity. For instance, financial institutions have been progressively using MyInfo since 2017. This allows non-face-toface customer identification and verification. It also improves the customer onboarding experiences and increases business efficiency. This benefit was very evident, and certainly amplified during the circuit breaker as customers could continue to be on boarded by financial institutions without disruption,” Loh points out. Business sans Borders (BSB) — an initiative by MAS and Infocomm Media Development Authority — serves as a meta-hub for business and digital services that enables enhanced domestic and international trade opportunities for small and medium-sized enterprises (SMEs), interoperability between SME ecosystems, access to digital services, and a sandbox environment to test new services and products. “BSB will be AI (artificial intelligence) enabled to help SMEs and FinTechs accelerate their post pandemic recovery. By connecting domestic and international platforms, BSB can help SMEs improve their discovery and matching of buyers, sellers, and service providers across different platforms, across different industries and across different countries, thereby increasing trade opportunities and deepening the financial inclusion of SMEs,” Loh explains. BSB will utilise merit based AI to enable SMEs to discover prices and transaction or seal opportunities in a much larger global marketplace, as well as to build business resiliency by access to multiple supply chains, and allow for easier sourcing of relevant financial and business solutions that will be important for SMEs, she adds.
SEE:FinTech finds a home, finally
Job creation Ultimately, the purpose of government is to improve lives and provide good paying jobs for the population. On this score, FinTech is a gift that keeps giving. The financial sector has performed creditably this year. In the first three quarters of the year, growth in the finance and insurance sector averaged 4.7%. On the jobs front, for the year as a whole the financial sector is expected to remain net creative for jobs, even though this is likely to be at a rate much lower than in previous years. On the people front as the adoption of technology and solutions increase, demand for tech related job roles is expected to increase. Job roles from UI (user interface) and UX (user experience) to data analytics and machine learning and cybersecurity — these are all new roles — will continue to increase in a more digitally focused economy and digitally enabled financial sector. This will help the creation of new job roles in the job market. An estimated 10,000 people are employed by FinTech firms in Singapore. And many of these FinTech firms and innovation hubs are still hiring, despite current more challenging macroeconomic conditions, as seen on the Singapore FinTech Association jobs portal. Challenges remain While FinTech has been a great enabler of financial services, challengers remain and none more evident than in the area of trade finance. Digitising trade finance is proving to be more complicated that initially envisaged. This is because trade finance involves several processes with numerous players across different geographies connecting diverse players. These include shippers, freight forwarders, buyers, sellers, customs, banks, insurance in different jurisdictions. A common standard — like Society for Worldwide Interbank Financial Telecommunications (SWIFT) for cross border funds transfers — is absent in trade finance. “Trade finance is a highly manual process which relies heavily on paper documentation, with added complexity from legal requirements across jurisdictions that differ. One of the challenges is in bringing parties onto a common platform where there is no natural central party that can be trusted by all the diverse market participants,” Loh says. Some organisations have attempted to digitise these processes. A Singapore based trade finance network, Contour, is attempting to digitise letters of credit (LoC). The organisation trialed these digitised LoCs with more than 50 banks and corporates and succeeded in reducing the LoC process from five to 10 days to less than 24 hours. “This is just one example of a promising use case. And we’re eager to see this go live,” Loh says. Pros and cons of CBDCs Another area that central banks are running trials on are central bank digital currencies (CBDC). MAS along with many other central banks are following the technology and economic use case developments of central bank digital currencies closely. The focus and priority of central banks is on improving efficiency and user experience in epayments for institutions. “We already have the ability to transact money through digital means safely, securely and seamlessly, through a wide range of service offerings by banks and FinTechs. [Our] efforts extend to active collaboration with other countries in the area of cross border payments, in an effort to reduce costs that are associated with cross border transactions,” Loh explains. However, retail CBDCs bring a number of challenges. In particular, a retail CBDC poses significant risk to financial stability, where a frictionless retail central bank digital currency could exacerbate bank runs by allowing consumers and firms to shift out of any vulnerable financial institution very quickly into retail central bank digital currencies. This could present vulnerabilities to the entire banking system. “Even outside of stress periods, we also have to consider the potential negative consequences from the issuance of retail CBDCs to the flow of credit to the economy,” Loh cautions. For instance, if banks could transfer deposits to CBDCs, this could also lead to increased funding costs which could ultimately result in reduced credit supply to the economy. CBDCs can also assist capital flight from certain economies during periods of stress into CBDCs issued by other countries. There is currently no universal case for issuing retail CBDCs. Instead, it depends on country-specific circumstances. “We will continue to follow developments in retail central bank digital currencies, bearing in mind that we are already able to transact digitally, and efficiently across a range of swift and secure payment solutions,” Loh reasons. SFF is here to stay With all the advantages of collaboration, innovation, high level jobs and investment the FinTech sector brings to Singapore, the Lion City looks set to continue hosting FinTech festivals. With a Covid-19 vaccine on the horizon, Loh and her team are looking at a resumption of a physical event. “It is too early to tell but we certainly hope to be able to host a large physical event in Singapore, for the global financial services community to meet in person. Nothing beats the physical connection and buzz from bringing in people and businesses from around the world, as a convening platform for innovation and technology. We will take on board the learnings from SFF2020, including the global FinTech experience with more than 40 cities hosting FinTech events, into SFF2021,” Loh concludes
