Tharman Shanmugaratnam: Financial technology (FinTech) -
transforming financial services in Singapore
Speech by Mr Tharman Shanmugaratnam, Chairman of the Monetary Authority of Singapore, at
the Launch of LATTICE80, Singapore, 10 November 2016.
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Introduction
1 Good morning. Thank you for inviting me to join all of you. Let me begin by congratulating
Marvelstone on the launch of LATTICE80.
2 It is the first innovation space in Singapore dedicated to and designed specifically to support
FinTech. LATTICE80 is also the first not-for-profit private sector initiative in this business of
nurturing start-ups.
The FinTech Phenomenon
3 FinTech - or financial technology - is transforming financial services, both from within
established financial institutions and from outside the regulated sector through new, FinTech
players.
4 When FinTechs first came to global prominence, it was tempting to cast this as a battle
between new, innovative and responsive players and lumbering, flat-footed banks and other
financial institutions.
5 The real picture is more nuanced, mainly because the incumbents have not been sitting still:
Many of them are investing heavily in technology to streamline and optimise entire swathes
of operations.
For example, several initiatives are underway among banks to tap on distributed ledger
technology to achieve swift, seamless and secure trade settlement.
Several financial institutions have set up in-house FinTech units to replicate the start-up
culture.
They are also collaborating with and, in some instances, buying over promising FinTech
companies.
6 And not many technology companies aspire to become financial institutions. Complying with
regulations, submitting to supervision, and churning out disclosure documents for the markets is
not always an appealing prospect.
7 In short, the Goliaths of the financial world have become more nimble-footed, and are both
competing with and partnering the Davids.
8 That said, we are still at an early stage of FinTech, globally. It has spurred greater competition
in every segment of the value chain of finance. It is too early to say who the winners will be.
9 The traditional financial institutions have the advantage of scale and a reputation amongst
customers. But those that fail to keep up with technology will see part or all of their business
models disrupted. Consumers are cautious about shifting their wallets to new players, but they
are also looking out for services that offer the best value.
10 But many FinTech start-ups will also fail. It is in the nature of innovation that few new ideas
and technologies will develop scale, sustain funding and end up as winners in the market. The
collapse of many peer-to-peer lending platforms in the US, UK, and China is a reminder that it will
not be plain sailing for FinTech companies.
A growing FinTech ecosystem in Singapore
11 Singapore's strategy is not to choose between financial institutions and new FinTech players
but to provide the conditions for both to innovate, compete, and collaborate. Our aim is to create
a FinTech ecosystem where innovation thrives. This is an ecosystem comprising the innovation
centres of our financial institutions, the mushrooming FinTech start-up scene, our institutes of
research and higher learning, the VC/PE community of investors, and connectivity to regional
markets.
12 We are making good progress:
Singapore is home to more than 300 FinTech start-ups, focused on each segment of the
value chain - from providing consumers more seamless payments services to offering
institutions enhanced, automated fraud monitoring.
More than 20 global banks and insurance companies have set up innovation labs and
research centres in Singapore. Several will be opening their labs next week during the
FinTech Festival, to showcase their experiments.
MAS is working with the industry to facilitate greater collaboration. For example, MAS is
encouraging the development of open APIs among Financial institutions to enable efficient
data sharing.
Our A-STAR's research institutes are partnering financial institutions on data analytics and
mobile technology projects. Our universities and polytechnics have also updated their
curriculum and internship programmes to help their students get the hang of FinTech.
Venture capital interest is growing, with some of the most active VC investors in Asian
FinTech being based here.
We have a growing network of co-operation agreements connecting Singapore to other
FinTech centres in Australia, India, Korea and the UK. Indeed, FinTech offers an effective
way for players in Singapore - both financial institutions and start-ups - to meet the
burgeoning demand for financial services in the wider Asia-Pacific region.
Nurturing promising FinTech start-ups
13 LATTICE80 is an important addition to this ecosystem for FinTech.
14 It offers a conducive physical space dedicated to the infrastructural needs of FinTech
startups, here in the heart of Singapore's financial district. It reduces costs for start-ups, gives them
convenient access to data centre and other services, and even has a nursing room.
15 Let me cite two FinTechs starting up residence here in LATTICE80:
Percipient, a local start-up, has successfully developed a customised digital solution for the
State Bank of India. Percipient's big data technology allows for efficient management of the
bank's database of over 500 million accounts, and translating into large potential cost
savings.
Sparks Systems builds new generation trading platforms for hedge funds, banks, financial
institutions and other high volume institutional participants in the foreign exchange market. It
aims is to develop an efficient market place for emerging market FX.
16 This innovation village also promotes collaboration and co-creation. Even in an age of
Tweets and Snapchats, face-to-face interaction remains a source of new ideas, and a way to
suss out potential partners.
R3 LRC, a specialist in distributed ledger research supported by a consortium of more than
70 financial institutions, will set up its first physical presence here. R3 Asia Lab will promote
the cross-pollination of ideas between Singapore FinTechs and leading technologists around
the world.
The Fintech Association Singapore, another resident here, is a cross-industry initiative to
facilitate collaboration among all stakeholders in the FinTech ecosystem.
17 There is another feature to this collaboration here, which is to bring start-ups together with
venture capital and other investors.
tryb is an investor in promising technology start-ups that are building the financial
infrastructure platforms of the future for ASEAN. tryb is currently in the process of raising
US$100 million in long-term funding.
The Marvelstone Group too, has been investing in FinTech start-ups and linking them up with
their network of business and specialist expertise.
Further MAS initiatives to grow VC activity
18 MAS is working with the VC industry to grow the funding landscape for start-ups in Singapore
and the region. The role VCs play in stimulating economic dynamism has been a recurring
theme in discussions of the Committee on the Future Economy (CFE).
19 There are two key prongs in MAS' approach.
20 First, MAS is reviewing its regulatory regime for VC managers.
Specifically, MAS is looking to significantly simplify and shorten the authorisation process for
new VC managers.
Further, to the extent that there are contractual safeguards to provide sufficient protection to
a VC's sophisticated investor base, MAS is also looking to exempt VC managers from
business conduct requirements that are currently applied to asset managers in general.
MAS will be doing a public consultation on its proposals in January next year, and targets to
introduce changes by July 2017.
21 Second, MAS is studying whether existing incentives for funds and fund managers, which
have been successful in attracting traditional asset managers to set up in Singapore and to grow
over time, are suitable to anchor VC funds and VC fund managers here too.
We recognise that VC funds and fund managers are typically smaller in size and headcount
than traditional asset managers. But they contribute in a different way, by supporting
entrepreneurship and innovation in Singapore and the region.
We will take this into account in assessing the requirements for VC funds and fund
managers to qualify for our incentives.
Conclusion
22 Innovation will drive Singapore's economic future. It will disrupt existing business models, but
it is how consumers get better value, how new firms can scale up and grow internationally, and
how we create quality jobs for our people.
23 This innovation village is part of this ongoing journey. It will, I am sure, nurture a new
generation of technology entrepreneurs in the FinTech space. I congratulate Marvelstone once
again for the successful launch of LATTICE80.