Only then are we able to exercise thoughtful judgment. There will be a balance between supporting innovation and technology use, while pre-empting new or heightened risks that these may present. MAS takes an even-handed approach by providing a regulatory regime that is risk-proportionate across the range of institutions involved in regulated financial activities. We seek to provide the environment, and even to encourage new FinTech and other players to establish themselves to compete, collaborate and innovate. We allow for adoption of technology and innovation in 3/5  BIS central bankers' speeches  financial services, especially those that hold promise in raising efficiency, in creating new opportunities, in enabling new or value-adding services or simply to manage risks better. MAS adopts a “materiality and proportionality” test, and seeks to right-size regulations to be fitfor-purpose; for both traditional as well as new business models, according to the risks the activity poses. For example, in the new Payment Services Bill that MAS has consulted on, regulatory requirements for payment activities will be differentiated according to the risks that specific activities pose rather than apply a uniform set of regulations on all payment service providers. Regulation comes in when the risk posed becomes material or crosses a threshold. The weight of regulation must be proportionate to that risk. Singapore is one of the first jurisdictions to have established regulatory sandboxes where firms can experiment their innovative solutions in a contained environment, with access to a limited pool of actual customers.

This is what the FinTech players have sought to do, and this is what banks are fighting back on. Banks will have the advantage of being highly regulated and trusted, that smaller and newer players may find it hard to challenge. The general consensus is that many FinTechs and the established financial institutions will collaborate. There is a natural synergy here: (a) Collaboration with financial institutions enables FinTech players and technology firms to broaden their reach. (b) On the flip side, FinTech solutions present established financial institutions with opportunities to enhance their product offerings or to improve operational productivity. McKinsey estimated that enhancing digital capacity and adopting technologies could result in productivity gains worth roughly $ billion for the global banking industry by 20252. But the competition will remain intense. Large internet-based firms with their massive customer base can be serious contenders for customer mind-share and wallets including in the area of financial services. There is another development that has gained traction. We see the emergence of fully digital banks that operate entirely online with no physical branches, but are able to provide similar services as the traditional brick-and-mortar banks. Fidor Bank, founded in Germany, is one such example. WeBank in China is another. DBS’ Digibank, a mobile-only bank in India, is also completely branchless and in less than two years, have signed up more than 1.5 million 2/5  BIS central bankers' speeches  customers. All three have different origins and operate very different business models.