REGULATION Conducive to Innovation Let me start with a couple of general principles underlying our approach to FinTech regulation. First, we believe regulation must not front-run innovation. Introducing regulation prematurely may stifle innovation and potentially derail the adoption of useful technology. But the regulator must run alongside innovation. It is important to keep pace with what is going on, assess what the risks might be, and continually evaluate whether it is necessary to regulate or leave things to evolve further. Second, we apply a materiality and proportionality test. This means regulation comes in only when the risk posed by the new technology becomes material or crosses a threshold. And the weight of regulation must be proportionate to the risk posed. Third, we focus on the balance of risks posed by new technologies or solutions. Many technologies mitigate existing risks but may create new ones. The regulatory approach must seek to incentivise the risk mitigation aspects while restraining the new risks. Let me illustrate our approach to the regulation of FinTech with a few concrete initiatives: Activity-based regulation to keep pace with payments innovations. Specific guidelines to promote secure cloud computing. Enabling digital financial advice and insurance. A regulatory sandbox to test innovative ideas. Strengthening cyber security. 2/9  BIS central bankers' speeches  Activity-Based Regulation for Payments Some of the most visible FinTech innovations are taking place in the payments space. They are making payments cheaper, faster, better – delighting consumers and giving the banks a run for their money.

More than 20 global FIs have set up innovation centres here. You would have seen during the Innovation Lab Crawl earlier this week some of the exciting things they are experimenting with: digital health solutions tapping on wearable devices; telematics for motor insurance; blockchains to streamline payments; big data to produce customised service offerings. MAS itself has set up an innovation lab – called Looking Glass. It aims to: spur collaboration among MAS, FIs, start-ups, and technologists; and facilitate consultations for start-ups by industry experts on legal, regulatory, and businessrelated matters. Infrastructure for Electronic Payments: UPOS, CAS We have a world-class infrastructure for electronic payments. It is a 24/7, real-time inter-bank fund transfer system. We call it FAST; short for Fast and Secure Transfers. But FAST is grossly under-utilised and Singapore is still heavily dependent on cash and cheques as means of payments. The Association of Banks in Singapore is working on two key initiatives to make electronic payments seamless and convenient for everyone. First, a Central Addressing Scheme (CAS) that will allow you to pay anyone using that person’s mobile number, national ID number, email address, or any other social media address, without the need to know the recipient’s bank or bank account number. Second, a Unified Point-of-Sale (UPOS) terminal that will allow a merchant to accept all major card brands, including those that are contactless or embedded in smartphones. A National KYC Utility Knowing the identity of a customer – or KYC – is one of the biggest pain points in the financial industry.