Fintech's aim is to cut costs, lift customer convenience

Fintech's aim is to cut costs, lift customer convenience

THE end-game of embracing financial technology (fintech) is to make finance cheaper and more convenient for customers, and Singapore will look at its use in every segment of the finance business, Deputy Prime Minister Tharman Shanmugaratnam has has said while on a visit to New York City.

Speaking at the launch of the Singapore FinTech festival there, Mr Tharman, who is also coordinating minister for economic and social policies, downplayed the importance of fintech rankings among financial centres; while these rankings are a competitive pursuit, the success of fintech development depends on tie-ups between players and cities, he said.

"Our aim is not to see if we can be above other financial centres, but to push the envelope and transform finance - to encourage players to find new ways of doing the business, and in a way that makes more sense to the customer - the borrower, the lender, the middle-class investor or someone who makes payments or receives them," he said on Tuesday, New York time.

"Singapore does rank well in the fintech stakes, but I have to tell you that it's a distraction at this stage and it really doesn't get to the heart of what we are doing."

He said it is too early to say whether fintech players will disrupt traditional players in a significant way; after all, most ventures globally have not succeeded to date, despite "a certain breathlessness" in the way new businesses are coming up in the first wave of fintech.

The exception is in China, with the likes of Alibaba and Tencent becoming established names.

Of the developments in peer-to-peer lending, he noted that the scene is now maturing, and that some new lending platforms around the world are now more concerned with the quality of loans made to small businesses.

"The real stress test of any new idea in finance is the economic and credit cycle. But even where new players fail, they usually leave behind an idea - an idea to be modified, taken over or improved," said Mr Tharman.

Regulators are watching the tension between experimentation and preserving trust in the financial system - a balance that is "foremost in our minds", he said: "We cannot stifle innovation. We must let people come up with new ideas and let them run with it. But once they acquire meaningful scale in the financial sector, they should expect regulation."

The head of the Monetary Authority of Singapore Ravi Menon, who is also in New York, said Singapore will start regulating its fintech companies only when they grow to a sufficient size to pose risks to the wider financial system.

Fintech developments are happening in a significantly underserved market in the Asia-Pacific, where a large swathe of people have little access to financial services. "And there's a new generation of tech-savvy individuals in Asia like elsewhere. They are also averse to paying fees; they too are a prime market for fintech in Asia," said Mr Tharman.

Banks and financial institutions have been partnering or acquiring new, smaller players - either as a defensive mechanism, or to introduce disruptive technologies within their own organisation, he noted. In the latest tie-up between a Singapore bank and a fintech entity in March, UOB invested US$10 million in global-equity crowdfunding platform OurCrowd to offer start-ups and Asian small-and medium-sized enterprises access to another source of funding.

Mr Tharman added: "Fintech ventures are also acting as a catalyst for existing players to re-engineer legacy systems. But most importantly, fintech is promoting a shift from the traditional focus on products to a focus on customers."

The Singapore FinTech festival comes to Singapore in November.

This article was first published on April 14, 2016.
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