Singapore tries to please all parties in fintech assault on banks
Singapore's central bank's new fintech lab aims to attract enablers, rather than disrupters, according to its chief fintech officer, Sopnendu Mohanty. In a city with more than 200 established banks, policymakers are keen not to kill the goose that lays the golden egg. While other cities see fintech as a threat to banks, the Monetary Authority of Singapore's Mohanty says he hopes it will help lenders by cutting costs and creating new sources of revenue. The central bank has said it is planning to invest SGD225m ($158m) in fintech by the end of 2020.
IN AN era when architectural masterpieces curve and bloom (Zaha Hadid), or shimmy and fold (Frank Gehry), designers of central-bank buildings remain reassuringly fond of right angles. The Monetary Authority of Singapore (MAS), the city-state’s central bank and financial regulator, is housed in a boxy tower just south of the central business district. But tucked into one corner is a room called “[email protected]” that desperately wants to be Silicon Valley: witness the scruffily dressed young men, whiteboards on wheels covered in buzzwords and the kitchen along one wall.

This is the MAS’s fintech lab, where Singapore is trying to put its own twist on the technologies disrupting the financial sector. A report from Citigroup published in 2016 warned that as fintech lets customers do more online and cuts into banks’ lending and payments activities, European and American banks could lose almost 2m jobs in the next ten years. Similar fears stalk Singapore, home to more than 200 banks, and dependent on finance for 12.6% of GDP.

In London, Berlin and San Francisco, many fintech innovators are betting against the big banks. Singapore, typically, is trying to play both sides of that bet. It wants a thriving fintech industry that supports, rather than undermines, incumbent big banks. The MAS has vowed to invest S$225m ($158m) in fintech by the end of 2020. Sopnendu Mohanty, its fintech guru, says he wants to attract fewer “disrupters” than “enablers”. He hopes fintech can help banks by cutting expenses and opening up new sources of revenue, through products that can slot into banks’ front- or back-office systems. The idea is to combine the cost-effective nimbleness of fintech with the trust, solidity and customer base of mainstream banks. Translation: even if you can beat them, join them.

One attraction of Singapore for fintech entrepreneurs is what Mr Mohanty calls the “sandbox”: a relaxation of some regulatory requirements to allow small-scale experiments. This lets firms test ideas in secure, rich, low-risk Singapore before exporting them to bigger markets. Singapore also makes much of its efforts in “regtech”—software helping banks comply with increasingly complex regulations.

But Mr Mohanty stresses that, although the MAS has eased regulation for small fintech experiments, “there is no compromise on principles” : ie, cyber-security must be flawless. Having been caught up in Malaysia’s sprawling 1MDB scandal, Singapore has also been ranked by Oxfam, a charity, as the world’s fifth-biggest corporate-tax haven (“inaccurate”, said the government). So the employment-destroying peril of fintech is not the only threat to the health of its financial sector: Singapore may also be worried about its reputation.