Financial technology companies in Singapore will only be regulated when they start to present problems to the mass market, Ravi Menon, the head of the Monetary Authority of Singapore (MAS), told reporters in New York yesterday.
MAS, which acts as the central bank of Singapore, governs financial institutions in the country, including banks, insurers, capital market intermediaries, financial advisors and the stock exchange. In recent years, the statutory board has been mulling over the approach it should take toward regulating financial technology companies, and it seems to have come to a conclusion.
“If you start regulating every one of those, you stifle a lot of innovation, and they don’t get a chance to grow,” said Menon, who was visiting New York with Tharman Shanmugaratnam, the Deputy Prime Minister of Singapore, to boost the country’s image as a financial hub.
“So only when they grow and reach a certain critical mass, which then poses a significant impact on the system, or it can affect a large number of consumers, then we step in to regulate. It’s always a fine balance.”
“Do you want to regulate PayPal the way you regulate DBS or Standard Chartered? No, that would be far too onerous, that would kill the business model and they won’t even come here. … Do you need to regulate them? Yes, because they have a scale.”
In July 2015, MAS set up the FinTech & Innovation Group (FTIG), a new group within its organisation structure “responsible for regulatory policies and development strategies to facilitate the use of technology and innovation to better manage risks, enhance efficiency, and strengthen competitiveness in the financial sector”, according to an announcement.
FTIG, which is headed by Sopnendu Mohanty, its Chief FinTech Officer, is also responsible for promoting “a culture of innovation”, committing to put in about $167 million in five years to assist Singapore in strengthening its position as the region’s premier banking hub.
Recently, MAS, alongside the National Research Foundation and Infocomm Development Authority of Singapore, also launched its plans to set up FinTech Office, a virtual network for small firms in the financial technology space, that will open May 3.
Menon added that it is still too early to quantify how much the fintech industry will generate in terms of economic growth for the city-state, and that the most immediate impact is probably going to be on jobs in the traditional banking industry.
“It’s a process of creative destruction we’ve seen in every instance of technology advancements, and fintech will be no different.”
While MAS is showing support for financial technology companies, it is not alone. Banks in the country are also coming up with programmes and capital for technology startups that are able to help the traditional players gain ground and compete in the fintech space. DBS Group Holdings Ltd, for example, which is led by Piyush Gupta, has launched a pre-accelerator programme in Singapore to help early-stage companies conceptualise their ideas without taking any equity.
Additionally, MAS is working with the Australian Securities and Investments Commission (ASIC) to enter into an agreement and make sure that regulations will not slow existing fintech companies down and hinder progress, particularly the ones looking to set up overseas in Australia or Singapore respectively, according to a report.
The agreement, according to Sydney Morning Herald, will require both regulators to share information about innovation and financial technology between each other, and refer to the other fintech businesses entering Singapore or Australia respectively, while at the same time providing support to those referred.
In Japan, regulators appear enthusiastic about easing investment restrictions in the fintech space. The country is set to allow banks to acquire up to 100 per cent of shares in non-financial institutions. This means that banks will be able to invest and acquire technology companies that are working on solutions that would benefit the financial industry, like blockchain, for example.
Globally, regulators are also coming close to establishing a regulatory framework, as the Financial Stability Board (FSB) sat down for a meeting in Tokyo last month. The FSB, which consists of central bankers, regulators and government officials from finance ministries, including Menon, typically look at financial technology to assess if it will shake up traditional banking, and the risks it may present.
With inputs from Bloomberg and Reuters