Singapore, the garden of innovation – exclusive interview with Varun Mittal

Friday 22 January 2021 09:34 CET | Editor: Vlad Macovei | Interview

Varun Mittal, co-founder of Singapore Fintech Association and author of Singapore – The Fintech Nation, reveals what stands behind Singapore’s boom in fintech and regulation

What led to Singapore turning into such an attractive hub for the banking and fintech industry and what unique opportunities can be found here, in the context of further developments in Open Banking in Asia?

Singapore has what we call ‘kiasu’, meaning ‘fear of missing out’. Singaporeans want to recheck everything and be very cautious about not making any mistakes. But we have turned this ‘fear’ into a strength because, in a regulated industry, that ‘fear’ is a positive. Unlike social media apps, where an error leads to a reset, when it comes to fintech regulation you can’t just make a mistake. The acceptance of the law (or the rules) process is very important. 

Singapore has been a trading hub for hundreds of years and, since with trading comes financial services, Singapore has always had a role in financial services and strong local banking and insurance capabilities. A key element behind Singapore becoming a ‘fintech nation’ was resilience. Previous financial crises saw banks in many other parts of the world struggling with challenges, while banks in Asia generally remained very strong.  While the banks experienced a bit of heat because of international exposure, the domestic markets didn’t get hit as much. We didn’t experience a ‘supreme’ crisis where we had people freaking out about mortgages.

Also, there was a massive push towards digitisation, which created a need for B2B fintechs. On the consumer front, as everything moved towards mobile, consumers experienced a generation jump and adopted mobile financial services, and for a large section of consumers, it was the first time when they accessed financial services in general. The digitisation of financial services created a huge impact. 

During the last 5-6 years in Singapore, we saw some things influenced by destiny, others by effort. As an example of ‘destiny’, in Singapore ‘mas’ means ‘gold’ and Singapore’s super-regulator, dealing with banking, insurance, wealth and even currency printing, is MAS (Monetary Authority of Singapore). MAS regulates everything to do with financial services – we don’t have multiple agencies dealing with regulation, everything happens in one place. Also, the laws are homogenised, unlike in some other places where, for example, you have digital KYC for banking and a different kind for insurance. With MAS, we don’t have this problem.

We already know that the pandemic led to swift changes and quick need of adapting to a completely new environment for the entire planet. What negatives had to be overcome by fintechs in your region and what approaches were taken to not only survive but thrive in this new context?

The good part was the pandemic boosted consumer adoption of digital financial services and fintech in a way you couldn’t have imagined or predicted. The not so good part was that fintechs had to figure out an operating model for operating in multiple markets. They had to find a way to engage with clients that were overseas. 

Your book Singapore: The Fintech Nation follows the journey that took Singapore to its current leading status in the industry. You talk about the nation becoming obsessed with excellence, implementing ‘Singanomics’ and a ‘Garden Innovation’ as an organised way of developing ideas. Could you expand a bit on this and let us know what makes ‘Singanomics’ stand out and how does it allow fintechs to prosper?

My book covers the three pillars that stand behind Singapore’s progress:

  • RFFL (Right First, Fast Later) – Every time there was a new thing to be done, Singapore said ‘it’s okay if it takes some time as long as we do it the right way’. So, by the time Singapore was working on payment regulation for wallets, the world already had all kinds of cryptocurrency tokens. Singapore said, we’ll make one super law and the payment regulation will cover wallets, loyalty tokens, payment tokens, remittances, B2B payments, consumer to merchant payments, and merchant acquirer payments. 

When we work on something in Singapore, we design it to last at least 10-20 years. Of course, you can change it if needed but we try to avoid making multiple laws, as this creates problems for everybody involved since payment companies must deal with multiple regulations. One customisable super law works best and that’s why we call ours the ‘swiss army knife’ of payment laws.

Another key point is that Singapore is a small nation. It’s different when you only have to regulate 5 million people versus 100 million.

  • Singanomics – The premise of Singanomics is that there are certain parts of development which cannot be handled well by traditional and neoliberalism-related economies. That’s why, for example, you don’t have real-time payments in the US. There are some areas that need slightly more nuanced approaches. From a nation’s point of view, when significant infrastructure investment is needed, consensus doesn’t always work. Sometimes helping people see a common goal, making them realise why that common goal is important, and focusing on what we need to do as a country is an understated but essential part of the process. 

With Open Banking in Europe, regulators made a law and then everybody had to figure out how to comply with it. Singapore, on the other hand, decided to try to get everyone aligned on the same page from the start. In Europe, 10 different banks may make 10 APIs in 10 different standards and formats. So, if you are a small company, you must adopt and implement 10 different standards if you want to interact with them. Only  larger companies can survive in this type of environment. Singapore instead gathered all the key players in one room and made them reach a single standard. 

It is easier to convince people to take part when you have just one standard to go by, even if it takes longer to reach  that standard. Once this happened, the companies then focused on social need. An average Singaporean has 2 to 3 bank accounts and at least 4 to 5 cards, and they don’t have a single view over their financial data. The European model was to pass a law for account aggregation, but this is tough to maintain it because everyone follows a different standard.

Singapore decided to bring together the top banks and have them align on a standard aggregation of the data. Then,each bank is able to have all of your information displayed in one view. If the top banks align on a standard, then all the other players will follow. Singapore decided that this is was national utility, to allow people to access their information in a single format to better enable their financial health and understanding.

  • Garden of innovation – Singapore is called ‘the garden nation’ because there are gardens everywhere. In the context of innovation, we cannot do everything by ourselves and be passing hundreds of new laws every year. That is why, a few years ago, the nation’s leaders got together to decide on the key priorities. They decided to focus on one thing at a time, instead of spreading attention over 10 different issues at once. For example, when it comes to blockchain, the initial focus is on blockchain use for interbank settlement and cross-model use cases. Then, financial institutions come together with regulators, government authorities and stock exchange to get the project moving. We pick a problem, focus on solving it and, only then we move on to the next one. 

The next key priority area is green finance and sustainability and all the raw energy, resources, and capital is being directed at that issue. 

Speaking of regulators, do you feel that regulation must continue to adjust to the banking and fintech industry booming? What are the current struggles encountered by fintechs in terms of regulation? 

We have to differentiate between the areas where new laws are needed and the areas where laws can become more relaxed and special treatment can be provided. For example, when B2B lending came into the market, Singapore didn’t create a new B2B lending law. They classified it as a security and decided that it should be governed by the authority in charge of securities. 

Another example is related to cryptocurrency exchanges. There’s no new law for crypto exchanges in Singapore. There’s an existing licence called the Recognised Market Operator (RMO) Licence and, if you want to run a digital asset exchange, you have to obtain it. For example, there was a company that used blockchain to trade bonds and it obtained the RMO licence.

If there is a company that does something completely new to the environment, like bonds trading, then it is invited to a sandbox, tested, and launched. 

Unlike other countries that organise sandboxes and announce that they have a lot of fintech participants, Singapore’s goal is to have zero participants in a sandbox. During the last 6 years, Singapore had less than 15 companies going to sandbox. The idea is that every time a sandbox is organised it means that a suitable law was not previously designed, or it wasn’t good enough to handle something. In an ideal world, Singapore would shut down the sandbox.

Last but not least, what are your thoughts on Singapore's current and future position? 

Earlier, people used to say that Singapore was the Switzerland of Asia and now people are calling Switzerland the Singapore of Europe. The fact that the World Economic Forum moved from Davos to Singapore is another credential for Singapore. When someone comes to Asia, they land in Singapore.

What more can you wish, as a fintech, when the world leaders will gather in Singapore, a small island of 5 million people? We used to say that the Singapore Fintech Festival is the Davos of fintech, and now Davos is in Singapore too. We already had the world’s largest fintech festival and now we have the largest economic festival too, and economists are as close to financial services as you can get. We are joking that at least 2020 brought SOME good news.

About Varun Mittal

Varun Mittal is a fintech professional and a partner at a global consulting & professional services firm. Varun manages client coverage of all financial services providers across banking & capital markets, insurance, and wealth & asset management in the ASEAN region. Varun has worked with multiple regulators and national trade promotion agencies to develop fintech hub ecosystems across ASEAN, India, Middle East, European Union, Caribbean, and Latin America. Varun has authored books and articles in domains of financial services (fintech, insuretech, blockchain, wealthtech, payments), regulatory compliance (regtech), entrepreneurship, and innovation. Varun is the co-founder of Singapore Fintech Association & ASEAN Fintech Network, working closely with startups, educational institutions, investors, and regulators across the world.

About Singapore - The Fintech Nation

Singapore - The Fintech Nation tells the story of Singapore becoming a fintech hub through efforts of the ecosystem, the regulators, and relentless individuals.


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Keywords: Singapore, fintech, fintech association, fintech hub, B2B fintech, B2B lending, MAS, Digital KYC, banking
Categories: Banking & Fintech
Countries: Singapore
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