Singapore’s strategy for becoming the world’s smartest financial hub

I have recently visited Singapore for the second time and was very impressed with what has been achieved within the past two years. Of course, the reason for my visit was Fintech Festival 2017. Hence, below is my interview with Sopnendu Mohanty, Chief FinTech Officer of the Monetary Authority of Singapore (MAS) — plus some links to resources I hope you will find useful! Please share them, especially the code!

Rather than giving you the overview of the whole event, I would recommend watching the opening speech by Ravi Menon, Managing Director of MAS. It is half an hour long and truly informative!

I can say that I really enjoyed the Festival, particularly the Lab Crawl. Believe it or not, there are already more than 30 fintech innovation labs in Singapore! “But, why is fintech so important for Singapore when it is not a large market like China and India?” you might ask.

That was actually my first question for Sopnendu, who has been in the position of Chief Fintech Officer for well over two years by now. He explained to me that although Singapore was really small, it was already a well-connected smart city with a plan of becoming a Smart Nation by 2020. The essence of that plan is the creation of efficient payment and governance systems with the help of fintech companies and Singapore’s digitally savvy regulator. In other words, Singapore intends to use technology to increase efficiency and manage risks better, and also to create new opportunities and improve people’s lives. Naturally, such an ambitious goal requires deep understanding of new technologies and business models!

That’s where Singapore’s can-do attitude and clarity of thinking comes in! They have created a coherent strategy for becoming the world’s smartest financial hub — which is already showing results! The strategy brings together many diverse players to collaborate as well as compete; encourages an open architecture economy to enable connectivity and innovation; relies on building international links to facilitate the exchange of ideas and scaling of solutions; and counts on developing talent and research capabilities. I would say that the most important part of the strategy is definitely Singapore’s endeavour to provide a suitable regulatory framework and secure cyber environment.

“The main idea was,” Sopnendu added, “to create a platform that would enables fintechs to innovate and experiment out of Singapore, and then scale to other markets”. If you watch Ravi’s talk I mentioned above, you will find out more details about all the initiatives Singapore has taken so far to turn that idea into reality: for instance, they have dedicated a hundred thousand sq ft to housing fintechs in the centre of the financial district; committed S$225m to the development of fintech projects and PoCs; partnered with the Massachusetts Institute of Technology (MIT) to collaborate on pilots using DLT, cryptography, quantum computing & big data, AI, and ML; even opened a regulatory sandbox to facilitate experimentation in that area. There is much more that they have done — but I do not want to spoil your enjoyment of the talk!

Singapore is running many interesting projects tackling real-world problems. (Ravi’s speech will fill you in!) As a matter of fact, they are trying to reimagine the architecture of the whole financial system. I was most interested in the following two: ‘Pay Now’ and ‘Ubin’.

Sopnendu considers ‘Pay Now’ to be the future of payment since it meets the needs of today’s consumers who want the banking to be done instantly and entirely on mobile phones. As you probably know, this is a real challenge for most banks due to cybersecurity issues. Sopnendu told me that they were approaching cybersecurity as part of design. They are therefore devising not just the tools, but also the policies to deal with it!

‘Pay Now’ is a joint innovation project between Singapore and Thailand. The users will be able to make a payment from one bank account to another, from Singapore to Thailand and vice versa, in real-time, securely, and at any time of the day — using just their mobile phone numbers! (Awesome!) This has been achieved by linking Singapore’s ‘PayNow’ and Thailand’s ‘PromptPay’ apps.

‘Ubin’ is a much larger undertaking. It has been exploring options for making cross-border interbank payments and settlements cheaper, faster, less risky and with no intermediaries. The second phase of the project has recently been completed and the results published in this comprehensive report. An interesting read! It gives details of the three prototypes developed on the following DLT platforms: Corda, Hyperledger Fabric and Quorum. Moreover, all the source code has also been released to encourage more experimentation and innovation!

Thanks to their different capabilities and features (Corda’s Unspent Transaction Output model and confidential identities, Hyperledger Fabric’s Channels design, and Quorum’s Constellation and zero knowledge proofs), the three DLT platforms came up with unique solutions to fund transfer, queueing mechanism and gridlock resolution. However, Sopnendu told me that the real breakthrough was actually the software prototypes for decentralised multilateral netting capable of preserving transactional privacy. (Congratulations to everybody involved!)

I was glad to find out that this was not the end of project ‘Ubin’. Singapore will continue experimenting with cross-border payments using blockchain in collaboration with the Bank of Canada.

I would like to point out that these two projects are my personal favourites. Others are equally interesting and important, especially the Global Trade Connectivity Network (GTCN) that will be developed by MAS and the Hong Kong Monetary Authority. It will be an open architecture cross-border DLT platform for trade finance that will enable the seamless transfer of digital documents and data between Singapore and Hong Kong. They expect it to go live in early 2019. (Wow!)

My overall impression is that Singapore’s biggest success is the industry-wide collaboration in innovation they have managed to achieve! The benefits to our human society are immense! I am not referring only to open source projects, but the fact that most new technologies export well.

There is another thing I would like to emphasise: general opinion is that financial companies need to adopt the mindset of tech companies. While that means that we all have to become ‘business technologists’, it does not mean that we all have to learn to code! It means, though, that we should all consider how these new technologies could enable our businesses and help us to create new experiences for our clients. This is what predominantly motivates me to share these articles with you!

Here is something else to ponder: the idea of finite and infinite players, and types of thinking. The link will take you to Simon Sinek’s latest talk at Google. It is 20 minutes long. The rest is Q&As. Hope you will find it interesting!