Digital Transformation in Finance: Implications for Future Trends

Between 2015 and 2020, FinTech, or technological innovations that improve and compete with traditional financial activities, have increased from 100 to 1,000 in Singapore. In particular, the nation has become a centre for FinTech innovations, welcoming new technology and innovation in diverse areas like payments and remittance, lending/credit, personal finance, and wealth management. While the growth has been substantial, are there frameworks in place to address fairness, ethics, accountability, and transparency?

On 27 October 2021, NBS Knowledge Lab brought together four experts to discuss the implications of future trends for digital transformation in the financial industry. The panellists were Mr Shadab Taiyabi, President of Singapore FinTech Association; Mr Alan Lin, Managing Director and Asia Pacific Head of Core Cash Management, J.P. Morgan Wholesale Payments; Mr Desmond Ong, Executive Director and Asia Pacific Head of Access Digital Channels, J.P. Morgan Wholesale Payments; and Ms Charis Liau, Chief Executive Officer of Minterest Private Limited.

The session was moderated by Associate Professor Cindy, Xin Deng, Division of Banking and Finance, Nanyang Business School, part of Nanyang Technological University, Singapore.

The FinTech Landscape in Singapore

Mr Taiyabi began by giving an overview of the landscape of FinTech in Singapore. As one of the world’s largest financial services hubs, Singapore is known for its openness, progressive regulators, technological trends, and strong talent pools. The strong foundation and opportunities for FinTech mean that FinTech innovation here has grown 10-fold in five years from 2015 to 2020. Some of these innovative initiatives are also well-supported by public sector interest and adoption.

Mr Taiyabi sees opportunities in credentials portability, greater collaboration between financial institutions and FinTech, and standardised frameworks to ensure fairness, ethics, accountability, and transparency (FEAT). Such opportunities, he says, necessitate growing Singapore’s pool of technological talent, middle management talent, and technological risk management professionals across different jurisdictions.

Applying FinTech to Financial Institutions

Providing perspectives from a bank, Mr Lin pointed out three key requirements from JP Morgan’s clients. Their clients expect any new financial technology to provide real time services, data analytics for better decision making, and collaboration between banks and FinTech companies for end-to-end treasury processes.

Importantly, Mr Lin drew attention to three levels of sophistication in the company’s digital transformation journey. First, building a digital treasury facilitates the use of

all available digital tools to eliminate time-consuming processes and leverage real time payment and solutions. Second, a smart treasury helps in forecasting for better fund management and robust planning. Finally, a transformative treasury creates a space where everyone can get together to solve complex problems. For example, in blockchain technology, money exchanges, settlements, and information gathering happen all at once, ensuring certainty and transparency.

Regarding non-bank FinTech banking, Mr Lin suggested that any form of banking would be regarded as an important industry and there is a need for regulated monitoring processes to be in place.

“There are certainly specific non-bank FinTech companies that do well but once they want to expand their businesses, they would typically opt to apply for a digital bank license in order for them to do more and provide more services,” he explained.

On central bank digital currency (CBDC) posing a threat to traditional banks, Mr Ong disagreed with the view as many CBDCs have been working with the Monetary Authority of Singapore to tokenise Real-Time Gross Settlement or RTGS networks.

“Generally, there are many areas for calibration and central banks will work together to promote CBDC,” he said.

Adopting Application Programming Interfaces (API)

Mr Ong explained that API is a system-to-system connectivity that links two systems for information to flow in real time. API is not something new but is now more exposed to allow corporates and financial institutions to avail their data to third party providers. Consequently, what now needs to be provided is not just real-time requests but also responses.

API can contribute to the area of payments. By providing corporates with the opportunity to leverage real-time payment, API allows them to hold on to cash longer and have better cashflow management. Collection of money could also be improved as customers’ credit lines are freed up and businesses can sell more.

However, businesses are still reluctant to adopt API due to a lack of standardisation and the fact that many traditional corporates are still using legacy platforms. Therefore, partnerships with FinTechs are crucial as many of them are data aggregators that provide seamless connectivity and interaction with partners.

FinTech Investments in Singapore

Ms Liau shared that investments in FinTech in Singapore topped a record US$1 billion in 2020, as general investor readiness and high-net-worth individuals and corporates have made Singapore an attractive place to invest in.

The work at Minterest, Ms Liau explained, involved connecting opportunities within Singapore’s financial ecosystem and democratising access to alternative investment spaces. Minterest fits into the wider financial ecosystem by forging partnerships with large corporates and various local financial institutions.

In response to a question on reducing the ticket size of a deal, Ms Liau explained that, traditionally, private products were only available to institutional investors because such products tend to be more sophisticated. However, simply reducing the ticket size would not help widen the product’s accessibility. Minterest’s aim is to democratise or make investment accessible to the wider community, regardless of the investment amount.

Joining the FinTech Space

Ms Liau shared her thoughts on how professionals can better prepare for employability in the FinTech space. “Individuals need to be genuinely passionate about technology,” she said. Roles in FinTech range from IT security to relationship and wealth management. “It is therefore advisable for professionals to continue upgrading, re-skilling, and keep testing out new digital innovation services,” she said. Soft skills such as trustworthiness, collaboration, adaptability, and curiosity are also desirable.

Mr Taiyabi added that the reality of joining a small FinTech firm is that one is often leading things on the ground level. “To succeed, try being open to doing and learning new things on a day-to-day basis, and maintaining a wide and healthy network of valuable contacts to gain ready access to the best opportunities,” he said.

View the webinar recording here.