Welcome to the SUSS series of podcasts that tackles growing technologies around us, technologies that changed how we engage the world, connect and come together as a modern society. This series discusses how the tools of our everyday lives have evolved and changed our lives.
Finance plays a crucial role in our lives. With the advances of science and technology, the financial sector has seen tremendous innovation in business operations and the delivery of financial services.
From mobile payments, robo-advisors, blockchain technology and more. The synergy between finance and technology seems boundless.
I mean, five years ago, I wouldn't imagine using my phone today to perform most, if not all of my banking and investment transactions.
So, how can the advances of FinTech serve a larger purpose? How will it improve the lives of individuals, build a more dynamic economy and promote a more inclusive society?
That's why I met with Associate Professor Tan Chong Hui, Head of Finance programme at SUSS School of Business, Shadab Taiyabi, President of Singapore FinTech Association [SFA], and Bryan Lim, founder of SUSS FinTech Interest Group, to find out how FinTech is changing the world.
I began by asking Chong Hui how dramatically has the financial technology landscape shifted in the past decade till today.
In recent years, we have seen mobile payments; making payments through the mobile phone. We have seen the rise of internet banking, internet, SMS and mobile. They're all connected together, very smooth, but also, bringing out lots of cybersecurity issues. These are developments in FinTech and they go hand in hand with developments in technology, especially as software development progresses.
Other than the modes of payment, the means of payment.There are also financial products, which are non-traditional, like Bitcoin, smart contracts and stuff like that. Financial things, arising on the internet space, so these are great developments that will seem to be surprises or innovations if you don't look further back into history. There is some kind of coevolution between technological advances and financial developments.
And you can trace all the way back to the turn of the century from the 19th century to the 20th century. The laying of the trans-Atlantic cable, which allows the trading of messages being sent between Great Britain and America, announced exchange rates between British pound and US dollars.
And then fast forward into the ‘50s. You have maybe ATM machines and core banking systems, wiring up banks, allowing people to access the banks, but don't have to go to the banks themselves. And then in the ‘80s, you have electronic exchanges.
So, we see that technology advances hand-in-hand with finance or maybe technology advances somewhat faster than finance because you need to have the communication means first and then finance follows along.
So, the whole development falls into such a pattern. And what do you have in the early 2000s? You have the rise of mobile technology and the maturing of internet technology. And that's what we are having now, bitcoin, mobile payments, smart contracts and stuff like that.
That's really a very interesting overview of the entire landscape. And I liked how you walked us through the entire technology development. And I think that probably is something that a lot of people are confused about because we hear that a lot. Like ‘FinTech’, right, but what exactly is it? So that's the long answer.
Shadab, can you also share with us a layman definition of what FinTech is?
Sure. So financial technology, as it is commonly known as FinTech is essentially the ability to deliver financial products and services using technology. Now that can include whether it's disrupting the existing business models, or it can be delivering the same financial products and services through additional channels.
Both can comprise FinTech. So for most FinTech companies, business models are built around that. I hope that answers the question.
Yes, it answers the question. I like how we have an overview of the historical developments till today, and also the shorter answer as a layman’s definition as well.
And just Shadab, can you help us understand how the progress of FinTech has been like for Singapore?
I would say Singapore has been quite progressive in the development of FinTech as an industry segment altogether. We were ranked number one in APAC, as well as in the top four in the global FinTech rankings that were released last year .
And if you think about it, Singapore has always had this unique sense of looking at what's new and what's emerging, be it in the technology space or other business models. And they have really picked up FinTech since 2015 at a whole national level, I would say. There are FinTech companies that are operating before 2015 as well.
But since 2015, there has been a national concerted effort with the collaboration between the industry participants, the regulators coming in together, along with academia to actually build a very mature and robust FinTech ecosystem as what it has evolved to be as of now. If we look at some of the numbers back in 2015, we had less than a hundred companies in the FinTech space with close to 1,100 employees.
But if you fast forward to 2020 when the official figures were released, 1,400 FinTech companies, and more than 10,000 employees were being employed by these pure fintech companies. So that just shows how the growth trajectory has been so steep for the FinTech industry segment in Singapore.
And if you look at the overall majority of the industry, as of last year, we had overall three unicorns in the FinTech space. One pure FinTech business model, a unicorn called Nium, became a unicorn last year. And of course, we are very familiar with Grab and Advance Intelligence Group as well, which are both Singapore-headquartered companies that have become unicorns.
Thank you for providing such a comprehensive overview and landscape of what's been going on in Singapore. You mentioned ‘ecosystem’, you mentioned ‘companies’, the ‘regulatories’, as well the technologies that enabled this ecosystem. But I'm also curious about the talent.
The talent pipeline or the young people as well, which brings me to Bryan.
Bryan, I would like to ask, you worked with the FinTech and Innovation team at MAS in 2016. You helped to organise Singapore's first FinTech festival. Can you share with us what the experience was like back then?
When I first joined the MAS, I was an intern. So what actually pushed me and motivated me to continue to be with the authority was how they had a mission to develop a vibrant ecosystem. Back then, MAS and Singapore as a global FinTech hub, have always been recognised as one that is strict.
And so when innovation came into play, they had to be balancing what is strict regulation and at the same time, when do you relax such regulation to encourage innovation? So building this vibrant ecosystem was what really motivated me to stay with the MAS. Back then, I was with the technology innovation department, where we source for cutting-edge technologies and see how they can collaborate FinTech players with big financial institutions and vice versa.
So they believe in the three C’s: Connect, collaborate and co-create. You connect with the people, you connect with the industrial players, you collaborate with them to generate better innovative solutions, and then you co-create new existing solutions or more innovative solutions that I think help not only the society itself but also help the users of the financial system in itself.
So what were some of the most memorable moments, because that was a huge experience you’ve gone through. Were there any moments that you recalled vividly?
I think one of the memorable moments and the thing about our flagship products will be the Singapore FinTech Festival. When I entered as an intern, that was the first-ever Singapore FinTech festival, and this was something which really interested me because when it comes to the Singapore FinTech Festival, connecting, collaborating, and co-creating were actually put into play.
Year-on-year, we see the number of attendees globally, the number of attendees in terms of numbers and in terms of the people which are going in, the profile of these people. They start to recognise that this is something which is important. And I think when we look at the Singapore FinTech landscape, from then to now, it is constantly improving. And I think it's growing such that here in Singapore, we are not just building a regional place to build a FinTech community. But I think it has attracted a global presence as well.
Definitely, when we talk about FinTech, we cannot run away from connectivity, and that is about the whole global landscape as well.
Which brings me to really look at FinTech; where do we go from here? Especially since we’ve just been through a pandemic for the last two years. How has that impacted the industry or how has it changed anything in the FinTech landscape.
Chong Hui, would you like to weigh in on this?
I think the pandemic has accelerated the adoption of technologies in carrying out financial transactions, as well as other kinds of activities. So what's interesting is that all these cryptocurrency platforms, actually represent little communities that have their lives on the internet. Such communities exist before cryptocurrencies- the software development communities.
These people were writing programs. So they were communicating using programming languages. The development in FinTech, in Bitcoin, is that these communities have become economic in nature. So in addition to talking about languages, programming languages, and creating software, they were able to pass tokens to each other.
So what's going on is that we have all these little communities, which are actually economic in nature and they can support, as we know, that's how countries work. We are all economic societies, economic communities. But now these things are rising on the internet and these economic communities can support new kinds of coordination, cooperation and social activities, which are virtual. But because the virtual currencies are exchangeable into real things, tangible things,...
these virtual activities are becoming more and more real. So that's what I feel is interesting going forward. It's virtual, but it can become real in some sense.
So it is like what you were sharing. Hand-in-hand with the whole technology advancements as well. And of course, the pandemic accelerated a lot of things that happened in the tech communities and henceforth, it has spilt over. Shadab, what are your views on this?
Completely agree with Chong Hui, what he said. Essentially the pandemic has accelerated the whole digital transformation. Be it, if you look at the transformation of the existing financial institutions, products and services or, of course, FinTech where the new companies or the new business models have evolved and even the existing business models that different techs were running before the pandemic hit, have accelerated as well in terms of growth. Now, this is quite well reflected in the equity funding growth that we have seen in different techs, that has been coming into ASEAN as well.
SFA did a combined report with UOB and PWC at the end of last year  on [the] ASEAN FinTech funding landscape. And the numbers spoke for themselves. There was an increase in equity funding coming into the ASEAN Findex by almost three times, from $1.1 billion in 2020 to $3.5 billion in 2021.
The good news for Singapore is that we came out at the top in terms of the ratio of this funding for Singapore-headquartered companies. About 44% followed by Indonesia. And this was the trend that was there in 2020 as well, where Singapore was still at the top in terms of the ratio of the equity funding coming into Singapore companies. In terms of the deals as well, the number of deals has grown as well from somewhere around 100+ to 167 deals happening in 2021.
And out of these, there were 13 mega-rounds, which comprised about $22 billion of that. So you can see that there was a fair spread in terms of the funding going into these various sizes of the companies Some being large and some being relatively smaller startups. But overall, it just shows a good positive trend towards the growth of the FinTech companies and the FinTech business models as such in ASEAN and especially in Singapore, over the last year .
So it's all positive news, right? I think this was something that Chong Hui also mentioned. He mentioned a lot about blockchain and cryptocurrency. That's something that we cannot shy away from as well as talk about developments in FinTech or technology as a whole. Especially when we hear ‘metaverse’ and all that in recent times.
So when utilised correctly, of course, blockchain or technologies like that can create a FinTech ecosystem that can revolutionise finance. What are some of the key developments that you're seeing in the existing space right now?
I think the key development that initiated this phase of FinTech evolution, I mean, FinTech has always been evolving, but the current phase, some call it FinTech 3.0 or 4.0, whatever, it's just a different phase. The key development was due to bitcoin or the implementation of decentralised tokens.
In the decade from 2010 to 2020, there were many software communities and open-source software communities. They copied the idea and hence, many cryptocurrencies platforms or smart contract platforms are out there now. So what's going on now seems to be these communities, these platforms are trying to grow activities on top of the platform.
So this is what I think we are going to see, developments in for the coming decade. They all compete with one another to grow the communities in creating all kinds of activities that are virtual and real at the same time. And to support these, new technologies will be developed to support the activities. But exactly what these things will be? Only time will tell.
So it’s very much a mix of organic growth as well, right? The communities are the ones that are picking it up. But would you think that it's too fragmented, what are your thoughts?
Maybe I'll just add to what Chong Hui mentioned, in terms of the usage or the proliferation of these technologies. Absolutely right that it has actually been driven, of course, you know, in a decentralised manner. But the underlying technology has been picked up by existing financial institutions, as well as the large finTechs or the FinTech players who actually use these as business models.
Some of the changes that have actually happened and it is actually a growing field, is digital asset players have come into the market, which are offering new asset types, custody and settlement services, as an example. I can give a few examples from the Singapore landscape as well. I mean, there are companies like Bond Evalu who has come up with fractionalised bonds being offered on a decentralised exchange, and this exchange is already regulated as a recognised market operator by MAS.
This is a very new business model for example. There are companies like the Funnel Group and ADDX that are offering tokenised, private assets directly to clients as well. And then there are companies who have actually evolved into a B2B business model, which essentially are providing these white-label digital asset platforms as a service to existing financial institutions. Now all these are very good examples of how an underlying technology, which started with bitcoin, the DLT [Distributed Ledger Technology] and the blockchain as we know, has been used extensively in evolving a completely new business model.
And we all know about how it's being used in Defi as well. The financial services industry, as we know it, will continue to exist the way it is. But there is a lot of disruption, I would say, new business models that are coming in as well. This may require a rethink of the way some of these financial institutions have been delivering their products and services or an augmentation of their existing business models.
So as Bryan was talking about the Singapore FinTech Festival, I thought I'll highlight 2021 Singapore FinTech Festival. Its theme was Web 3.0, which was looking at all these technologies which use blockchain as the underlying technology and how new business models are evolving.
So one of the very important aspects that was picked up was the NFTs and Linkin Park as you might know, is one of the very famous bands. Their singer, Mike Shinoda talked about how the artistes are using NFT as a technology to be able to provide or to get value out of their artwork during the pandemic.
Essentially we all know how the pandemic created such a huge challenge for all these artistes who actually relied on their performances for bringing food to the table. They realised that with the usage of these new emerging technologies, they could actually get real value for their artwork while sitting at home. So NFTs actually became very popular and we all know that they're actually a good investment asset class for the investors’ segment. In addition to these, the business models that have evolved are also digitising the existing traditional securities that some of these financial institutions offer as well.
And we have quite a few FinTech companies in Singapore whose business models are pretty much based on providing these white label solutions to financial institutions as well. So overall, it's quite exciting to hear about how blockchain and DLT in general have actually shaped a flurry of multiple business models that have evolved. And I think the sky's the limit there.
And definitely you know, just to your point of how because of all this organic growth, it also made businesses or the corporates rethink a lot of their business model.
So, what are some of the possibilities in using the technology, in all these acceleration of things that are happening in FinTech. Because I think for the younger generation, that has been on the top of their minds or we see more and more youth standing up for ESG, where's the inclusion and all that.
There are examples of using blockchain technology outside of finance. One outstanding example is the supply chain. So supply chain involves the creation or the harvesting of produce and then sending it through the supply chain until it reaches the customers. And along the way, intermediaries are there to take cuts out of the value that's represented originally by the original producer.
So there's one example of the World Bank Group working in tandem with companies in Haiti, to help farmers of mangoes, and avocados deliver their goods to the customers in the world at large. Skipping the intermediaries that are taking value away from their produce.
So to do something like that is to recognise what the intermediaries are actually doing. They are standing in the middle of the transport system, taking away value, because they are able to coordinate certain activities and so on. But these coordinative actions are now implementable on the internet, which is available to everybody,
So blockchain and tracking, the flow of goods on the blockchain is kind of a democratic process. You don't need a physical company to coordinate these activities. You only need some people to be able to write the software and then put it on the blockchain. And you have a number of people involved in the supply chain who trust each other with respect to the use of that smart contract.
To be able to carry out the coordination in this way, we are able to use something that arose in the financial industry, the FinTech industry, the blockchains in non-financial purposes is a concrete use case. And you're going to see more and more of these in the future. And why is this important in ESG? Because in the past, when you analyse companies for investment purposes, you look at financial statements. But now with more data and information available that is put on the internet, tracking of companies, analysis of companies is evolving to involve more than just financial statements.
We want to see what the companies are actually doing along the supply chain and whether it conforms to ESG principles or not.
If I may add to that, I completely agree with Chong Hui that it is actually creating a completely new, different business model and creating good outcomes for society in general. If you look at it from a pure business investment perspective, we all know that to a certain extent the company's business models are pretty much in, we are talking about PNL-driven companies here, what attracts them to be more focused on their ESG goals.
A lot is dependent on where the money is coming from. And if you look at the investors as such, I would just highlight a few factors or changes that are happening. Of course, there is a large intergenerational transfer of wealth happening at the high net worth level as well, where the majority of the section or a good segment of the wealth is being transferred to the new generation, which is very much focused on some of these ESG themes as a key factor in their investment decisions.
Now that is driving the financial institutions to think about ESG as an important factor in their investment decisions. Now the part where Chong Hui mentioned comes in, how do you effectively measure the ESG efforts being taken by some of these companies?
This is where a lot of this technology is coming in. I can say that there are many FinTech companies in Singapore that are focusing on solving these problems, which is having a clear taxonomy of the factors to be measured, having a clear mechanism to measure those factors and having an immutable record of a blockchain so that the investment community could actually tap onto it as well. So there are quite a few FinTech companies in Singapore that have actually evolved the business models around it.
So all this is good. And then of course, in addition to that, there is that aspect of micro-investments as well. Now, even in micro-investments, companies that are doing this, there are a lot of requirements for impact measurement. So there are companies that are focusing on measuring that impact as well, on how those micro-investments are getting involved. So overall, quite exciting, like I said, there has been a lot of progress in the recent few months or I would say years, and there is only more to be done.
You’ve been listening to the SUSS series of podcasts. The next part of this episode will be available at suss.edu.sg/podcast. Stay tuned!