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Asia-PacificNovember 1 2017

Monetary Authority of Singapore fintech chief seeks perfect balance

Singapore’s central bank and financial authority, the Monetary Authority of Singapore, must balance fintech disruption with a safe regulatory environment. Chief fintech officer Sopnendu Mohanty talks to Joy Macknight about walking the tightrope to innovation.
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Sopnendu Mohanty

Regulators walk a fine line when developing policy in the current fast-changing technology environment, balancing an enabling regulatory environment and a safe financial system.

According to Sopnendu Mohanty, chief fintech officer at the Monetary Authority of Singapore (MAS), regulators should neither push innovation nor trail it, but stay abreast of new developments. “In Singapore, our approach is policy-making through experimentation because technology by design is subject to rapid change,” he says.

Many regulators, including MAS, have adopted the ‘sandbox’ concept, but Mr Mohanty believes a common misunderstanding has developed. “A regulatory sandbox is a great tool for the industry, but should be a last resort for policy-makers. They should use the existing ecosystem as a conduit for innovation,” he says, adding that this has been MAS’s approach for the past two years.

“Our existing policy, with a little fine-tuning, should be suitable for innovation,” he says. “If there are 100 start-ups in a regulator’s sandbox, then something is wrong, because this suggests that new ideas require an exception process.”

Launched in June 2016, MAS’s sandbox is designed as a last-mile opportunity. “Only production-grade experiments, with real customers and transactions, should happen in a sandbox. This method allows us to make policy changes faster, backed by empirical data,” he says.

Fostering strength

In support of Singapore’s aim of being a global fintech hub, MAS encourages entrepreneurial spirit and a strong start-up community. “Good ideas are hard to justify at an early stage, for often they come from unknown sources,” says Mr Mohanty. “So we have created an ecosystem where individuals – from inside and outside the sector – can embark on an entrepreneurial journey. They may develop financial services in competition with incumbent institutions, or they may want to help existing banks and insurance companies along their digitalisation path. We have created an ecosystem for both the enablers and the disruptors.”

More than 90% of start-ups in the Singapore ecosystem are primarily enablers. “Most are addressing specific customer pain points within the existing financial sector and building solutions that help financial institutions better serve their customers. Singapore doesn’t have a big disruptor scene like in the US, for example; instead, we have a strong enabler ecosystem and a small, genuinely disruptive start-up ecosystem,” says Mr Mohanty.

In June 2015, MAS announced a five-year funding budget of S$225m ($166m), as part of its financial sector technology and innovation scheme. “In the past two years, we have created the largest concentration of innovation labs involving banks, insurance and technology companies,” says Mr Mohanty. “This has resulted in a fast-growing ecosystem, with 400 to 500 start-ups looking at blockchain, payments, wealth services, infrastructure, and so on.”

Clearly not all will be successful. “The majority will fail, which is the nature of innovation, but the 5% or so that succeed will transform the way we do things today,” says Mr Mohanty.

Enabling regulation

Common characteristics of fintechs are the use of infinitely scalable infrastructure, such as cloud computing, and masses of data. MAS realised that it must adopt a progressive cloud policy to help banks engage with fintechs and adopt a digital strategy. While other regulatory policy-makers are still struggling to send out a clear message, MAS published its cloud computing guidelines in July 2016.

It also advanced a liberal approach to data residency. “Singapore’s policy allows data to sit outside the country, as long as the organisation follows our guidelines. This allows big data to be used more efficiently,” says Mr Mohanty.

Not to be left behind in the blockchain race, in November 2016 MAS launched Project Ubin, an industry collaboration exploring the use of distributed ledger technology for clearing and settlement of payments and securities. In October 2017, the regulator announced that the consortium it was working with has successfully produced three software models which achieve decentralised netting of payments in a manner that preserved transactional privacy. Mr Mohanty describes Ubin as “a multi-phase project designed around exploring blockchain and digital currency to re-architect the financial services sector”.

A fintech celebration

This month, Singapore is holding its second annual Fintech Festival, which will focus on financial inclusion. “The world is shifting to emerging markets that want to leapfrog from the ‘third world’ to a digital world,” says Mr Mohanty. “Therefore, the best technology is the one that will enable this leap to a better, more inclusive future.”

His vision includes a future in which more women can be entrepreneurs, especially in emerging markets. “With the right skills and infrastructure, women can work digitally, without having to leave their homes. Creating capacity in the family for women to become entrepreneurs not only benefits their family but also helps in wealth distribution,” he says.

As well as financial inclusion, the festival will focus on talent, which is the sector’s single biggest challenge. “This year we are concentrating on upskilling people to develop and expand our talent pool,” says Mr Mohanty.

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Joy Macknight is the editor of The Banker. She joined the publication in 2015 as transaction banking and technology editor. Previously, she was features editor at Profit & Loss, editorial director at Treasury Today and editor at gtnews. She also worked as a staff writer on Banking Technology and IBM Computer Today, as well as a freelancer on Computer Weekly. She has a BSc from the University of Victoria, Canada.
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