S'pore in race to be Asia's fintech capital

Singapore is rushing to reinvent itself as Asia's financial technology, or fintech, hub to fend off a regulatory threat to its wealth management industry and revive a sluggish economy.

State funding, light-touch regulation and a recent move to allow start-ups to test financial products in a controlled environment have put Singapore ahead of rival Hong Kong as Asia's fintech hot spot.

Much like how Uber, Airbnb and other companies have harnessed technology and online social networking to disrupt taxi and hotel services, fintech firms are shaking up the traditional banking and financial services industry.

Singapore's fintech drive comes as its role as an offshore private banking centre is under threat amid a multi-billion-dollar money laundering scandal in neighbouring Malaysia, and as Indonesia chases undeclared money parked in the low-tax city state.

Its traditional shipping and manufacturing growth drivers are also faltering amid a global economic slowdown and a slump in commodity prices and demand.

It is attracting interest, too, from among the 60,000 or so fintech firms based in London's nearly US$9 billion (S$12 billion) market - a trend that is likely to accelerate now that Britain has voted in the referendum to leave the European Union.

"We already have registered interest from UK-based companies to move to Asia as it's getting very crowded there," said Mr Markus Gnirck, partner and co-founder of tryb, a fintech consultancy. "Brexit will probably accelerate a few of these conversations."

Mr Taavet Hinrikus, chief executive officer of peer-to-peer money transfer firm TransferWise, told the World Economic Forum in the Chinese city of Tianjin last week that his company was looking to expand in Asia, and Singapore appeared to be a more vibrant fintech centre than Hong Kong.

According to a KPMG report, Singapore has been more aggressive in pursuing fintech opportunities, and tryb noted that all but a dozen of the around 210 fintech firms operating in the Republic have opened in the past two years - the fastest growth rate in Asia.

However, Singapore's immigration laws are an obstacle, observed start-ups and consultants, as measures to curb the number of foreign workers and give priority to Singaporeans have led to a shortage of talent.

And the country's banking regulations have created a risk-averse culture that is at odds with the trial-and-error approach of fintech start-ups.

In Hong Kong, despite nearly US$300 million in fintech funding, start-ups face tough regulatory hurdles, said lawyers, consultants and fintech executives.

There are fewer than 100 fintech firms in the city, according to tryb. Hong Kong's rules and regulations make it difficult to set up crowdfunding platforms, payment companies and peer-to-peer lending operations, as well as to secure operating licences.

Monetary Authority of Singapore managing director Ravi Menon said fintech firms would be regulated only when they grow large enough to pose a risk to the traditional financial system.

REUTERS

A version of this article appeared in the print edition of The Straits Times on July 05, 2016, with the headline 'S'pore in race to be Asia's fintech capital'. Print Edition | Subscribe