Credit: Monetary Authority of Singapore

Credit: Monetary Authority of Singapore

Fintech, fintech, fintech and more fintech.

This tech jargon has come to dominate the conversations of regional and global tech players, as well as major financial institutions this year. And with Singapore as the beacon of financial prowess in the region, it is little surprise that the government has been firing on all cylinders to take its financial hub status to the next level.

Yesterday, at the FinTech conference held at the Singapore Expo Exhibition Centre — part of the week-long Singapore FinTech Festival — Ravi Menon, Managing Director of Singapore’s central bank, Monetary Authority of Singapore (MAS), outlined Singapore’s extensive plans to drive up fintech innovation in the immediate future.

Here are seven key takeaways.

Building a blockchain infrastructure

MAS is launching a project that will allow banks to make transactions to each other via digital currency.

Together with US-based blockchain research firm R3 and payment systems provider BCS Information Systems, MAS will build a blockchain research lab based in Singapore for this purpose.

It will work with the Singapore Exchange and eight banks on a proof-of-concept project to use blockchain technology for inter-bank payments, including cross-border transactions in foreign currency.

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Essentially, banks will deposit cash as collateral with the MAS in exchange for MAS-issued digital currency, which is then used to pay other banks. The receiving bank can then convert the digital currency into cash.

Banks will also have the option to leverage on BCS Information System’s payment gateway instead of building new back-end systems.

Electronic payments infrastructure

Singapore already has a fairly decent 24/7 electronic inter-bank fund transfer system called Fast and Secure Transfers (FAST). But according to the MAS, it is still ‘grossly under-utilised’.

The Association of Banks in Singapore (ABS) is embarking on two key projects that will simplify electronic payments.

First is the Central Addressing Scheme (CAS). It would allow customers to transact to another person as long as they have the recipient’s mobile number, national ID number, or email address, without having to know their bank or bank account number.

Then there is the Unified Point-of-Sale (UPOS) terminal. Merchants who install this POS system will be able to accept payments from all major card brands including those embedded in smartphone e-wallets.

National KYC utility

For financial institutions, knowing your customer (KYC) is an important but laborious process. There are usually several layers of authentication steps involved to prevent incidents of fraud.

The Ministry of Finance (MOF) and the Government Technology Agency of Singapore (GovTech) has built a personal data platform called MyInfo to streamline this process.

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Singapore residents will have to enter their national ID and all other personal verification information such as house address into the system. Once that is done, financial services will only need to retrieve this personal information from the MyInfo database to verify a client’s identity. This cuts out the pain of form-filling and data entry errors.

The government plans to run a MyInfo pilot with two banks in Q1 2017.

Open API Architecture

A week ago, the MAS announced its plans to release 12 Application Interfaces (APIs) to the public. This will allow developers to build applications that can automatically integrate official financial datasets such as credit card stats or currency exchange stats.

To facilitate the development and adoption of APIs, MAS and the ABS will set out a comprehensive set of guidelines in a playbook called the Finance-as-a-Service API Playbook.

The playbook will contain a list common and useful APIs that financial institutions could release to developers. For example, banks could publish APIs that allow developers to build apps that would aggregate credit card rewards points, allowing customers to redeem points with merchants directly.

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The playbook will also set out the standards of API in critical areas such as information security, data exchange and governance mechanisms to foster seamless application interoperability.

Building a sandbox for experimentation

In June this year, the MAS became the first regulatory agency in the world to create a sandbox environment to test various aspects of fintech including digital and mobile payments, authentication and biometrics, blockchains and distributed ledgers, and Big Data.

The importance of an environment where startups have the freedom to experiment in risk-free environment cannot be understated. Groundbreaking solutions are usually the result of long trial-and-error processes.

That said,  MAS will be reviewing the guidelines for its regulatory using feedback from industry players and after ‘road-testing’ the initial batch of sandbox applications.

Cybersecurity

Without a robust cybersecurity framework, all talk of establishing cutting edge fintech ecosystem will be moot. For that purpose, a Final Services – Information Sharing and Analysis Centre (FS-ISAC) will be set up in Singapore.

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This body will help the financial industry monitor cyber threats and provide timely intelligence support and expert advice on impending threats facing the global financial service sector.

Other regulatory and financial support

Besides the six aforementioned initiatives, MAS will also actively move to centralise other regulatory frameworks such as those for e-wallet solutions and e-payment services. This would include issuing one license for different kinds of payment activities or allowing merchants to adhere to regulations pertinent to only their specific payments systems.

MAS will also set out guidelines for financial institutions using cloud computing services to ensure that they are secure and operationally up-to-standard, as well as guidelines for insurers offering life insurance products online without advice.

Additionally, last year MAS pledged a funding of S$225 million (US$164.2 million) to boost fintech innovation.

So will Singapore be the shining beacon of fintech revolution it hopes to be? If MAS keeps up this momentum, all signs point to a positive outcome.

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Image Credit: MAS