Contributed by Benjamin Wong, co-founder and CEO of TranSwap
My Fintech idea came to me in 1997, about 20 years ago.
Back then, I had adequate knowledge on the US currency and wanted to hedge it with an FX forward contract but it was exorbitantly costly. Fortunately, I found a friend overseas with US cash, looking to buy Singapore money. We agreed to swap our currencies at an agreed mid-market rate and that’s how the idea of cross-border FX swapping model came to me.
However, the internet, technologies and regulations were not suitable for fintech innovation back then and I dropped the idea.
Fast forward 20 years later, I finally took the plunge to establish TranSwap, a cross-border payments platform for businesses.
What has changed since then?
Major regulators in respective countries are now beginning to allow fintech companies to operate in the regulated space by providing a fintech-friendly environment and the relevant licenses to operate.
In the United Kingdom, the Bank of England has extended direct access to real-time gross settlement systems (RTGS) accounts to non-bank service providers, giving them direct access to key payment systems.
In Europe, the Bank of Lithuania has given non-financial institutions access to Single Euro Payments Area (SEPA) through their own infrastructure, enabling non-financial institutions to innovate and serve their customers directly, avoiding the need to rely on brokering services of many traditional commercial banks.
Closer to home, Hong Kong is poised to issue the city’s first virtual banking licence by the end of 2019, and Singapore is exploring opening up its real-time, round-the-clock payments system, known as FAST, to Fintech firms to broaden access to various payment players.
Even in Japan, their regulator has announced that it will allow non-bank companies to handle money remittances of over 1 million yen (about US$9,000), lifting a limit that has previously prevented start-ups from providing faster and cheaper services in an area dominated by the banking sector.
Evidently, the payments environment has evolved from a stricter space to a much friendlier one, and the tide is rolling in favour of fintech.
The Cross-Border Payments arena is currently a US$22 trillion market. 80 per cent of these payments are B2B related, with banks currently dominating 95 per cent of this market; banks are still the default option most people and companies for cross-border payments.
With fintech’s leaner operations and utilisation of technology to facilitate such cross-border transaction, companies like TranSwap are able to offer an enticing alternative that is more cost-effective, and quicker too.
As fintech continues to inspire more innovative solutions, it would prove to be challenging for banks to maintain the overwhelming majority in these transactions at current specifications.
With all these deviations from the once traditional and comfortable methods with financial institutions, the disposition has shifted massively from a business-centric view to a consumer-centric perspective with the focus centred squarely on customers’ needs.
Collaboration is key for growing the market
As famous Fintech evangelist Dan Cobley said, the future of innovation in finance will be driven by partnerships between fintechs, who bring innovation, and incumbents who bring distributions.
Essentially, while financial institutions are stable and strong, fintech firms are versatile and offer refreshing ideas.
Financial institutions have a great infrastructure that has been built over many years. This allows for a strong brand recognition with established trust among their consumers. Fintech companies, on the other hand, may not have such strong brand recognition at the start compared to financial institutions.
However, what fintech lacks in it makes up for in an innovation-oriented mindset, agility, consumer-centric perspective and flexible infrastructure created for digital. Financial institutions, on the other hand, are big ships, difficult to manoeuvre, and weighed down by heavy cost-structure and huge staff count that restricts their ability to quickly implement new processes.
But together, they can create new opportunities and fill new market gaps to expand the market.
For example, at TranSwap, we are working with certain local and international banks, not just as a usual banking customer, but partnering to develop innovative financial products and expanding our customer base together with them.
What lies ahead
In the next 10 years, we believe fintech will be a vibrant part of the global financial system. It will take on a major role in shaping the industry and leading the way for innovative financial solutions.
Some Fintech companies will eventually become a virtual bank, while some will collaborate with financial institutions and many will thrive in their own area of niche service. It will not be a ‘winner takes all situation’ — the market is huge enough to accommodate those who continue to innovate with customer-centric products.
I look forward to the next 10 years!
More about Benjamin Wong:
Having worked in senior management roles in a range of industries, Benjamin is familiar with the issues of settling overseas payment and has now committed himself to help other businesses simplify their FX payments by establishing TranSwap, a cross-border payments platform targeted at businesses. TranSwap is also on the Networked Trade Platform—a Singapore Government initiative—as a Value-Added Service offering local importers and exporters seeking to make payments internationally a cost-effective and convenient solution.
TranSwap offers the most competitive rates through its proprietary online transaction portal and a wide network of FX partners to enable businesses to fulfil payments overseas at the lowest cost efficiently.