SINGAPORE (May 22): In 2015, the Monetary Authority of Singapore (MAS) announced the “Smart Financial Centre” plan as part of the Smart Nation vision for Singapore, designating the financial sector to lead innovation and the implementation of new technology.
Since then we have witnessed many developments including progress towards a conducive regulatory environment, which has resulted in Singapore’s flourishing fintech ecosystem.
For the plan to be effective, the MAS devised several initiatives, including:
- Continuous regulatory reforms – new sandbox licenses, reclassification of investment products to be more accessible to clients, rationalisation of licensing requirements, etc.
- Grants – dedicating $27 million in support of R&D in the financial sector, with the amount set to increase in the future.
- Formation of the FinTech and Innovation Group (FTIG) – Open dialogues with financial institutions and start-ups.
- Annual Fintech Festivals since 2016 – the last one which took place in November 2018 attracted over 40,000 participants.
With this came the emergence of a multitude of start-ups designing solutions to digitise wealth management, targeting both the business to consumer space and the business to business space. Poised to capitalise on the region’s US$22 trillion wealth market, what all these providers continue to have in common is that they are all looking for the best way to access global equities, ETFs, bonds and mutual funds.
While these companies showed promising technological innovation, they were missing the financial expertise and access to global financial markets that needed to be provided at competitive prices – existing advantages enjoyed by established incumbents such as banks.
On the other hand, banks could not ignore the threat posed by these challengers. A notable concern being the attractive qualities of start-ups for millennials, who as a generation favour greater transparency delivered through user-friendly platforms and lower prices.
Initially strategising to progress with a defensive stance, banks soon realised the viable way forward was to take on an adoptive approach towards technology and capitalise on their advantages of scale and more resources, which start-ups did not offer.
Where the opportunities lie
Suitable partnerships and outsourcing then became and continue to be the solutions to help large and small banks, robo-advisers and digital wealth managers deliver relevant products to their customers in an efficient and flexible way. A digital wealth manager, for example, needs to focus its effort on its core competencies, while entering into partnerships supporting the technology underpinning the rest of the value chain.
For new digital investment solutions and robo-advisers, a suitable partner who can facilitate access to global capital markets at competitive prices is instrumental. There remains a clear demand from digital wealth managers for partner solutions equipped with broad access to global markets and risk-management solutions that they can easily integrate into their own offering. The successful partner is therefore the business that can meet these needs with open technology architecture, API connectivity and the widest range of tradable instruments.
In addition, it’s essential these capabilities are combined with a familiarity with the regulatory environment, best practices in market access and connectivity to exchanges and market structure, in order to help advise founders and CEOs of these start-ups looking to digitise wealth management. For regional banks and brokers, partnerships are key to enabling them to digitise their investment services on a white label basis, exhibiting their innovation and thus, creating or retaining multi-channel banking for their clients.
Digital innovation for investors and robo-advisors is an on-going journey, requiring existing partners to continue actively engaging with new digital investment start-ups as well as broaden existing partnerships by bringing new innovations to existing partners. Examples include the recent launch of SaxoInvestor, which offers investors, including everyday retail investors, greater access to multi-asset investments.
Apart from regional banks and digital wealth managers, technology platforms are impacting other industries and becoming the go-to partner for the insurance industry as well as the asset management industry more broadly.
It has been a very interesting journey for Singapore in the move towards a “Smart Financial Centre”, as start-ups, platforms and banks alike in the Fintech ecosystem continue to contribute to the digitisation of Singapore. The long-term plan will undoubtedly make Singapore the digital innovation hub of finance in Asia.
The real opportunities have only just begun, as we start to see a few of the original robo-advisory clients mature and accumulate significant AUM and established financial institutions become more relevant to their clients through technology.
Adam Reynolds is CEO Asia Pacific, Saxo Capital Markets