Tokyo and Seoul should take a leaf from the Singapore fintech playbook

Joe Seunghyun Cho
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Japan and South Korea are playing a catch-up game to Singapore when it comes to fintech, but there is reason for optimism with potential partnerships across the region

With news last month that Japan’s banks are being forced to embrace fintech, and PayPal is throwing its weight behind a South Korean fintech pioneer in a US$48 million deal, it’s clear there’s a growing need for further deregulation and government support of the financial technology (fintech) space.

But business and financial leaders in Tokyo and Seoul would do well to take a leaf out of Singapore’s fintech playbook, where the government is relaxing regulations and aggressively supporting innovation at the grassroots.

The Monetary Authority of Singapore (MAS) has been driving the evolution of Singapore into a leading fintech hub. This year, the body is expected to further fast-track and simplify the authorisation process for venture capital funds in a bid to attract more VCs to the city-state.

Also read: Singapore central bank and Japanese finance regulator partner to smooth fintech collaboration

A look at the numbers

In its Connecting Global FinTech: Hub Review 2016, Deloitte ranked Singapore as a top fintech hub alongside London, ahead of New York, and Silicon Valley. The city is one of the best test beds for startups looking to go global and most financial giants have a serious presence here.

“Singapore is a leading international financial centre and a serious contender for the global number one spot in fintech,” the report said. With this in mind, Singapore was an easy choice for us when we launched our fintech hub LATTICE80 at the end of last year.

Meanwhile, new regulatory tools being planned by MAS will facilitate and encourage fintech experiments by financial institutions and startups. The goal is to encourage risk appetite among startups while reducing regulatory red tape for breakthrough technologies.

The results to date have been dramatic: US$605 million invested into Singapore’s fintech startups in 2015 alone, according to KPMG. In the same year, Japan received only US$142 million, according to data cited by Science & Technology Office Tokyo. Numbers for South Korea are harder to come by.

Also read: Despite the fintech boom, robo advisors in Japan have yet to make their mark on the industry

Playing catch up

This month, South Korea’s financial regulator announced it would temporarily ease regulations to help boost the fintech sector. That’s good news because South Korea has a lot of potential as a global fintech hub: good infrastructure and a culture of fast tech adoption. However, as a market it is very much focussed on its domestic consumers, investors, and startups.

In Tokyo, fintech has been slower to get going than many would have liked.

While the space is growing in Japan, compared to much of Asia most Japanese institutions have been late movers in adopting the emerging technology. In fact, there is a whole ecosystem that has prevented the grassroots demand for fintech in Japan.

An example is the deeply embedded bank-branch culture. Unlike in many parts of the world, the very positive image of Japanese banks gets in the way of entrepreneurial fintech startups.

Partnering for progress

Still, there’s many reasons to be optimistic.

Singapore and South Korea signed a cooperation agreement to foster greater fintech cooperation in October of last year. And more recently, this month, Singapore and Japan established a fintech cooperation framework to initiate discussions between regulatory bodies in the two countries.
While Singapore is undoubtedly ahead in almost every way as a fintech hub, the potential currently locked up in Japan and South Korea is increasing all the time.

Singapore scored between 5/5 and 4/5 in Deloitte’s aforementioned report (versus between 1/5 and 3/5 for South Korea) across criteria including regulation, foreign startups, proximity to customers and expertise, innovation culture, and government support. Japan isn’t listed.

But South Korea is a much bigger market that is spending a lot more on fintech and starting to see some very positive results. For now, Singapore scores notably higher on indexes including position as a global financial centre, ease of doing business, and global innovation.

For someone with stakes in the fintech market of at least two of the three countries, it’s an
exciting time to be an entrepreneur and investor. While Japan is the biggest market of the three, it’s still perceived as being relatively closed off.

Korea is one of the leading tech innovators but remains weak in globalisation, even though the country is spending US$60 billion on creating its own Silicon Valley equivalent.

Singapore, meanwhile, is one of the best global hubs and leading players on the fintech stage. For South Korea and Japan, it represents the best possible partner and mentor on their road to success.

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