E-payments the key to powering a smart nation

FINTECH is thriving in Singapore. Enabled by a supportive regulatory environment and nurtured by government policies, this small city-nation boasts some of the most innovative solutions in the modern world - but it was not always this way.

Singapore realised early on that its source of wealth would not just come from commodities such as oil and gas, nor is it rich in land or population. Rather, Singapore's strength has come through its incubating of homegrown and international talent, and supporting industries - such as fintech, and in turn, e-payments - that thrive on innovation and drive modern methods of creating value. Singapore fundamentally recognises the need to adapt and innovate to thrive in an increasingly borderless world.

For others across the region, the pressure to remain competitive in this borderless world has never been higher. Many may look at Singapore's progress and wonder how it can be emulated in their industry or country. So, what lessons can we learn from Singapore's fintech roadmap, and what does it take to truly future-proof an economy?

A BLUEPRINT FOR THE REGION

A supportive regulatory environment has proved to be the cornerstone for the acceleration of Singapore's fintech industry, with the Monetary Authority of Singapore (MAS) being one of the biggest sponsors of fintech in the region.

Early on, the goal was set for Singapore to become the world's first "Smart Nation", connecting technology with everyday life, and fintech was an important piece of this puzzle. The promise of solutions that democratise finance and empower users to access services that were previously unattainable was recognised by MAS as vital in the future-proofing of an economy.

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To realise this goal, MAS created the conditions for fintech to thrive. In 2015, the regulator committed S$225 million to fintech for the next five years - a policy that has received numerous top-ups, including the recent MAS-SFA-AMTD FinTech Solidarity Grant to help Singapore-based fintech firms maintain their operations and retain their employees during the Covid-19 crisis.

The Singapore Fintech Festival (the largest of its kind in the world) was then launched in 2017. This signalled a commitment to the industry and was followed by the creation of a regulatory sandbox to provide a controlled environment where financial services could experiment with innovative tech solutions.

Even at a glance, it is clear that government-backed events and ongoing support to elevate the fintech industry are key elements for a successful fintech blueprint that can be mirrored in any region. The figures also reflect this: Singapore's fintech industry recorded a record high in equity funding for the first half of 2020 - a sure sign of a maturing industry.

LOOKING TO THE NEXT GENERATION

To help develop the economy for the next generation, Singapore has leveraged digital payments as a key focal point for its positioning as a tech-focused nation. The E-payments Roadmap recently released by MAS lays out a pathway for Singapore as it heads into the new decade, further cementing e-payments' place in this Smart Nation's future. The government is openly inviting banks and innovators to leverage these systems to build new use cases and applications that will ultimately increase the number of, and uses for, e-payments services.

Supported by government initiatives, even the traditionally cash-only merchants and hawker stalls of Singapore are shifting towards digital and e-payments. Solutions such as InvoiceNow, a national e-invoicing method that breaks down the barriers of digital payments for small and medium-sized enterprise (SME) operators, removing the need for any manual paperwork, have had a marked impact on shifting the needle toward greater digital adoption.

Consumers in Singapore are following with the rapid adoption of digital payments and, according to a recent report by McKinsey, are turning towards it at an unprecedented rate with this trend set to continue.

The backend framework championed by the Singapore government to create streamlined and secure mechanisms for e-payments has certainly been a driving factor in increasing end-user adoption. For example, the National Digital Identity (NDI) platform was established as a means to allow every citizen a unique digital identity, allowing for greater know-your-customer (KYC) authentication of customers.

It also helps that Singapore has been an early adopter of easy-to-use account-to-account technologies, including Fast and Secure Transfers (FAST) which was launched in 2014 to allow users to transfer funds almost immediately and real-time payments systems (RTPs). This includes the widely-adopted PayNow, which allows peer-to-peer (P2P) transfers between customers of participating banks using mobile phone numbers.

Singapore is also taking the regional lead on cryptocurrency innovation, including its flexible Payment Services Act 2019 (PS Act) that adds a layer of regulation to cryptocurrencies in the country. Singapore Exchange further announced in September that it is creating two new cryptocurrency indexes with the goal of setting the pricing standard for Bitcoin and Ethereum in Asia. Creating regulations and trusted trading exchanges for digital currencies is a critical step in enabling cryptocurrencies to be less speculative, and becoming more trusted payment instruments with strong consumer protections.

FUTURE OF THE PAYMENT LANDSCAPE

The successful development of Singapore's cross-border e-payments capabilities relies on the level of digital payments adoption across Asia. For these payments to become easier and more seamless, countries across the region need to strive towards five distinct levels of development:

In addition, driving greater digital and financial inclusion must remain a constant underlying priority for all nations. All levels of society must be reached for the full benefit of e-payments to be reaped. This effort is particularly critical in Singapore, as the country will need to be fully inclusive to realise its Smart Nation goals.

A TRULY SMART NATION

Creating an environment that encourages collaboration is vital when considering the level of competition that currently exists in the payments space. Removing barriers to collaboration - for example, by governments creating and championing proof-of-concept sandboxes - is crucial for encouraging creativity, collaboration and ultimately results in workable solutions that can cross both industry and geographical barriers.

In Europe, we have seen the likes of Revolut and TransferWise blurring the lines between technology and finance, while Asia has seen solutions such as GrabPay, DBS PayLah, AliPay, and WhatsApp in India reimagining solutions to democratise payment services for all. This kind of innovation and accessibility is hugely important to compete on a regional or even global scale.

Finally, as the reality of a (digitally) borderless world is becoming ever more apparent due to the Covid-19 travel restrictions, it is important for payments providers to prioritise creating solutions that can work without borders. This will also be a key pillar for any Smart Nation - to be able to operate and provide solutions within a country while allowing wider access for all.

The growth and support of fintech, and more specifically, e-payments, is hugely important in any country's path to becoming a truly Smart Nation. Without the legacy support from regulators, Singapore would not be where it is today, and this blueprint must be recognised as the leading actions towards achieving the ideal digitally-enabled world. As we move toward continued creation and development in the wider industry, identifying this pathway to success is a key enabler of Smart Nation initiatives, both in Singapore and throughout Asia.