Most of the Kapronasia (and China Fintech) team were in Singapore for the festival. There have of course been countless write-ups on and praise for the event and everything that the Monetary Authority of Singapore (MAS) managed to pull off, what I wanted to focus on was the view from an outsiders perspective. Although we spend quite a bit of time in Singapore and have an office there, we see global fintech through the lens of what's happening in China.
This was especially clear as, besides ourselves, we brought down 17 fintech executives from some of China's largest P2P lenders, consumer finance and payments companies along with members of the Shanghai Finance Information Association, one of the key government-affiliated fintech organizations in China. The trip was a 'learning expedition' for the delegates to visit Singapore to experience, understand, and learn from the city-state about how incubators, associations, banks, VC, start-ups and the regulators could all work together to drive Fintech.
Talking to the delegates at the end of the week and reflecting on our combined experiences, there were a few things that became obvious:
At the end of the day, Fintech is about product, not technology.
The delegates that we brought had a few things in common. Firstly, they were all Chinese...this may have been obvious. Secondly, their companies are some of the biggest fintechs in the world; one delegate just bought the Australia National Stock Exchange and another has a P2P platform that processes US$500 million in new originations monthly. Finally, the technology behind their platforms is relatively simple - no AI, no blockchain, no machine learning. They are focused on product. They created products that provided move economic value to their customers and had commercialized them. Very simple, very straightforward. With all the talk about innovation, blockchain, AI, etc., we often lose sight of the basics. Having an AI-enabled, Ethereum-based, distributed robo-advisor means nothing if no one wants the underlying product.
A lot is riding on Singapore's (very hands on) regulatory approach to fintech.
Singapore has a lot to lose if it gets the regulation wrong especially as fintech has become a critical part of Singapore's (self-written) economic narrative, just as the financial industry has been. This can be fragile. We've seen this from the IMDB scandal and a general slow-down in banking. Supposedly over 7,000 bankers in Singapore were let go this year (I know, I know, but still, they are people too...), and there are likely more to come. The government and regulator were all-in on the financial industry, and now fintech, which is a decision that they have made very clear. One of the big debates in Singapore that I heard during the week was if it was proper for the MAS to be this involved in fintech. Should they be running events and setting up direct investment funds? Or should they be setting guidelines with a bit more arms-length arrangements?
There is a 'proper' regulatory approach to fintech, no one has figured it out, but China is closer than Singapore.
For all the talk about the regulatory sandboxes that the MAS, London and the HKMA have setup, China is hands-down the world's biggest fintech regulatory sandbox. From P2P lending, to Digital payments to blockchain, the Chinese government has fostered innovation by staying out of the way. We'll see if this is long-term smart, but it seems to have worked so far.
A small market, even for fintech, is still a small market.
Five years ago, there were tens of mobile payments companies trying to become the leading provider of digital payments in Singapore. Nearly all failed. Today, Red Mart was just sold in a fire sale, and Lazada is struggling. Even though both of those companies have a bit of a regional play, focusing on just Singapore seems to be a recipie for disaster for nearly any start-up. As China has shown, scale in fintech is critical for its success. Thankfully, most of the fintechs we spoke to during the week had either a regional if not global strategy. They should learn from Grab which has done an amazing job expanding and adapting to markets outside of Singapore.
In the end, it was great to be in an environment where you can talk to the regulator directly, meet with incubators, chief innovation officers and others. Certainly the festival brought more attention to Singapore as a regional (global?) fintech hub. How this all turns out is anyones' guess. Do we need 30 different accelerators, 5 industry associations and incredible regulatory focus to make this work? Maybe, maybe not. And another, potentially even more critical question is: what is the future of fintech? Will we see the Fintech Festival as the Lehman-defining moment of peak-Fintech? and what happens next?
This will be a key question for Kapronasia's research and the industry as we move forward into 2017.