Developments in the financial technology (fintech) space are gaining traction.
Just across the causeway, Singapore is pulling out all the stops, with its government agencies announcing a slew of initiatives that are capturing the attention of fintech entrepreneurs the world over.
The regulator there is setting aside millions to beef up its own competencies in this space.
Money is also being thrown at entrepreneurs to come and dabble with fintech ideas on the island state. Innovation labs are sprouting up all over the place.
The government has voiced out its stance that regulation should not stand in the way of fintech, but rather facilitate its growth with the right safeguards in place.
Singapore is really setting the stage - at its recently held “fintech festival”, big global names in fintech were flown in to speak. A reported figure of 12,000 people attended the week-long event. That would make it very likely the world’s largest fintech conference.
So, why is Singapore doing this?
Some sceptics reckon that Singapore is getting close to fintech in order to ensure that its banks are not totally disrupted.
Banking services make up a key economic activity of that country, and by being on top of all the innovation, regulators and banks working together can ensure the longevity of Singapore’s banks. But it is hard to accept that theory because the push for fintech looks very much deeper. Singapore’s banks are being told to disrupt themselves or face a bleak future. A fertile fintech eco-system ensures that banks there have the chance to collaborate where possible or even acquire some of the smarter start-ups that begin to surface.
But there is a bigger prize that awaits countries in this region which get their fintech act together. Asean represents a salivating prospect for some fintech innovations. One of the most attractive propositions of fintech is that it is able to bring banking and other financial services at low cost to the millions who are left out of the financial system. And Asean has those millions. Successful fintech companies operating out of Singapore will be able to tap this low-hanging fruit, in the form of foreign exchange, cross-border remittances, micro loans, insurance offerings and all forms of crowdfunding, to name a few.
This is why it is so important for Malaysia to keep pushing to also create our very own vibrant fintech eco-system.
Nothing should be taken away from the efforts of regulators here to embrace fintech. Just a month ago, the Securities Commission licensed six peer-to-peer (P2P) financing platform operators, making us the first country in the Asean region to regulate P2P financing.
Bank Negara has issued the Financial Technology Regulatory Sandbox Framework for financial institutions and fintech players to experiment with new solutions in a production or live environment.
While these are steps in the right direction, it is still lesser than the efforts being taken by countries like Singapore. Still, Malaysia has other advantages to take on the fintech wave.
We have a pool of entrepreneurs who have been successful, especially in bringing their offerings abroad. They are racing to get on the fintech bandwagon. All they require is a basic regulatory framework. They seem to be able to source the right talent and funding required and a few are already quietly working to launch their fintech innovations.
It is hoped that the sandboxing experience that they have been invited to participate in goes smoothly. It is hoped that the Malaysian regulator will also share the stance that regulation should not stand in the way of fintech, but rather facilitate its growth with the right safeguards in place. They must also acknowledge that time is of the essence. The fintech race in on.
Besides that, the key regulator may want to consider a few more initiatives. One is expanding its resources so that it is in a better position to facilitate the building of the local fintech ecosystem. Or perhaps explore ways in which it could “creatively outsource” some of this work to the private sector or other government agencies. Another effort should entail promoting fintech to the market at large through education and helping to get the market’s buy-in.
Finally, perhaps Bank Negara ought to come up with a game-changing fintech framework by providing the licensing guidelines for parties to apply to become full-fledged digital banks. A few other countries have done this, why shouldn’t Malaysia do the same, albeit with the required safeguards in place?