THE inaugural Singapore FinTech Festival organised by the Monetary Authority of Singapore (MAS) in November last year was significant on multiple fronts, and small and medium enterprises (SMEs) here would do well to take notice.
First, financial technology (fintech), along with innovation, is gaining momentum in Singapore as it is across the globe. In fact, the momentum is such that last year alone, more than US$20 billion was invested in fintech globally, according to research by consulting firm Deloitte, business school Insead and venture capitalist Life.Sreda.
Fintech is an umbrella term that covers companies that focus on a broad spectrum of new technologies such as blockchains and sandboxes, new forms of payments such as mobile and contactless, global and online commerce platforms, as well as social phenomena such as crowdsourcing and crowdfunding, all of which hold the allure of enhanced business security and productivity.
Next, the fintech event in Singapore, which was strongly supported by the Republic's major banks, also heralds a change in the landscape of financial services here in a couple of ways.
Where once the ubiquitous bank held sway as the single point of contact for every conceivable financial need, the rise of fintech businesses has changed the financial services landscape to the point where more and more consumers are prepared to seek out specialist providers for specific needs. In addition, many banks, once wary of a new type of competition from fintech providers, are increasingly adopting a more collaborative approach, seeking to work with fintech providers for the benefit of everyone. As a leading financial services hub in Asia, Singapore has seen fintech companies flourish.
Why leverage fintech?
Given this evolving financial services environment, progressive and growing SMEs, particularly those with global aspirations, can take advantage of fintech advancements to improve their own competitiveness in order to navigate the uncertain waters of the current economic climate.
Here are some of the benefits that accrue after distilling the technology and innovation from a business perspective.
Much of the innovation of fintech has to do with increasing the options available for SMEs to conduct business or support financial transactions. At the simplest level, for example, leveraging the ubiquity of the Internet allows for greater business reach regardless of time or geography.
It also comes as no surprise that increased competition will, over time, reduce the cost of acquisition. Newer companies are not slowed down by cumbersome legacy systems and can implement automated processes that lower the cost of doing business for the SME. An example of this is international wire transfers for cross-border payments. Where many banks still have semi-manual processes in place, fintech organisations may leverage technology to optimise this service.
By focusing on specific technologies or innovations, fintech companies can more effectively meet customer needs in that area. This also allows them to grow quickly across the globe in order to meet the needs of their customers.
While the benefits to SMEs of utilising fintech services can be both tangible and significant, a valid concern remains regarding the credibility of such companies. After all, the last thing SMEs want to spend time worrying about is whether a fintech can be trusted to manage significant sums or money or investments.
In Singapore, SMEs can also draw confidence from the nation's intrinsically strong financial regulatory regime, and they should ensure that the fintech companies they work with are regulated by MAS. Better yet, those that are able operate within a global environment, and are able to meet each the diverse and stringent requirements wherever they operate.
The fact that the Singapore Fintech Festival was supported by banks shows that the entire banking ecosystem can benefit from financial technology. SMEs can take confidence in the fact that the underlying robust financial infrastructure does not change. Fintech companies often collaborate with many different banks to provide their services.
The bottom line is that for progressive SMEs willing to look beyond traditional banking offerings, and open to leveraging fintech while exercising appropriate due diligence, the exercise can be most worthwhile.
- The author is managing director of World First Asia