Two highly-developed free market economies in which fintech flourishes, albeit via different approaches

One of the more recently developed fintech connections between Australia and Singapore is the partnership between Credit Card Compare, Australia’s largest credit card comparison website, and Singapore’s first rewards-based financial comparison marketplace, Finty.

The Australian company acquired Finty in mid-2018, viewing Singapore as the natural gateway to the fast-growing ASEAN region and Finty as a key plank in its growth strategy.

Although the Australian economy (GDP US$1.3 trillion in 2017) is four times larger than that of Singapore (USD 324 billion), Singapore is still one of the world’s major financial centres, ranking fourth on the Global Financial Centres Index (after New York, London and Hong Kong).

Australia (represented by Sydney, 7th, and Melbourne, 20th) is much lower down the table. So, while Singapore is clearly punching above its weight, it seems reasonable to ask the question, “How do these two financial centres differ in their treatment of fintech companies, and in what ways are they similar?”.

The results may surprise you.

Comparing the two economies Both countries have a strong and highly-developed free market economy. While Australia’s nominal GDP is four times that of Singapore, a different picture emerges when GDP PPP (Purchasing Power Parity) is compared.

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The figure for Singapore is US$94,105 per capita, is nearly twice as high as Australia’s US$50,391, and the third-largest in the world. Australia is currently the only country in the world with 27 years of uninterrupted economic growth, but the economy, though stable, is undergoing significant change following the 2012 peak in the mining investment boom and the subsequent slowdown.

The services sector accounts for 61 per cent of GDP, with minerals and agriculture the main exports. Free trade agreements with China, Japan, South Korea and other ASEAN nations facilitate the 64 per cent of exports which go to East Asia. The 25 million population provides a skilled workforce which, together with its rank of 13/180 in the Corruption Perceptions Index, makes Australia an attractive destination for foreign investment.

Singapore, the location for APEC’s headquarters, is a regional hub for wealth management. It has an open and corruption-free business environment (3/180 in the Corruption Perceptions Index) and a government which promotes economic growth through fiscal incentives, public investment, workforce skill set development in its 5.8 million population, and economic diversification.

Once again, service industries dominate, but despite the shortage of raw materials and water it is also a major electronics and chemicals manufacturer as well as being home to one of the world’s largest ports.

The financial regulatory environments

Australia’s financial system are regulated and supervised by four government agencies which together form the Council of Financial Regulators: APRA (Australian Prudential Regulation Authority), ASIC (Australian Securities and Investment Commission), the Reserve Bank of Australia and the Australian Government Department of the Treasury. A fifth agency, ACCC (Australian Competition and Consumer Commission), regulates anti-competitive behaviour. Recent intensified scrutiny on the Australian financial services sector has resulted in the introduction of BEAR (Banking Executive Accountability Regime) regulations as well as the 2018 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

Despite some of the Royal Commission’s adverse findings, the regulatory environment itself is still regarded as transparent, efficient and conducive to entrepreneurship. Singapore, by contrast, has a single regulator and supervisor of the financial services sector, in the shape of MAS (Monetary Authority of Singapore), which oversees the application of the 1970 Banking Act and later amendments.

The principal objectives of MAS are economic growth through price stability, fostering financial stability and the continuing growth of Singapore a reputable and competitive financial centre, and the effective management of foreign reserves.

In 2017 MAS released an Industry Transformation MAP (ITM) to facilitate innovation in the financial sector, including appropriate and supportive regulation. Two nations progressing towards open banking.

As the world moves towards open banking – opening up competition in the financial sector by putting the control of customer data into the hands of customers – Australia and Singapore are not quite leading the field, but are not far behind.

The UK and European Union already have compulsory regimes, while Australia’s is imminent and Singapore’s is on the ‘emerging’ list.

Since customer data is currently stored digitally in many thousands of databases worldwide, accessed by a similar number of software programs, one of the main ways in which open banking will be achieved is via APIs (Application Programming Interfaces), allowing external developers to access financial institutions’ software systems in order to create useful new applications for customers.

Open banking and APIs in Australia

In Australia, the government is in the process of rolling out Customer Data Right legislation which will give individuals the right to access specified data held on them by businesses, and to authorise secure access to this data by accredited data recipients such as banks, telcos and other utilities.

The country’s four major banks are expected to make bank transaction, credit and debit card account data available by 1st July 2019. There are also plans to establish an enhanced regulatory sandbox to allow new financial product concepts to be evaluated for commercial viability.

Australian bank NAB has a number of APIs in place. Its seamless integration with Xero’s accounting cloud ecosystem allows small businesses to streamline their accounting systems and save valuable time. And, its QuickBiz Loan product utilises APIs from both Xero and MYOB to access business accounting data to enable a speedy credit decision on small business loans.

ANZ, another of Australia’s largest banks, has developed eGate, a product which offers easy integration with online store software, including secure online payments via Mastercard Internet Gateway Services, and mobile payments via Apple Pay and Google Pay.

Citi’s collaboration with Qantas allowed the airline to use the banking giant’s APIs to launch two new white-labelled credit cards and a mobile app within a nine-month timeframe.

Open banking and APIs in Singapore

In Singapore, although the government is not legislating to enforce open banking, it is supporting voluntary initiatives, allowing financial institutions and fintech companies to experiment with innovative products.

The MAS API Register lists hundreds of APIs from Citi, OCBC, DBS, Standard Chartered and NETS. They include Product APIs (financial product information, rates, branch/ATM locations), Sales & Marketing APIs (product sign-ups, sales and leads generation), Servicing APIs (managing customer profiles and feedback), Transaction APIs (payments, funds transfers, settlements, trading) and ‘Other’ APIs (e.g. authentication, authorisation, reporting, market data and compliance).

Additionally, DBS, OCBC, UOB and Standard Chartered have begun a pilot with the collaboration of MAS and other government agencies, to use the government-created MyInfo service.

MyInfo is a one-stop data platform that saves time by automatically filling out online forms (e.g. credit card sign-up, bank account opening) with a single sign-in and no need to upload any verification documents, since these are authenticated when a MyInfo profile is first created.

Banks and fintechs collaborate to create the future of financial services in Asia and Oceania

Australian bank Westpac has committed AUD 150 million in venture capital funding to venture capital group Reinventure, which has provided funding to start-ups like Ping Data.

Ping auto-links to a user’s credit or debit card and attaches receipts to the corresponding transaction within a banking app.

In other news, the Commonwealth Bank of Australia recently completed a regtech pilot with fintech Ascent Technologies, using NLP and AI to convert 1.5 million paragraphs of financial regulation into bitesize, actionable tasks, saving countless hours of manual processing.

The bank, in conjunction with government agencies, has also successfully trialled a ‘smart money’ blockchain-powered concept, which could be used to help manage insurance payouts and the management of trusts and charities.

In Singapore, UOB and SGInnovate’s joint venture, FinLab, is an ASEAN fintech accelerator. It has helped companies like CardUp (large online payments earn rewards points even where credit cards are not accepted)and Aimazing (platform agnostic payment method enabling contactless mobile payments using soundwaves).

OCBC Bank Singapore’s Open Vault program is a permanent open call to innovative global fintech firms to collaborate with the bank to create solutions that will benefit customers. Similarly, DBS Bank defines its Asia X initiative as ‘a space where we collaborate with start-ups and the broader fintech community to reimagine, inspire and create the future of innovation’.

How the public and private sectors are funding fintech startups

Venture capital and angel investors are active in the fintech space in both Australia and Singapore.

In Australia there’s the already mentioned Reinventure, for example, plus groups like H2 ventures and Sapien Ventures.

Operating in the same arena, Singapore has organisations like Golden Gate Ventures and Jungle Ventures.

Crowdfunding for fintech start-ups is available in both jurisdictions, in Australia only recently after legislation for equity crowdfunding was passed in 2017, and recently amended to include proprietary (privately-owned) companies.

Federal government grants are available in Australia through its CSIRO On Accelerate and CSIRO Kick start programs. There are also state government grants for start-ups and SMEs.

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Enterprise Singapore has similar start-up grants, early-stage funding, mentorship and government/private co-investment schemes. The low-tax regime in Singapore, including 0 per cent tax on dividends and capital gains and a low top corporate tax rate of 17 per cent, fosters fintech investment.

In Australia, although the top corporate tax rate is a high 30 per cent, there is an R&D tax incentive in place, as well as an instant US$20,000 asset write-off for small businesses.

Two economies, two companies, one fintech future

Australia relies heavily on central government taxation and regulation to drive its economy and impose innovation on a financial market which is nevertheless ready with its own initiatives.

In contrast, the low-taxing Singaporean government appears to see its role as more of a fintech facilitator than an enforcer, and the corruption-free financial market where the private sector is driving rapid change is an indicator of the success of this approach.

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