Greater collaboration between regulators and policymakers to develop FinTech ecosystem

Source: Middle East Insurance Review | Dec 2018

Regulators and policymakers around the world are working closer together to develop and grow the FinTech ecosystem across markets. Together with FinTech industry associations, regulators are entering into partnerships globally to share leading practices, experiences and frameworks, and help FinTech firms export their services and expand in each other’s markets. Regulators in the UK, Singapore and Australia have entered into the most number of bilateral agreements with other regulators.

This is one of the observations highlighted in a new EY report, ‘FinTech Ecosystem Playbook’, which offers a panoramic view of the FinTech ecosystem, in addition to the trends and key developments at regional and country levels across 26 markets around the world. The playbook also highlights the best industry practices, success stories and key developments in the emerging markets in ASEAN; Latin America; Central, Eastern and Southeastern Europe and Central Asia (CESA); the Middle East; Africa; and Asia Pacific.

The latest measure to promote collaboration among regulators is the Global Financial Innovation Network (GFIN). Launched in August 2018, GFIN saw the collaboration of 12 financial regulators providing a more efficient way for innovative firms to operate in multiple jurisdictions in order to interact with regulators and venture into markets within the network.

Regulators are also experimenting with new technologies such as distributed ledger technology to improve processes in areas such as payments (including wholesale payments, sovereign currency, trade finance and interbank payments).

Government-backed programmes to boost FinTech

The playbook also highlights active interventions by regulators to support the sector. These government-led initiatives include those that are targeted at:

Demand: Advancing technologies, rapidly expanding economies and changing customer expectations are driving demand for FinTech products and services. Successful FinTech hubs tend to have diversity in the ecosystem, with startups spanning across multiple subsectors and growth stages.
Capital: For FinTech startups, access to capital often depends on factors such as product maturity, background of founders, company headquarter location and target market segment. To ease the funding challenges, governments globally are supporting startups through access to risk and growth capital.

Some FinTech hubs have dedicated funds or fund-of-funds to support firms in their growth stages. Examples include the $100m FinTech-focused fund by the Dubai International Financial Centre; the $256m Innovation and Technology Venture Fund by the Hong Kong regulator; and the S$225m commitment over a five-year period for the Financial Sector Technology and Innovation scheme by the Monetary Authority of Singapore (MAS), and the S$27m Artificial Intelligence and Data Analytics Grant under the scheme.

Talent: As competition for tech talent intensifies globally, the FinTech hubs are developing FinTech-focused programmes and initiatives to boost the local talent pool. These include FinTech-specific courses and programmes such as the MBA programme in FinTech launched by India’s Bombay Stock Exchange in association with the University of Mumbai; and FinTech Talent incubator and accelerator programmes such as the FinTech Career Accelerator Scheme in Hong Kong, which provides internships in the FinTech sector for undergraduate and postgraduate students.
Regulations: To increase competition and provide an enabling environment for FinTech firms, regulators are pushing out initiatives in varying degrees with regards to open banking. This allows FinTechs to leverage banks’ data to provide and extend their offerings to existing bank customers. For example, the UK became a pioneer in open banking when it mandated nine UK banks to open up their data via a set of secure application programme interfaces (API) in January 2018; while not mandated, the MAS encourages financial institutions to adopt open API as a foundational layer for innovation and interoperability. M

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