Transforming Singapore into a Technology-driven Global Financial Centre
Nov13

Transforming Singapore into a Technology-driven Global Financial Centre

On 30 October 2017, the Monetary Authority of Singapore (MAS) released an industry transformation map (ITM) for financial services that outlined an agenda for continuous innovation and technology adoption. As a law firm that combines a deep-seated funds and investment management expertise with a leading-edge technology practice, we would like to highlight the following takeaways from the ITM: 1. Leading fund and wealth management hub. MAS is working with the financial industry to develop a centre of excellence for wealth management technology and innovation. A significant part of this initiative would be using big data and artificial intelligence to counter money laundering in the region and maintaining Singapore’ reputation as a clean financial centre. This can be done by identifying unusual patterns of transactions across a network of entities and across times. Digital advisory services, where programs assist clients in deciding on investment portfolios, are also becoming more popular. The introduction of these new technologies are however not discrete, and are instead part of a larger transformation of the financial services ecosystem. 2. Technological innovations. MAS acknowledges that technology has changed the financial services industry, and it is crucial for our financial sector and regulations to transform in tandem. A key focus under the ITM is to facilitate innovation in the sector by encouraging the adoption of technology by financial institutions. For example, MAS will collaborate with financial institutions to create common standards such as for electronic payments, and electronic know-your-client checks. These will accelerate the adoption of technology by financial institutions which will ultimately benefit customers. The ITM reflects what is already happening in practice. We have noticed a greater convergence of fund and wealth management and technology, where fund and wealth management institutions are starting to invest in new technologies such as crypto-currency or blockchain technology. MAS, in turn, has also sought to boost the Singapore venture capital landscape with relaxed rules for fund managers (we recently wrote an article on this which can be accessed here). The ITM enforces this interaction and is a step in the right direction to encourage or enable more of such crossovers in future. Taking a step back, the ITM is part of wider ambition to create a Smart Financial Centre in Singapore, where technology is used pervasively in the financial services industry. MAS is taking a holistic approach to this transformation, by setting up an international advisory panel for cybersecurity matters. This ambition brings with it certain risks, and the advisory panel will bring global perspectives on evolving technologies and cyber threats and their implications for financial services. Overall, with the transformation of the way financial services are delivered, customers can...

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New opportunity for Singapore banks: MAS expands scope of permissible activities
Oct10

New opportunity for Singapore banks: MAS expands scope of permissible activities

On 29 September 2017, the Monetary Authority of Singapore (MAS) released a public consultation paper to relax the anti-commingling rules for banks. This is a follow-up from the Minister for Finance’s announcement in June 2017 that these rules will be further adjusted. See our previous post on the announcement here. Since the introduction of the prohibition on banks to carry out non-financial businesses more than a decade ago (the anti-commingling rules), the banking landscape has evolved. Technological advancements have disrupted traditional banking business models. Today, consumers can access financial and related non-financial services seamlessly. Banks are also facing competition from non-financial players who are leveraging their large user bases to provide e-payments and other financial services. MAS acknowledges this new environment, and recognises that the anti-commingling rules can be simplified and adjusted. MAS’s proposals will allow banks to broaden and better integrate their financial services. Crucially, the adjusted rules will continue to ensure that banks remain focused on their core banking business and competencies, and avoid potential contagion from the conduct of non-financial businesses (the core policy objectives). The following are the key proposals under this public consultation paper: Streamlining the conditions to carry out non-financial businesses. Currently, banks are allowed to carry out non-financial businesses, but only upon compliance with certain minimum requirements. These requirements are onerous and include the requirement to obtain prior approval from the banks’ parent supervisory authorities. MAS proposes to simplify the rules by removing this requirement, subject to certain conditions. The primary condition is that the aggregate size of all non-financial businesses cannot exceed 10% of the bank’s capital funds. This is to limit contagion risks and ensure that banks remain focused on their core financial business. Broadening the scope of permissible non-financial businesses. MAS acknowledges that the online purchase of goods and services and the use of e-payment services are becoming increasingly integrated. Many non-financial entities are also starting to deliver financial services through their online platforms. MAS proposes to broaden the scope of permissible non-financial businesses to enable banks to better compete against such non-financial players in this new digital economy. The proposal allows banks to engage in: (i) operating online platforms that match buyers and sellers of consumer goods or services; (ii) sale of consumer goods or services via online platforms; and (iii) any business incidental to (i) and (ii) including the provision of logistic services to deliver goods to consumers. MAS also proposes to allow banks to engage in: (i) sale of software or systems originally developed by the bank for its financial business; and (ii) entering into tie-ups to sell or provide products or services (which the counterparty...

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Next step in Singapore’s payments journey
Jul03

Next step in Singapore’s payments journey

As Singapore moves towards a Smart Nation and a cashless society, our electronic payments system has also developed to allow consumers to send and receive money easily. The most recent development in this journey is PayNow, which allows bank customers to transfer funds using only the recipient’s mobile number or Singapore NRIC/FIN. Technology has transformed the way Singaporeans use financial services, and surveys show that 94% of Singaporeans have used mobile and internet banking to access their bank accounts. In addition, one in five consumers in South-East Asia use digital wallets, with Singapore being the top adopter in the region. Electronic payments are becoming more common, and Unified Point-of-Sale (UPOS) terminals are being used at major supermarkets across Singapore. Even traditionally cash-based hawker centres are catching up to this trend, and some are undergoing a trial to accept contactless cards or QR codes which customers can scan with their phones to make payments. MAS is also reviewing the regulatory framework for payments, and it recently proposed an activity-based regulatory regime for payments that will align requirements to the specific payment activities undertaken by businesses. It will be interesting to see how new developments such as PayNow will shape the industry feedback MAS receives on this proposal as well as the second round of public consultation. In addition, stakeholders in the payments ecosystem also have the opportunity to chart Singapore’s epayments journey, as MAS has also established a Payments Council under its leadership, which will function as a forum for the payments industry and businesses to discuss payment strategies and cross-cutting issues, and promote inter-operable payment solutions. With the recent launch of PayNow, transferring funds is not only fast and secure, but also convenient and efficient. PayNow rides on existing infrastructure used by Fast and Secure Transfers (FAST), which allows customers of 19 participating banks to make interbank fund transfers almost immediately and at no cost. Before PayNow, under FAST, transferring funds was almost immediate, but transferors need to know the recipient’s bank and account number. There is also no need for PayNow users to have a mobile wallet, which is required by existing solutions such as DBS’ PayLah!. Looking ahead, PayNow will soon also be introduced for transactions between individuals and businesses, and there is also potential for it to be implemented across South-East Asia. Making payments convenient, fast and secure is a key component in Singapore’s goal to become a Smart Nation, and PayNow is a step in the right direction. We are hopeful that the uptake of PayNow will be swift amongst Singaporeans, and that there will be continued innovations in the payments space in the near...

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Blurred Lines: MAS streamlines regulation of banks’ non-financial services activities
Jul03

Blurred Lines: MAS streamlines regulation of banks’ non-financial services activities

16 years ago, when MAS introduced the anti-commingling framework to separate financial and non-financial businesses of banks, the iPhone did not exist and clamshell Motorola Razrs were cool. Today, almost all Singaporeans carry smart phones and our wireless broadband penetration has gone up to 200%, making Singapore one of the most connected societies in the world. This connectivity has made Singapore the perfect ground for technology disruption, and we have seen how technology disruption has impacted traditional business models and shaped consumer behaviour in Singapore. For example, instead of dining and shopping along Orchard Road, many of us now get our meals delivered via Deliveroo and make purchases on ecommerce platforms like Taobao or Honest Bee. Financial services are not immune to technology disruption and the manner in which their customers consume their services. Non-financial companies such as WeChat have created platforms that enable customers to chat, purchase and pay for goods and services, including financial products, all within one mobile application. Such disruption encroaches onto activities that were historically in the financial services remit. MAS recognises that this disruption has resulted in the increasing blurring of lines between financial and non-financial businesses, and that banks are facing increasing competition from non-financial businesses that have leveraged their large user base to provide digital wallets, payments and remittance services. In 2011, MAS took a first step in giving banks greater allowance to carry out non-financial businesses that are related or complementary to their core financial businesses under certain conditions. This time, MAS has gone further by streamlining the requirements for banks seeking to conduct or invest in permissible non-financial businesses. For example, banks will not need to seek prior regulatory approval before conducting or acquiring major equity stakes in permissible non-financial businesses. Other requirements such as conducting regular stress test or external audits have also been removed. As such, banks can more easily integrate banking services into customers’ day-to-day activities and deliver value added service to them by ensuring these additional services can be provided on the banks’ platform. MAS has highlighted that it is still important for banks to focus on their core financial businesses and has consequently limited such non-financial businesses to 10% of a bank’s capital funds. Apart from certain digital platforms which banks are now expressly allowed to operate, banks would also need to seek case-by-case approval from MAS. Going forward, non-financial businesses will continue to make inroads into traditional banking business, and banks need to be able to transform and adapt to such changes in the economy and society. We welcome MAS’ swift response to these changes around us, and look forward to the consultation...

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