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Taking fintech full throttle into the deployment phase

Taking fintech full throttle into the deployment phase

This was first published in The Business Times on 22 Jan 2019

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Leong Kok Keong

Head of Financial Services

KPMG in Singapore

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Singapore’s financial services ecosystem has kept pace with global changes, allowing Singapore to compete against other financial centres . The advent of new technologies - artificial intelligence (AI), blockchain and digital payments amongst others - has also dramatically transformed the financial services landscape, a key element of a smart nation.

The $225 million Financial Sector Technology and Innovation (FSTI) scheme was announced on 29 June 2015 to fund the setting up of innovation labs and experimentation through proof-of-concept projects, as well as to incubate new industry initiatives in digital payments and blockchain use cases.

The scheme saw a proliferation of ideas in 2016 and 2017, and propelled the setting up of fintech companies and a vibrant fintech community here.

Both banks and fintech companies have now reached a point where a number of “proven solutions” are ready to be put into operation.

However, many companies are facing deployment challenges in a number of areas such as costs in implementing new technology while managing and improving incumbent platforms, time needed to train staff to manage AI or machine learning platforms, where costs are incurred now but benefits come later.

Furthermore, there is also resistance in migrating to new technologies such as cloud platforms due to work required and security concerns, and insufficient trained resources in emerging technology areas.

In the face of these challenges, the FSTI scheme that was designed for innovation and experimentation and capped at $200,000 per project, is now inadequate. This is compounded by the fact that larger deployments are likely to be multi-year and multi-million dollar efforts.

The next course of action must be to help remove the barriers to adoption and move fintech innovations firmly into the deployment stage.

In view of this, a new “Financial Sector Digital Deployment” scheme may be required to hasten the deployment of key technologies.

Such a scheme could focus on three main areas. 

Drive digital adoption

First, the FSTI grants could be extended to cover deployment and implementation costs of new technology in areas of digital payments, blockchain, cloud, data and analytics, as well as AI and machine learning technologies, based on say half of the outlay incurred for deployment (to move from design to “go live” phase).

Grants ranging between 30 and 50 per cent could also be provided on qualifying outlay by local fintech startups on talent search costs and relocation costs.

To address the tight supply of skilled resources and to propel the adoption of new technologies, a more open immigration policy would be necessary to facilitate the immigration of skilled resources in key areas of data science and emerging technologies.

A fintech academy could also be established, with an apprenticeship programme in which trainees could be deployed to financial institutions and fintech companies at subsidised rates on approved projects in digital technology.

This fintech academy can run along the lines of the AI research initiative ai.sg, which is currently funded by the National Research Foundation.

Encourage cloud migration

Second, FSTI grants could also be extended to cover cloud migration that typically involve significant capital outlay. Any qualifying expenditure for cloud migration (net of grants) should also be eligible for a 200 per cent tax deduction.

These schemes would incentivise more businesses in the financial services sector to opt for cloud migration.

Develop a platform to monitor trade transactions for money laundering and proliferation financing activities

Third, as the trade sector moves to other platforms and Singapore connects more with other trading hubs, financial institutions and companies will need to enhance the controls and processes to mitigate the risks of trade-based money laundering and proliferation financing.

To prevent and detect such activities, a platform to monitor trade transactions is needed. Financial institutions and trade participants must be convinced that the commercial benefits of such infrastructure outstrip the added costs of compliance.

Since last September, the Networked Trade Platform was officially launched to digitise and streamline end-to-end trade processes which are historically paper-based and manual.

To ensure the success of this platform, the FSTI proof-of-concept scheme could be extended to provide up to 50 per cent of qualifying costs to financial institutions that have substantial trade finance businesses in Singapore for early stage development of a platform that can efficiently monitor trade transactions for money laundering and proliferation financing activities.

With major financial centres actively looking to leverage the potential from new technologies, these three priorities should propel Singapore forward in the race to become a global fintech hub. 

3 focus areas to drive deployment of fintech

  • Drive digital adoption
  • Encourage cloud migration
  • Develop a platform to monitor trade transactions for money laundering and proliferation financing activities

The article was contributed by Leong Kok Keong, Head of Financial Services, KPMG in Singapore. Views expressed are his own.

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