The Singaporean economy has always been a riddle trapped inside an enigma.
For conservatives, the country’s massive post-war growth shows the importance of free trade and free capital flows in boosting development. For Keynesians, Singapore, where all land is government-owned and 22 per cent of GDP is produced by state-owned enterprises (the global average is 9 per cent), shows that central planning works.
And so it is with fintech.
The nation punches well above its weight in international finance, including fintech. But what’s interesting about Singapore is that its success owes as much to its government as to its entrepreneurs.
Singapore’s central bank, the Monetary Authority of Singapore, is arguably more committed to fintech than any other government. Last year, MAS added to its bureaucracy a fintech department - the Fintech and Innovation group - whose brief is to promote disruptive financial technology.
From this department, massive subsidies have flown, including direct funding and grants. It has also provided education. Last year, the central bank partnered with universities and polytechnics, bringing fintech into their curriculum. And launched a raft of internships, offering students industry exposure. The state support has paid off and Singapore currently vies with Hong Kong for Asia’s fintech capital.
Singapore’s supportive state is not in itself unique. The Australian government provides support for fintech through tax-breaks and licensing exemptions. So does the UK. What’s unusual about Singapore however is how far-reaching the government role is.
While the Singaporean government supports fintech, it is also wary of the consequences of doing so.
One of the hushed side effects of fintech is that its labour-cutting technologies mean fewer jobs. A report from Citigroup published in 2016 warned that as fintech eats traditional banking’s lunch, European and American banks could lose 2m jobs over the next decade. Such losses could be acutely felt in Singapore, which depends on finance for 13 per cent of its GDP.
Which makes Singapore’s support for an industry that threatens traditional finance puzzling. Or does it?
According to a report in The Economist, the threat fintech poses is precisely the reason for support. “[Singapore] wants a thriving fintech industry that supports, rather than undermines, incumbent big banks…The idea is to combine the cost-effective nimbleness of fintech with the trust, solidity and customer base of mainstream banks. Translation: even if you can beat them, join them.”