From Rakesh Bhatia at Singapore Business Review:
“According to the January 2017 report by Hootsuite and We Are Social Singapore, there are currently 644.1 million people in Southeast Asia. Of which, 53% are internet users making the region ripe for growth and expansion for Fintech adoption… In Singapore, the launch of the Smart Nation initiative has identified fintech as an emerging industry. The Monetary Authority of Singapore (MAS) is leading by implementing a regulatory sandbox that enables entrepreneurs to innovate further.”
Fintech refers to any new innovations in how people conduct business transactions, with the use of current technology. Since the invention of fiat currency, the recent explosion of Mobile Payments, Blockchain technology, Peer to peer Lending etc, has revolutionised the global Fintech landscape. Processes which were once handled with paper money and human interactions are now being replaced with digital currency and online transactions. With the inexorable advent of Fintech, comes significant changes and the implementation of regulations from the government. In Singapore, the Monetary Authority of Singapore (MAS) implementation of a regulatory sandbox, enables financial institutions and Fintech players to experiment with promising innovations in the market within the regulatory framework as stipulated by MAS. Based on the experiment, MAS will then decide on appropriate measures to change specific legal and regulatory requirements.
In addition, MAS commitment of S$225 million to help financial firms set up innovation labs and fund infrastructure to deliver Fintech services will lower the barriers of entry for startups and SMEs. With SMEs contributing to a large part of the economy, Fintech players provide SMEs the opportunity to secure loans, which they often find difficulties from traditional financial institutions. Where banks find loans under S$100,000 risky and time consuming, peer to peer lending platforms are more flexible with loan amounts. This would often lead to faster approvals and quicker funding for SMEs. Continue reading
From Maija Palmer at Financial Times:
“There is an estimated $2tn gap between SME funding needs and what banks will provide. If there were one overriding theme to pick out in the applications for this year’s Future of Fintech Awards, it was a focus on small business customers. The words “small businesses are poorly served by banks” kept cropping up on submissions. Fintech companies, it would seem, are lining up to fill this gap in the market by providing small companies with everything from lending, foreign exchange to advice. For many founders the idea for their start-up had come from a bad personal experience with small business banking…SMEs are a potential enormous market. Small companies account for 90 per cent of the world’s businesses, according to the SME Finance Forum, a global small business association. They are, indeed, poorly served by banks, says Matt Gamser, head of the forum. Banks tend to provide personalised services for a few high-value customers, or automate services for a mass consumer market.”
In Singapore, research from SPRING Singapore showed that 180,000 small and medium enterprises (SMEs) consists of nearly 99% of the all businesses. In addition to that, they contribute to about half of Singapore’s GDP and employ approximately 70% of the labour force locally. These statistics show that SMEs play a significant role in the development of Singapore’s future and the creation of job opportunities. While they account for a large percentage of the economic market, a gap still lies between small businesses demand for funding and what banks are willing to provide. Banks are more willing to provide personalised services for high net worth clients or automate services for large consumer markets.
Problems that local SMEs face include slow payments, rising costs, currency fluctuations and lack of skilled staff. Having sufficient cash flow as well as the timing of these cash flows are necessary to aid in their concerns. With limited opportunities for bank financing, SMEs are starting to turn towards alternative financing options which includes crowdfunding, peer to peer financing, ICOs and invoice financing. Through these options, SMEs are able to obtain loans much faster, with less paperwork involved. Invoice financing platforms conduct stringent background checks on each invoice and they are graded based on their creditworthiness. Therefore, the speed at which applications are checked are much faster with greater efficiency and customer satisfaction. Continue reading