Three Ts behind Singapore’s future as a leading financial centre

Given the strong prospects of economic and financial sector growth in Asia, Singapore’s future prosperity is inextricably tied to its continued success as a leading regional and international financial centre. However, competition among financial centres is heating up. The latest Global Financial Centres Index (GFCI) showed Singapore is ranked the fourth most competitive financial centre in the world, behind New York, London and Hong Kong.

What can Singapore do to enhance its competitive advantages to overtake its rivals? I argue that three Ts underpin Singapore’s future success as a financial centre: Talent, technology and trust.

BUILDING A CORE SINGAPOREAN TALENT POOL

In a recent speech given at the 40th anniversary of Singapore’s Institute of Banking and Finance, Mr Tharman Shanmugaratnam, the Deputy Prime Minister and Minister for Finance, noted that Singapore’s continued growth as a financial centre requires the development of deeper and more specialised expertise, particularly in emerging areas such as trade finance, reinsurance and speciality finance.

Expertise and talent have always been a key driving force for the world’s leading financial centres. One of the GFCI’s measurements of financial centre competitiveness is human capital. Indeed, the success of a financial centre is very much dependent upon the ability of its bankers, traders, asset managers and other financial sector professionals to attract financial flows and generate new business. However, financial sector professionals are also notoriously mobile.

Hence, Singapore needs to develop and retain an indigenous pool of financial sector talent. Measures are already in place to foster the development of a Singaporean core in the financial services sector.

Initiatives include scholarship and international posting programmes by the Monetary Authority of Singapore, which will also launch an Asian Financial Leaders Programme later this year to groom Singaporeans for leadership positions in the financial industry. More will need to be done to create the necessary incentives and environmental factors for retaining Singaporean talent.

HARNESSING TECHNOLOGY

Another important aspect of the financial services sector is the increasing role of technology in mediating and even generating new financial flows. Lubricated by technological innovations such as online trading platforms, global financial markets are becoming increasingly fluid and fast-paced. Singapore will need to maintain its technological edge in terms of price discovery and market-making capabilities.

As the financial sector becomes increasingly complex and the clientele more discerning and savvy, firms will also need to draw on new and emerging technologies to navigate this new and complex financial landscape.

One such technology is big data analytics. Early this year, DBS announced its plan to utilise IBM’s Watson cognitive computing innovation to process vast amounts of customer information. This will allow the bank to enhance its wealth management services by providing more relevant and tailored advice and services to customers.

With increasing complexity in the financial markets and greater diversity in consumer risk preferences, financial institutions will find themselves relying more and more on data analytics in order to gain a better understanding of financial markets and clients. This will allow for more effective risk management and more accurate matching of consumers to financial products.

Given Singapore’s small population and lack of an economic hinterland, technology is an important multiplier for its human capital. With the right online platforms and effective use of data analytics, financial institutions and professionals will be able to provide a greater range and quality of services to their clients.

GETTING THE RIGHT COMBINATION

However, talent and technology are not exclusive to Singapore. Other leading financial centres are also looking to attract or develop their own financial sector talent pools and tap the latest technological innovations to enhance financial sector operations.

Human capital and technology have become the crucial “hardware” of a financial centre that is necessary for its success. Policymakers all over the world are aware of this, hence the heavy investments in talent and technology among leading financial centres.

In order to truly distinguish itself as a leading financial centre, Singapore needs to develop its “software”, including the less tangible factors of trust, reputation and social capital. Singapore is already well-known for its transparent and robust regulatory infrastructure. The Republic has established itself as a safe haven for investors based on this. However, trust extends beyond having a reliable legal-regulatory infrastructure.

An early study conducted by business scholars Ilan Vertinsky and Kam-hon Lee showed that banking executives in Singapore value their ability to access and communicate with regulatory policymakers. As such, policymakers need to maintain strong relations with the industry, even while they retain their regulatory autonomy. This will provide them with a good sense of the market and key emerging trends in the global financial markets.

While talent, technology and trust are each important in their own right, Singapore will benefit most from a combination of all three, with talent being the centre around which technology and trust are built. Singapore’s financial markets must be operated by skilled and well-trained financial specialists who are able to deploy the latest technology in their work and establish deep networks of relations between industry and government.

This will require a new generation of financial sector professionals, who not only possess competencies in their functional specialisations, but are technologically savvy and socially adept as well. The future of Singapore’s development as a leading financial centre will thus rely on the development of talent with technology and trust.

ABOUT THE AUTHOR:

Dr Woo Jun Jie is a postdoctoral research fellow at the Lee Kuan Yew Centre for Innovative Cities, Singapore University of Technology and Design.