As e-payments and FinTech grow, regulators in Hong Kong and Singapore need to catch up
The Singapore and Hong Kong governments recently announced – coincidentally on the same day - changes that will allow for fund transfers across banks and stored-value facility providers as well as standardisation of payment QR codes. But are both cities too slow in their efforts to promote e-payments and FinTech?
On September 17, the Singapore government announced that its interbank instant fund transfer system - Fast and Secure Transfers (Fast) - will be opened up to non-banks such as GrabPay and Singtel Dash.
This will allow consumers to top up their e-wallets from any bank account, as well as transfer funds into any bank account.
Coincidentally, on the same day, the Hong Kong Monetary Authority launched its Faster Payment System (FPS), a consolidated platform that allows fund transfers across banks and stored-value facility providers as well as instant payments through the use of QR codes, email addresses and mobile phone numbers.
This is aimed at making retail fund transfers and payments quicker and easier for firms and consumers.
At the same time, both cities moved to standardise payment QR codes, with Hong Kong unveiling a Common QR Code Standard for Retail Payments and Singapore launching its national QR code standard, SGQR.
The question is: are both cities too slow in their efforts to promote e-payments and FinTech?
For instance, critics have argued that Singapore’s e-payments sector has been hampered by a lack of interoperability among e-wallets and banks.
While the government had previously argued that the wide array of e-payments options would allow for greater competition and innovation, it has become increasingly clear that there is a need to consolidate the various e-payments platforms in Singapore.
Similarly, Hong Kong’s policymakers have long been facing criticisms that the city is lagging behind other Chinese cities in the adoption of mobile payments and other financial technologies (FinTech).
Furthermore, a lack of interoperability between e-payments systems in Hong Kong and those in China had hampered financial integration between the mainland and the Special Administrative Region.
To address these concerns, Hong Kong’s FPS now allows for instant payments in renminbi (RMB).
Yet the fact that Fast and FPS have only been launched recently suggests a significant lag-time among the two cities’ regulators in keeping up with the latest FinTech developments.
While it is true that regulation, by its very nature, will always lag behind market developments, more can be done to ensure that regulators keep up to speed with FinTech developments.
For instance, many of the existing e-payments platforms such as GrabPay and Apple Pay were launched almost a year ago. Furthermore, prior to the recent launch of Fast, interbank transfers could take up to three working days.
It is clear that the demand for e-payments has been rising steadily over the past year.
Given the increasingly tough competition from China and Hong Kong, Singapore financial regulators and policymakers will need to move fast, in order to establish our position as an e-payments hub for Asia.
More broadly speaking, financial regulators will need to be keenly attuned to the continuously shifting FinTech landscape. Certainly, e-payments are only the tip of the ice-berg.
The growing digitisation of the financial services sector has in recent years given rise to new financial instruments such as cryptocurrencies as well as new modes of financial services delivery, ranging from robo-advisers driven by artificial intelligence technologies to blockchain systems.
Furthermore, Singapore’s FinTech sector continues to face challenges related to the country’s relatively small domestic market.
While Hong Kong is seeking to tap on its large Chinese hinterland by introducing RMB payments in the FPS, Singapore will need to explore the possibility of fostering greater e-payments interoperability with its own hinterland of South-east Asia.
To this end, Singapore has already taken some early steps.
As current Asean Chair, Singapore is driving a pilot for the Asean Smart Cities Network, which will allow for greater collaboration on urban and smart city development across the region.
As small open economies and leading global financial centres, both Hong Kong and Singapore will need to continuously lead the pack in an increasingly competitive FinTech landscape.
The launch of Fast and FPS will no doubt stimulate e-transactions in the two cities.
From an economic perspective, such consolidated platforms reduce what is known as transactions costs, the expenses that may be incurred by buyers and sellers in the process of making a transaction.
For instance, transactions costs may arise when consumers need to spend extra time and effort spent in navigating across the different e-payments platforms each time they make a transaction with a different party.
In order to leverage on this proliferation of e-transactions and at the same time minimise transactions costs for consumers, financial regulators and policymakers will need to keep apace with financial innovations.
In responding too slowly to new FinTech trends and innovations, Singapore runs the risk of lagging behind its competitors and losing out on a potentially powerful driver of economic growth.
To this end, there are policy lessons to be learnt from China.
Not only has China embraced e-payments and e-transactions extensively, its policymakers have also made decisive moves to ensure the stability of its financial markets in the face of new financial instruments, such as outright banning cryptocurrencies.
While it may not necessarily benefit Singapore to ban cryptocurrencies, it will definitely be a move in the right direction for its policymakers to be similarly swift and decisive in their responses to financial innovation.
ABOUT THE AUTHOR:
Woo Jun Jie is an Assistant Professor in the Public Policy & Global Affairs Programme at Nanyang Technological University.