Singapore is the incumbent state that could complete a fintech trinity that facilitates unprecedented growth and innovation opportunities.
If the trilateral fintech bridge mooted earlier this year between Australia, the UK and Singapore comes to fruition, it will incubate innovation and break geographical barriers further.
The current partnership between the UK and Australia is a bilateral agreement that aims to strengthen engagement on fintech policy and regulation, facilitate trade flows and access to capital opportunities; and address barriers to international growth.
Extending this agreement to incorporate Singapore, thereby creating a trilateral bridge, could prove to be an exciting opportunity that each country can reap rewards from.
Bridging three fintech hotspots
The markets in Australia, the UK and Singapore have significant differences due to the population sizes and financial ecosystems in each country.
The UK, with a population of more than 60 million, is a much bigger marketplace and has a large number of traditional banks that sit alongside a growing number of digital banks for consumers to choose from.
Australia is dominated by its big four banks attracting more than 80% of the population, with digital banks tending to the niche sectors.
Singapore’s market, due to its geographical position, enables elements of innovation from across the ASEAN region. There, a large number of fintechs concentrate on areas that are not mainstream in the more traditional markets. For example, new (digital) bank entrants in Singapore could be telcos, digital disruptors or tech giants.
These different approaches highlight a huge benefit of the partnership, with information sharing and technology transfers. One market may initially have the opportunity to race ahead, but this will force the others to change and catch up.
Impact on regulations
The role of regulation is interconnected globally. For example, if you look at the Prudential Regulation Authority (PRA) in the UK, the Australian Prudential Regulation Authority (APRA) and the Monetary Authority of Singapore (MAS), their regulations are quite aligned.
The trilateral fintech bridge will force regulators to align even more closely so that fintech services can be launched and offered across the board.
This means that the shared data economy across each of the three countries will become almost transparent, enabling a level playing field. A company that operates in the UK will be able to do likewise in Australia and Singapore easily.
How the alliance affects traditional banking
If the alliance comes to fruition, traditional banks will be forced to modernize at a much faster speed in the pandemic crisis.
In every market, fintechs will be driving change and traditional banks will have to sit up and take notice. Existing financial technologies will be easily transported across regions and operated in Australia, Singapore and the UK. This will be a catalyst for more change, with new and innovative ideas coming to the market in a way that will make traditional players review their processes, forcing them to make the back office of their banks digitalized to provide the same level of straight-through processing service.
Traditional banks will also see more competition from digital banks. While there are already many digital-only banks in the UK, they are less prevalent in Australia and Singapore, and there will be continued expansion across these countries.
Unparalleled opportunities if ratified
The benefits of the trilateralized fintech bridge will open a door for shared ideas and commercial innovation across Australia, Singapore and the UK.
Fintechs will be able to drive innovation across these three countries. Initiatives that originated in Europe like Open Banking and the associated regulations that have been adopted, will be transferred more easily to the other partners. Also, fintechs will be able to acquire operational licenses internationally through cooperation and collaboration between cross-border financial regulators.
Each country will be able to learn from one another, sharing their approaches and modernizing the way they operate.
Overall, the extension of the fintech alliance will mean that digital adoption will no longer be an option, but an imperative to ensure survival. Banks and fintechs will be taken on a cross-border rollercoaster ride that will help them change and become stronger than ever.
