Singapore’s network of financial technology providers and innovators have been tasked with taking on challenges in the financial services industry, including cross-border payments and environmental, social and governance (ESG) data.
Speaking at the Sibos 2022 event held in Amsterdam earlier in October, Monetary Authority of Singapore (MAS) Managing Director, Ravi Menon, said – when properly harnessed and risk-managed – fintech can be “a powerful force for good, solving problems and creating opportunity”.
“These two challenges are what I would call foundational issues that need to be addressed before broader progress can be made,” Menon said.
“Payments is the life blood of the modern economy. Payments connectivity, especially across borders, is a key ingredient for digital connectivity, financial inclusion, and economic integration.
“Sustainable finance is a powerful enabler for the net zero transition. High-quality, trusted ESG data is critical for comparable climate-related disclosures, management of environmental risks, and green and transition finance flows.”
Menon highlighted how the 21st century has outgrown the dated system that currently powers cross-border payments, proving slow, inefficient and costly as the average transfer cost is 6.4 per cent of the transfer value.
He also told attendees at the conference about several initiatives in Singapore and the Southeast Asian region developing solutions to tackle cross-border payment difficulties, including the Bank of International Settlements (BIS) Innovation Hub’s Singapore Centre’s multilateral payments solution; the trial of a multi-central bank digital currency (CBDC) platform between Singapore, Australia, Malaysia and South Africa; and private sector-led secure blockchain networks.
“Solving the cross-border payments problem will yield gains in both economic efficiency and financial inclusion,” he said in his speech.
“This is why the G20 has made it a priority to address existing frictions in global cross border payments – to make payments cheaper, faster, more transparent and more inclusive.”
Menon also discussed the importance of “green fintech” in the wake of MAS’s launching an ESG Impact Hub, to address the need for better ESG data and to better manage climate-related risks.
“Many central banks, including MAS, are very keen to understand the impact of climate risk for financial stability,” he said.
“[Fintech] enables robust sustainability reporting. Quality data is foundational in our fight against greenwashing and in enabling relevant stakeholders to make effective ESG-investment decisions. It helps to catalyse green and transition finance flows.
“We need good data on firms’ carbon footprint, historical carbon emission trends, and compliance with their respective transition targets. We also need data on the climate-related risks their physical assets are vulnerable to.
But the ESG data acquisition process is often manual, tedious and costly. ESG data verification is at a nascent stage. This impacts the credibility of reporting. FinTech can be a key enabler in addressing these ESG data challenges.”