1 - The rise of the regulatory sandbox
States and cities around the world recognized the importance of promoting fintech within their borders and rushed to become the global leader in the field. The tool of choice to reach this goal was the regulatory sandbox, a program allowing financial institutions and fintech firms to test their platforms in a relaxed regulatory environment. Singapore, Hong Kong, Thailand, Abu Dhabi and Malaysia were among those that announced their intentions to launch such programs.
2 - Singapore stakes claim as the global fintech leader
As jurisdictions jostled for the title of the global fintech hub, Singapore charted a path for all to follow through numerous programs, initiatives and a general approach for nurturing the growth of fintech. In no order of importance, these included:
- Concluding fintech cooperation agreements with Australia, the UK, Switzerland, the Indian state of Andhra Pradesh, and Korea;
- Taking the position to only regulate fintech startups once they reach a certain critical mass that may pose a threat to the financial system;
- Launching a fintech innovation lab;
- Concluding a memorandum of understanding with local institutions of higher learning for fintech curriculums;
- Reviewing the regulatory regime for venture capital managers in an attempt to lure more funding to Singapore;
- Opening a dedicated blockchain research and development centre;
- Hosting over 11,000 for the inaugural fintech festival;
- Releasing the final guidelines of the fintech regulatory sandbox;
- Establishing a grant of $200,000 to help fintech startups trial their projects;
- Announcing a partnership with the R3 consortium to conduct interbank payments using blockchain; and
- Releasing 12 sets of data APIs to help financial institutions and developers offer new innovative products to their customers.
3 - A black eye for fintech
Peer-to-peer lending platform LendingClub was embroiled in a scandal when its founder and CEO, along with other senior managers, resigned from the company following revelations of poor corporate governance and abuses related to the sale of some of its loans to investors. In China, online lender Ezubao was shut down after it was revealed that the platform was essentially a Ponzi scheme.
4 - Blockchain applications gain momentum
Much effort was dedicated to moving blockchain from the theoretical discussion stage to actual applications. Trade finance was one beneficiary of this attention with banks such as HSBC, Bank of America, Barclays, Well Fargo, UBS and BNP Paribas all testing successful blockchain based transactions. Increasing efficiencies in the trade lifecycle was another area of focus, particularly with respect to share offerings, repurchase agreements, fx clearing and settling gold trades. Stock exchanges also showed interested, including those in Australia, Myanmar, and Hong Kong.
5 - Growth of Consortia
Consortia formed for the purpose of exploring and developing blockchain applications became a major trend in the fintech space. From R3 and the Hyperledger project, to country specific ones in Japan, China and Russia, financial institutions (and other unrelated businesses) realized the value proposition of this model as a means for advancing a technology with mutual benefits to all participants. The year did however conclude with some uncertainty around the viability of these partnerships as a result of R3 losing some prominent members and downsizing from $200 million to $150 million the amount it was looking to raise from its members.
Abraham Tachjian
As always, feel free to contact me to discuss these and related topics.