Asia’s Fintech Hub: A Long, Long Way to Go

For the past two years I have had the pleasure of visiting Singapore during early summer to host the Waters Asia-Pacific Buy-Side Technology Summit. Aside from the gruelling 14-hour, non-stop flights and the Singapore heat (I'm British; I only get to see the sun for six days a year) I have always enjoyed both the time spent in the city and the event itself.

Listening to the conference panel discussions, individual speakers and talking to delegates, there is a clear message that the Asia-Pacific region has embraced the idea of new technologies and its working hard to find ways to integrate these ideas into their existing practices. Note that the word used there was "integrate," not "disrupt."

This year's keynote address was given by Pierre Humblot, COO, Asia fixed income and global emerging markets, at JPMorgan Asset Management, who did extol the virtues of digital disruption, or as he coined it, "asset management 2.0."

The other message is that Singapore or Hong Kong will soon be a world-class fintech hub, ready to compete with those in the US and Europe in terms of investment and product development, all within the scope of regulators keen to foster creative, yet easily accessible, spaces.

In this month's issue of Waters, Wei-Shen Wong wrote "The Race to Be Asia's Fintech Hub," as Singapore, Hong Kong and others vie to be that tech beacon. Her findings are similar to what I heard—that Singapore is widely recognized as the leader in Asian fintech.

Money Talks

There is a somewhat grey haze that surrounds the word "fintech" still; while it's fine that large-scale investment in this area is being driven by the Asia-based regulators—The Monetary Authority of Singapore foremost among them—the granularity of such projects isn't quite there. Fintech, as a word, covers almost every aspect of financial services technology (the clue is in the name), so how much of these initiatives would cater to the Asian buy side in particular, for example?

Maybe I am splitting hairs here, but it is still true that the lion's share of regulatory and governmental investments in this area are dedicated to commercially focused banks, and even other regions that are more often thought of as emerging hubs.

According to Accenture's report, of the $4.3 billion invested in the Asia-Pacific region in 2015, just 9 percent targeted asset and wealth management (combined), while 78 percent was aimed at institutional banks. China saw the majority of investments in terms of deal size with 45 percent, but India was a close second with 38 percent. Of the main Asian hubs noted in the report, neither Singapore nor Japan was mentioned.

But money isn't everything. Talk to most asset management heads of trading or CTOs, and they'll tell you that getting the right technology talent and culture is just as crucial. The same is true in Asia-Pacific, particularly in the wealth management space, where client demand for new technologies to be implemented outstrips that of the US and Europe.

Progressive Attitudes

Attitudes toward disruptive or emerging technology in asset management circles are often cautious, particularly in countries such as Japan, but the shift is occurring. While compliance and risk were the main topics of discussion at this year's Singapore-based conference, interest in distributed ledger technology and machine learning was also high.

While that doesn't sound much different from what is being discussed within Western buy-side groups, the difference is that large-scale investment and advanced projects in these areas are nowhere near the levels found in the US or Europe.

And it seems that is how things will continue to play out, at least for the buy side. Almost all of the delegates I spoke to admitted that Asia-Pacific lags some way behind the West in terms of its development of new financial technologies, despite the money and regulator support.

The tide is shifting, but the sheer pace of development going on means that whichever city or nation becomes Asia's primary technology hub, it will still be behind its main competitors.

Side Notes

• The 2016 Olympics in Rio are in full swing, the USA and China are already hoovering up the medals ... and that's about all I know of the whole thing. I just can't get excited, or even mildly interested, about the current games. Perhaps it's because it was last hosted in London. After a dozen or so years of living here I cannot remember another time when this city was as full of optimism, camaraderie and genuine sense of solidarity as the summer of 2012. While that may sound a bit mawkish, it also helped that Great Britain won a load of gold medals and Brexit wasn't a thing yet.

• My own personal highlights of Singapore this year included: watching a lightning storm breaking across the city at 5 am, walking around the Botanic Gardens feeling like I was in Jurassic Park (yes, I did hum the theme tune to myself), and finding a noodle place that had chosen to use a cartoon elephant's rectum as its corporate logo (I definitely didn't eat there).