In the recently released Fintech Ecosystem Playbook, EY gives a panoramic view of the fintech ecosystem in 26 fintech hubs in emerging markets across six clusters, namely ASEAN, Latin America, Central, Eastern and Southeastern Europe and Central Asia (CESA), the Middle East, Africa, and Asia-Pacific.
Hubs and clusters, EY Fintech Ecosystem Playbook 2018
The report sheds light on the trends and key developments at regional and country levels across these emerging markets. The followings are 10 key takeaways from the research paper:
Hub subsector specialization
Though, globally, successful fintech hubs tend to have diversity in the ecosystem, some fintech hubs have identified subsectors where they have certain advantages. These hubs managed to take leadership or are positioning themselves to become the dominant hub for those subsectors.
Three relevant examples are Switzerland with cryptocurrency and blockchain, Malaysia with Islamic banking, and Stockholm with payments, the report notes.
Hub subsector specialization, EY Fintech Ecosystem Playbook 2018
Government-backed funding
To ease some of the capital challenges, government globally are supporting startups by giving access to risk and growth capital. Some hubs have dedicated funds or fund-of-funds (FOF) to support fintech.
These include the Dubai International Financial Centre (DIFC), which launched a US$100 million fintech-focused fund in November 2017, the Indian government, which launched the Startup India Initiative in January 2016 that includes a US$1.5 billion FOF, Hong Kong’s US$256 million Innovation and Technology Venture Fund, and the Monetary Authority of Singapore (MAS)’s S$225 million Financial Sector Technology and Innovation scheme.
Attracting talent
Countries such as the UK, France and the UAE are attempting to attract technical talent from other countries by offering special visas.
The UK provides a visa route for non-European Economic Area (EEA) researchers and plans to offer startup visas for foreign tech entrepreneurs. The UAE introduced a 10-year residency visa for investors and specialists. Meanwhile, countries such as Estonia and Lithuania have Startup Visa programs.
Training local workforces
Hubs are also developing fintech-focused specialized programs and initiatives to develop local workforces.
Some initiatives include government-led courses and programs such as the SkillsFuture program in Singapore, Hong Kong’s Bachelor of Engineering Programme in Financial Technology at The Chinese University of Hong Kong and Bachelor of Science (Hons) in Financial Technology at Hong Kong Polytechnic University, and Bombay Stock Exchange’s MBA program in fintech in association with the University of Mumbai.
Fintech talent incubator and accelerator programs also exist including the Fintech Career Accelerator Scheme (FCAS) in Hong Kong, and the TechSkills Accelerator (TeSA) Fintech Collective in Singapore.
Favorable regulatory landscapes
Regulators and policymakers are actively seeking to develop attractive fintech ecosystems through a range of policies and other interventions.
The report highlights some key practices at the regional and country level, including the introduction of sandboxes, which allow fintechs and firms to launch products and services without necessary licenses, economic zones with varied benefits like tax exemptions, consultations with industry players, guiding principles and frameworks rather than rules, and fintech laws or licenses.
Innovation through Open Banking
To increase competition and innovation, countries are pushing out initiatives related to Open Banking. Open Banking allows fintechs to leverage on banks’ data to provide and extend their offerings to bank customers.
Regulators around the world have undertaken different approaches: the UK pioneered Open Banking, launching the initiative in January 2018 and mandating nine UK banks to open up their data via a set of APIs, Singapore’s MAS is encouraging financial institutions to adopt Open API, and Hong Kong released its Open API Framework in July 2018.
Collaboration among regulators
Regulators and policymakers around the world are working closer together to develop and grow fintech across markets. Together with fintech industry associations, regulators are forming partnerships globally to share leading practices, experiences and frameworks, and help fintech firms export their services and expand in one another’s markets.
Regulators in the UK, Singapore and Australia have entered into the most number of bilateral agreements with other regulators, according to the report.
Collaboration among regulators, EY Fintech Ecosystem Playbook 2018
Public accelerator programs
Hubs globally have recognized the significance of incubators and accelerator programs aimed at developing startups by providing mentoring, funding, training, networking, and marketing and public relation opportunities.
Dubai’s DIFC runs the Fintech Hive accelerator program, which focuses on fintech opportunities in the Middle East, Africa and South Asia (MEASA) region, the Abu Dhabi Global Market tied up with Silicon Valley’s Plug and Play in October 2017 to launch its fintech accelerator, and Singapore’s MAS runs its global accelerator program Global Fintech Hackcelerator each year.
Support from traditional financial institutions
Besides government-led initiatives, financial institutions globally too are supporting the fintech sector through various initiatives. Banks such as Citi, HSBC, BBVA, United Overseas Bank and Bank Mandiri, have launched dedicated funds to invest in fintech ventures. Banks are also actively engaging with fintechs through innovation labs, hackathons and accelerator programs.
Emergence of fintech global platforms
Through fintech events and programs, several hubs are providing fintechs with a platform to connect, collaborate and network with investors, tech players, industry participants and regulators.
Examples include the annual week-long Singapore Fintech Festival, organized by MAS in partnership with the Association of Banks in Singapore and in collaboration with SingEx Holdings, and the annual Hong Kong Fintech Week, hosted by Invest Hong Kong (InvestHK), which offers a window into Hong Kong’s position as Asia’s financial hub and an entry point to China and the Greater Bay Area.
