Transcript of Remarks by Minister for Foreign Affairs Dr Vivian Balakrishnan at the Pacific Islands Fintech Innovation Challenge, 27 July 2022

Good morning everyone, and let me first say on behalf of Singapore that we are delighted (and) we are honoured to be the venue for the Pacific Islands FinTech Innovation Challenge. We would also like to thank Australia for its support for this event. To all our guests from overseas, a very warm welcome to Singapore.

2 Your Excellency Henry Puna, Secretary-General of the Pacific Islands Forum – I hope most of you realise he used to be the Prime Minister of the Cook Islands. Apart from all his achievements locally, one key intellectual contribution was to coin the term “large ocean states”. Now, this is important and relevant today. Many people think of the Pacific Islands as far-flung tiny islands scattered across the oceans. For a long while, we used to call ourselves small island developing states. Henry Puna upended that concept and reminded all of us that if you include the Exclusive Economic Zone around the islands, you are in fact, large ocean states. Unfortunately, for Singapore, we remain a small island state.

3 The second point, which is related to this concept of large ocean states, is that with the installation of submarine cables and the application of digital technologies, those far-flung distances collapsed. Therefore, the third point which we need to think about today, is how are you going to convert large ocean states with telescoped distances due to digital technologies into opportunities for all your citizens and to access the rest of the world. This is the larger context for the application of FinTech in the Pacific Island region, and indeed, even to ASEAN, in Singapore, and to Australia and New Zealand.

4 The digital revolution was well under way before the pandemic hit us. But the events of the last two and a half years have reminded us that the pace of change due to digital technologies has increased. In fact, the impact of unequal digital access has been accentuated. Just think about the lockdowns, the fact that people had to go online to engage, to connect, to transact – you realise that COVID-19 in fact underline and emphasise this point.

5 The digital revolution has created new jobs, new economic opportunities. Digital marketplaces have enabled small businesses to reach more customers everywhere. The technology has facilitated trade and cross-border transactions, and it has helped to, in a sense, offset headwinds against globalisation. Digital technologies have of course also been essential for education, and skills training, especially during this time of COVID-19.

6 The robust FinTech solutions offer pathways to a more open, inclusive, and sustainable economy. This is particularly relevant for the Pacific Islands. FinTech enables access to financial services and it bridges gaps for unbanked people.  In Southeast Asia, just ASEAN alone, we have a combined population of about 660 million. However, about 40% or 250 million people in ASEAN remain unbanked. Similarly, in the Pacific Island region, I believe the figure is also around 40% of the population, (they) do not have access to formal financial services. We believe digital technology can broaden the reach of financial services and lay the foundation for a more inclusive economy.

7 Payments, in particular cross-border payments, are essential for cross-border trade. Making this cheaper, faster, more secure, accessible, and fairer will significantly boost trade, e-commerce, tourism spending and remittances across the globe. Just to give you one example: think about a black pearl farmer on an island, having access to a market of hundreds of millions, and being able to receive payments within minutes. Think of the impact on jobs and opportunities that creates for Islanders everywhere. Our central bank, the Monetary Authority of Singapore, and the Bank of Thailand have collaborated to look at innovative ways to address this challenge. In 2021, we launched the world’s first retail faster digital payment systems linkage. This allows individuals in Singapore and Thailand to send money to one another. All we need is not a bank account number, but a mobile number. The money is transferred directly from the sender’s bank account to the recipient’s bank account. It literally just takes a few minutes to complete the transaction. It is five times cheaper: I believe it is around 3% of the transfer value compared to the previous 10%-15% via correspondent banking channels. As anyone who has had to remit money across borders would know, this is a big deal for people. Southeast Asia is the world’s fastest growing region for digital wallets. In 2021, some 77 percent of Malaysians, 70 percent of Indonesians, 66 percent of Thailand’s population used a digital wallet at least once a month – the figure is even higher in Singapore. Moving forward, new technologies such as Central Bank Digital Currencies (or CBDCs) are currently being explored and experimented on by many central banks across the globe. The Bank for International Settlements Innovation Hub is doing extensive technical pilots to explore the potential for wholesale CBDCs to further reduce the cost and to enhance the efficiency of wholesale cross-border transactions.

8 Climate change is another existential challenge for small island states like Singapore, and of course, the large ocean states of the Pacific Islands. We all need to invest in mitigating physical risks whilst transitioning our economies to a low carbon future. We need to incentivise the entry of private sector capital to finance this massive undertaking through green finance. One precondition here – investors will demand accountability that their capital is truly achieving the purported environmental benefits. It is thus in our collective interest to promote Green Fintech – to harness technology and data to enable transparent, trusted and efficient green finance to take off. Singapore has launched Project Greenprint, a collection of initiatives to harness this technology for a data-centric ecosystem that supports the financial sector’s green and sustainability agenda. The Monetary Authority of Singapore will partner the industry to develop interoperable data platforms to drive efficient and trusted collection, and the flow of data for green finance across different stakeholders. This is an area which I will commend the Pacific Islands Forum to study and to ride on these platforms that we are developing.

9 We cannot disregard the headwinds that are being faced by the FinTech sector. It has become more challenging to access capital with rising interest rates, falling valuations, and investors quite rightly emphasise a path to profitability. We have all seen the recent cryptocurrency crashes affecting a large number of digital asset players, and this quite rightly has led to scepticism of emerging technologies. Geopolitical and macro-economic challenges, including higher food and energy prices, and inflationary pressures, have added to this uncertainty.

10 But the potential for FinTech remains strong. Growth is still on an upward trajectory. A record of over US$210 billion in FinTech investments were made last year and another US$108 billion in the first half of 2022. In Singapore, we have more than 1,400 FinTech companies – a marked increase from the 50 FinTech companies that we had in 2015. In 2021, we achieved an all-time high of US$3.9 billion of FinTech investments. More than 40 financial institutions have set up their innovation labs in Singapore to experiment with these emerging technologies and develop appropriate, new products and services that work in Asia – and if I may now add, in the Pacific Islands region too.

11 Singapore looks forward to working with our partners to grow this regional FinTech sector, and to harness FinTech solutions to expand opportunities for your people. The Pacific Islands have always been known for their robust, entrepreneurial people. You are tough people who have to work with the challenges of nature, but also overcome some of the challenges of history, and overcome geography. We believe FinTech solutions will help to uplift the prospects for micro-business owners across the Pacific region. I know that mPaisa QR Pay is a popular payment app in Fiji that is used by businesses of all sizes. For many Fijians, it is the first formal financial service that they have used. Such apps have allowed Fijians to set up their own micro-businesses with little to no transactional cost. The Central banks of six Pacific countries (Fiji, Papua New Guinea, Samoa, Solomon Islands, Tonga and Vanuatu), as well as Timor-Leste and Seychelles have launched the Pacific Regional Regulatory Sandbox. This allows financial service providers and financial technology firms from across the world to test their products in a live environment, enabling greater access to markets in these eight countries. These remittances also make critical contributions to national incomes in the Pacific Islands and are a key source of foreign exchange.

12 But digital transactions are not yet completely seamless, and the full benefits have not yet been fully realised. We need to build on the foundational digital infrastructures (FDI), which comprise both physical infrastructure as well as policy and rules that govern digital identity, consent, payments and data exchange. These will allow different users, solutions and devices to connect, to interconnect, to interact, and to engage. It will support innovative digital solutions for inclusive participation, establish trust and facilitate scaled economic transactions that go across our borders. These enable digital services, including remittances, to scale up, to reach more people and businesses, at lower cost and greater convenience. Singapore has worked with Brunei, Cambodia, Ghana and Kenya in 2021 on a Report which sets out the core components of FDI. This includes advocating for open-source codes and for collaboration to benefit developing countries. The pitch I am making to the Pacific Islands region is that there are no trade secrets – these are open platforms, open-source. Take a look, examine, kick the tyres, build your own systems, and make sure they interoperate with those that we are developing serving Southeast Asia and beyond.

13 So I am very glad that the Pacific Islands Forum and the UN Capital Development Fund chose Singapore as the venue for the Pacific Islands FinTech Innovation Challenge Bootcamp. Apart from Singapore’s role as a FinTech hub, we also enjoy longstanding relations with the Pacific Islands. I have not tracked the mileage of Singapore’s Non-Resident Ambassador to the PIF Mary Seet-Cheng – she has assiduously travelled and engaged across the region over the years. We are very glad we have been able to welcome more than 5,400 officials from the Pacific Islands to participate in the Singapore Cooperation Programme. This includes courses, including digital transformation. Singapore is also deeply honoured to have been admitted as a Dialogue Partner of the PIF in 2021. We look forward, and I give you the assurance that we will be an active and constructive partner to the PIF; and all the more so because we are a small island state, and we are brothers and sisters across the Pacific.

14 So I am optimistic that the Pacific Islands Fintech Innovation Challenge will foster stronger collaboration between ASEAN and the Pacific Islands. I understand that 11 companies will be presenting their solutions to address five areas including improving access to financial products and services, as well as digitising customer services. I look forward to the knowledge sharing. I wish the Bootcamp every success, very intensive sessions, before you retire for drinks at the High Commissioner’s (William Hodgman) house tonight.

15 Thank you all very much.

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