13 November 18 The Business Times by CLEMENT GOH
CASHLESS payment options and e-wallets seem to have proliferated every part of our lives these days - from paying for ride-hailing rides to online shopping, buying groceries, watching movies and even getting food at the local hawker centre. The convenience of paying with a quick swipe of our fingers seems to have made a large number of us converts to these new modes of payment.
Apart from bitcoin and other cryptocurrencies, fintech is also powering much of the financial services industry through such things as algorithm-based portfolio management, insurance, stock-trading apps and websites, and so on. With Frost & Sullivan predicting Singapore to become 82 per cent cashless by 2022 and a concerted effort by governments in the region to go cashless, a fintech boom in South-east Asia might be imminent.
Singapore has taken huge proactive steps to position itself as a hub for fintech firms in the region. With Singapore's central bank taking the lead in organising the world's largest Fintech Festival two years in a row and playing host to over 400 fintech firms, it is safe to say that the republic is now the fintech capital of South-east Asia.
In the South-east Asian region, where 73 per cent of the overall 650 million population remains unbanked and only 3 per cent are covered by insurance, the growth potential for fintech is immense.
Yet while EY's Asean Fintech Census 2018 study revealed strong growth sentiments among fintech entrepreneurs, with 87 per cent planning to expand beyond home markets, many are remiss to the fact that a robust IT and data centre support infrastructure needs to be in place in order to handle the projected hyper-scale growth trajectory.
SPEED, SECURITY AND SCALABILITY
The top priorities to fintech's success are the three Ss - speed, security and scalability. Transactions need to be completed in split-seconds to offer real differentiation between cashless payment options and traditional modes of payment. At the same time, the transaction needs to be secure to protect the financial interests of the consumer as well as the merchant and platform provider from fraud. Lastly, fintech operators need to be well prepared to scale up their systems at the push of a button to meet sudden spikes in user demand as more users come on board and they expand to other markets.
All of the above requires a robust back-end data centre infrastructure. Fintech operators need to have a well-planned cloud and edge architecture in place to ensure low latency performance no matter where the consumer is, at or where the transaction is taking place. Any real or perceived lag in transaction speed or convenience would mean consumer preference for a rival payment platform.
A secure system, apart from the system design architecture itself and protecting against cyber threats, also requires secure data centres. In Singapore, this means compliance to the Threat Vulnerability Risk Assessment (TVRA) standards, in addition to multiple Fire & Safety and security certifications. Data centre sites of fintech operators would also have to fulfill multiple international standards of operations.
STAKES GETTING HIGHER FOR SYSTEM OUTAGES
As regulatory bodies in the region train their sights on fintech players and impose new rules and minimum service standards, the stakes are getting higher for any potential breach of security and service reliability. The Monetary Authority of Singapore (MAS) recently issued new guidelines to establish a regulatory framework for both fintech operators and end-users, imposing financial penalties for any negligence that leads to fraud or financial losses.
More worrisome is the risk of data breaches. With the sheer number of users subscribed to each platform, and highly-sensitive personal and financial information stored within, potential hackers would be keen to make away with valuable data.
In the highly competitive fintech landscape, any system vulnerability or operational mishap that leads to such breaches would not only bring about loss of reputation and credibility, worse, it could results in a direct hit to the bottom line. Users would very quickly switch over to rival platforms in the fickle landscape, and bring about direct loss of revenue.
MEETING THE DEMANDS OF A CASHLESS FUTURE
As governments in the region ramp up their cashless drive and more users get on board, fintech operators and associated banks and financial services institutions (BFSIs) need to recognise the importance of having a robust, secure and highly scalable IT and data centre infrastructure.
The critical juncture is now. Fintech operators and BFSIs need to make the right choice and secure their backend infrastructure, and ensure this is robust enough to withstand the stress level on their systems with the expected wave of activity and transaction volume that is to come.
Organisations that will succeed at outpacing the competition in a fully-digital, cashless future of smart cities will be those that are able to offer the quickest, most convenient, most interoperable and secure system of payment. And they would have the best back-end IT infrastructure to make sure that happens without a glitch.
- The writer is CEO, South-east Asia, ST Telemedia Global Data Centres
- E-payment war morphing from single to paired fighters
- Singapore's fintech drive arcs towards financial inclusion
- More work needed in regulations, industry to grab blockchain opportunities: panel
- Banks told to shed 'legacy stuff' for real innovation to happen
- E-wallets yet to take off in Singapore: Worldpay report