Mapping The Future

Friends, not foes: Governments as catalysts for fintech growth

05:02 AM August 19, 2019

Fourth Industrial Revolution technologies are not just transforming the way we live and work. They are empowering us to reimagine how we address the world’s most daunting challenges.

Fintech, or financial technology, for one, has the potential to help in our fight against poverty.


The International Monetary Fund says one in five people in the world is financially excluded or does not have access to bank accounts. The reasons include lack of money to maintain account balances, living too far from brick-and-mortar banks and the inability to meet know-your-customer verification requirements. Fintech can leapfrog all these barriers and unlock access for those who need finance the most.

There are varied reasons why fintech flourishes in some countries and stalls in others. In this piece, I explore a common thread found in jurisdictions where fintech has gained traction: the level of support governments extend toward the budding industry.


Where government regulators are accommodating, forward-looking, collaborative and proactive, the industry grows, user adoption expands and investment increases.

The stance governments take toward fintech is critical. Regulators can have a positive and proactive role to play. Rather than limit themselves to reactively managing risk, they can proactively support fintech growth.

In Singapore, the region’s fintech leader, the government embraced the industry. It has committed 225 million Singapore dollar over five years to boost fintech under its Financial Sector Technology and Innovation scheme.

Here at home, the Bangko Sentral ng Pilipinas (BSP) has been a proactive and forward-looking regulator, eager to learn about the developments in the digital era. Both Singapore and the Philippines have adopted a regulatory sandbox approach, where fintechs have ample room to experiment without undue fear. At the same time, their strategy gives regulators a closer look at innovations in a cost-effective, controlled environment.

The next two cases illustrate interrelated concepts: creating a national digital identification system and offering incentives for mobile payments.

India has one of the most compelling government-driven fintech success stories. I was attending a conference when I heard former Reserve Bank of India Duvvuri Subbarao talk about the “Jam Trinity” that is behind India’s widespread digitization. The Jam Trinity stands for:

Jan Dhan—a financial inclusion program atop the Modi government’s to-do list when it came to power. Jan Dhan registered 10 million free, zero-balance bank accounts using the Aadhaar digital ID on its launch day. As of April 2019, Jan Dhan had 355 million accounts, representing more than a quarter of India’s population. Total deposits reached more than $14.4 billion.


Aadhaar—Hindi for “base or foundation” is a nationwide digital unique ID system, the first ever to have registered more than 1 billion users.

With Aadhaar and Jan Dhan in place, the government can conduct transactions with taxpayers and dole out services through digital payments to its citizens, encouraging even more people to migrate to this new digital infrastructure.

But beyond hard investments, soft support such as favorable government policies are equally important. Singapore’s ease of doing business reforms have consistently put it atop global rankings. Recently, the government accelerated the patent application-to-grant process to six months from two years under the Fintech Fast Track Initiative. It also shortened the time fintechs can begin market testing to just 21 days from three months.

The Philippines also is making progress. Both the Philippine Identification System and the BSP’s National Retail Payments System will take us closer to broader digitization. The BSP and Landbank have begun enabling digital tax payments to the Bureau of Internal Revenue at the start of this month.

Indeed, the public sector need not be a constraint to the industry’s growth. We ought to continue learning from each other and adopt best practices if we are serious about realizing fintech’s potential to address poverty.

This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines. The author is an Asian Fellow at the Milken Institute and was Secretary of Finance from 2010-2016. He is a founding partner at Ikhlas Capital, a pan-Asean private equity fund. Send feedback via <[email protected]> and <[email protected]>. For previous articles, please visit .

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