Picture: Singapore aims to build a vibrant e-payment ecosystem

March 2008: The opening of PayPal's international headquarters in Singapore in November 2007 highlights Singapore's drive to make itself the hub of electronic-based financial services.

PayPal is just the latest of more than 600 leading financial institutions operating in Singapore, making the Republic the world's fourth largest foreign exchange trading centre.

Many MNCs, too, have located their regional treasury offices here, and investors appreciate the high level of transparency and reliability in government policies and regulations in supporting businesses.

The choice of Singapore by PayPal, a pioneer in electronic payments, also underscores its recognition of the Republic’s pro-business environment, strong technological capability, excellent ICT infrastructure, robust intellectual property protection and skilled talent base, says managing director Ko Kheng Hwa of the Economic Development Board.

Mr Ko also notes that the Singapore Technology Development Centre will be actively involved in developing PayPal’s global payments platform and integrating its newly-developed products into the worldwide infrastructure that PayPal and parent company eBay have built.

In a word, PayPal’s Singapore centre "will be creating cutting-edge solutions and technologies for the global Internet industry".

Vibrant e-payment ecosystem

In the new millennium, a vibrant e-payment ecosystem creates trust in the country's strength in financial infrastructure to support its international payments activities.

The e-payment ecosystem comprises a diverse range of e-payment institutions undertaking the complete value chain of activities from research & development, software development, manufacturing and the provision of services. Examples include:

• Wincor Nixdorf in ATM machines
• VeriFone and Hypercom in secure electronic point-of-sales terminals
• Venture Corporation in the e-payment hardware systems
• Gemalto in smart card solutions, and Sybase in mobile e-payments

Singapore as world's trusted financial gateway

Financial services providers leverage on infocomm technology to innovate and create new products, processes and services. In this respect, Singapore aims to be a trusted gateway to the emerging Asian market and an innovative hub for financial services, powered by technology.

To achieve this in the financial sector, the Infocomm Development Authority has put in place a number of technology-driven programmes:

• National Trust FrameworkTrust is the oxygen for the financial sector. The recent report, for example, of French banking giant Societe Generale losing 4.9 billion euro (US$7.44 billion) in a year-long binge of fraudulent transactions by one mid-level trader sent the industry into shock. Technology plus rigorous human supervision are the only way to build trust and fight fraud, as well as other cyber-threats.IDA says the National Trust Framework will focus on developing the "hard" and "soft" aspects of an infrastructure, in the areas of infrastructure development, manpower, education and regulation. Such a framework will provide a trusted infocomm environment that supports the development of new services on Singapore's next-generation infocomm infrastructure.
• Corporate Financial Information ExchangeTransparency is also another trust generator. When Citigroup and Swiss-based UBS announced sudden billion-dollar losses, stakeholders and regulators wondered why such information was not forthcoming earlier. Facilitating the flow of information and reporting will create not just generate trust and greater transparency, but produce a more efficient capital market. New electronic standards in corporate reporting such as the eXtensible Business Reporting Language (XBRL), can be used to streamline corporate financial reporting process. Financial analysts and consumers will benefit with greater and faster access to financial information.
• Next-Generation Electronic PaymentsIDA has put in place the Next-Generation Electronic Payments programme to encourage the deployment of innovative solutions that provide convenient electronic payments over different channels to consumers and businesses.IDA says it will also encourage the creation of value-added services that can spur online transactions or bring greater convenience to end users.
• I-Wealth Management and other projectsI-Wealth encourages the financial services providers to use online collaboration and data aggregation in both front-end customer engagement and back office processing as a more efficient way to manage wealth. IDA says it will continue to engage the industry in identifying and driving the deployment of other major infocomm projects, such as the so-called paperless fund management project which seeks to streamline and automate funds management processing in Singapore. Another industry collaboration is to facilitate paperless insurance. Considering the huge volume of unnecessary paper forms and legal documents generated by insurers just to handle one single policy, such a scheme is long overdue.

What can go wrong?

Today, Singapore and the surrounding East Asia is in an economically stronger position compared with a decade ago, as Prime Minister Lee Hsien Loong pointed out at the World Economic Forum on East Asia in June 2007.

"Ten years have passed since the Asian financial crisis (of 1997). East Asia has moved on. Per capita GDP in these countries has increased by almost 30% over the decade. Confidence has more than returned," Mr Lee said.

But mishaps can still happen. Rapid change and transformation in East Asia will bring new social and political pressures. Widening income gaps, for example, are already creating a sense of insecurity and unease among workers, he warned.

Another source of instability is the mounting global imbalances. East Asia (including China) are on one side of these imbalances, while the developed economies like Europe and particularly the US are on the other side. "Everyone hopes that these imbalances can be unwound in a coordinated and orderly way, over a period of time. But if the adjustment is sudden and disruptive, the whole global economy will be affected," Mr Lee warned.

Other dangerous and unpredictable threats include a disruption in world oil supplies, terrorism or avian flu, he said.

In the longer term, environmental problems that are not dealt with nationally and trans-regionally will hinder growth and threaten instability, he added.