Diving deep into S'pore's fintech ecosystem

THE first time the word "hack" was linked to machines was likely in 1955. In the meeting notes of one of MIT's oldest clubs - the Tech Model Railroad Club - a request was made for anyone "hacking" the electrical system to turn the power off to prevent the fuse from blowing.

While the word took on a darker definition in the decades after - apparently as "hack" had a malevolent ring to it - the current interpretation leans more to its MIT origins. A "hack" is a creative spark worth celebrating.

In the second run of the Global FinTech Hackcelerator at the Singapore FinTech Festival, the creative destruction continues among the selected 20 teams from the fintech space that are evaluated to be matured enough to take their ideas to the market.

Chia Tek Yew, head of financial services advisory at KPMG Singapore, which is organising the hackcelerator, said the move towards having more matured fintechs broadens the scope of this year's hackcelerator programme. "It goes beyond the selection and preparation of the startups for Demo Day. Instead, it seeks to help the three winning startups with the eventual commercialisation of their solution, as they work with industry champions and business sponsors to solve the problem statements sourced from the financial-services industry," said Mr Chia.

This year, 580 startups submitted their application for the Global FinTech Hackcelerator. Because the programme focuses on the participation of more mature solutions over simple ideas, more than half of the solutions have already completed the prototyping phase and entered the pilot, production or implementation phases.

There were 162 applications from Singapore-based companies, making up about 28 per cent of the overall applications, making Singapore the country with the biggest amount of applications in Asia. India and Nigeria followed with 61 and 44 applications respectively.

MOTIVATING FACTOR

The Singapore-based representatives this year can look to the experience of last year's winners as motivation.

Singapore's Aida Technologies was one winner from last year's Hackcelerator. Soon after the award, it quickly raised a million dollars in January this year that gave it a US$10 million valuation, and plans to go for a second round for funding, with proceeds used to deepen its customer base, and expand into other products and markets. Aida, which stands for AI-driven analytics, naturally puts AI, machine learning and Big Data at the heart of everything it does, said its founder Tan Geok Leng.

The company sells data-analytics services to banks and insurance companies that are looking to improve revenue, manage operating costs, and to manage risk and compliance by identifying risky behaviour on the trading floor and outliers in insurance claims systems.

Since its win last year, Aida has completed projects with Tier-1 banking and insurance customers, though it did not disclose names."Initially, Aida had planned to focus on developing its customer base in Singapore in the first year, but we are now also doing or in the midst of closing projects with banks and insurance companies based in Malaysia, Indonesia and India. These arose from inquiries from banks and insurance companies based in these countries."

Another Singapore-based winner last year was insurtech firm FitSense, which has recently secured a strategic investor. Started in 2015, FitSense worked off a data-aggregation platform for wearable devices for medical research that one of the founders, Alvaro Gauterin, had developed as a research engineer at NUS.

FitSense's idea is to help consumers easily and securely share app and device data with companies in return for more personalised services, as well as help companies access the relevant bits of information to create those products.

"We started with insurance because we saw a big pain point," said co-founder Jan-Philipp Kruip. "In pricing, why are people penalised for their medical history and not rewarded for the healthy lifestyle choices they take every day?"

The startup currently has three insurance clients and FitSense aims to double this number by the end of this year. It has run a number of pilots with health and life insurers to assess the impact of lifestyle data on underwriting and pricing, and will soon launch an insurance product that rewards users for healthy behaviour with premium discounts together with a re-insurer. It is also working with a client to launch personalised travel insurance for athletes.

SOLVING PROBLEMS

The fintech applicants in this year's programme are trying to solve problems in three main areas that have been streamlined since the first edition: customer-facing, financial inclusion, and regtech. The programme also has an all-inclusive category for solutions that do not fall neatly in the three buckets.

The categories that received the biggest numbers of application focused on customer-facing solutions - at 32 per cent of all applications - though followed closely behind are applications with solutions tackling financial inclusion at 30 per cent.

KPMG's Mr Chia said robo-advisory, machine learning, blockchain, and artificial intelligence were extensively used as base technologies by many of the teams.

The top 20 applicants include Singapore's Sqreem, an artificial intelligence platform that uses "autonomous, self-assembling, deep learning" algorithms to map human behaviour. Sqreem says it can determine intent, outlook, influence, and decision based on data analysis of patterns and relationships in massive unstructured and structured data sets.

In the customer-facing space, Denmark's Ernit has created what it has dubbed the world's first smart piggy bank for children. The fintech applicant wants to equip children with skills in saving, by connecting a piggy bank to an app with a bank account that captures real-time fund deposits.

With fintechs tackling customer-facing issues, the majority of the teams focused on development of personal financial management tools, automated insurance claims, digital customer service, and mobile wallets.

In a sign of an upcoming trend, the design of automated insurance claims tools was directly addressed by 12 per cent of the applicants for this category. The favourite technology in this category is blockchain, which is used to build automated smart insurance contracts and default prevention tools, said Mr Chia.

Many ideas in the financial inclusion space tackle the gap in credit history and assessment for the unbanked. Israel's ConfirmU tries to use a combination of chatbot data as well as payment history, potential employment opportunities, and geolocation history, to help lenders attach a more meaningful credit score to people with little credit history.

Of the categories, the smallest number came from the regtech space, a huge market as banks are still bearing high compliance costs. Nonetheless, among them is Switzerland's Apiax, which turns complex financial regulations into digital compliance rules that are updated and verified.

In seeking out more longevity from the hackcelerator programme, KPMG has increased it from an eight-week session to a 12-week programme. The aim is to guide the 20 finalists to ensure that their solutions are fit for the marketplace, said Mr Chia. In addition to the corporate or industry mentor assigned to each team, finalists will participate in themed sessions and networking events to help them build their expertise and prepare to deep dive into Singapore's fintech ecosystem, he said.