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Business Times
16-07-2025
- Business
- Business Times
MAS may want to nudge banks to standardise fintechs' access to API for the benefit of SMEs
[SINGAPORE] A recent report by think tank Fintech Nation on the lack of API access possibly stifling small and medium-sized enterprise (SME) lending points to a dysfunction in the financial sector. API refers to application programming interface, a protocol that allows for two different software programs to talk and exchange data. At the moment, the major banks in Singapore grant API access to only certain platforms, making it difficult for fintechs to get credit information on their customers. Thus, despite the Singapore financial sector's advanced digitalisation, SMEs that are seeking loans from fintech SME lenders are forced to download and send PDFs of financial statements of bank accounts. This results in the fintechs having to invest in manpower to tackle the manual process of reformatting these statements just to assess if the SME can be extended a loan. If they had API access, they could have pulled the data digitally from local banks. The Monetary Authority of Singapore (MAS) could thus find itself in a quandary. Despite the regulator having laid out guidelines for a more open financial services sector, traditional banks are gatekeeping digital access to their customers' data even though consent has been sought and given for these fintechs. While Fintech Nation's report was a way to highlight the dysfunction, there are a number of concerns from traditional banks over providing API access, ranging from security and privacy to costs and competition. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up It is thus clear that prerequisites are needed to determine if a fintech can qualify for API access to the traditional banks in Singapore. These include determining the critical mass of SME customers needed, choosing the security and data-privacy prerequisites for API access, and even deciding the cost of doing an API call. Without any compliance checklists, fintechs are in the dark on what can be done to negotiate API access. This is certainly an area where MAS can step in to nudge the industry to decide what is the best model that would satisfy the banks' concerns and allow for more SME financing. The regulator has done this before, in nudging the buy-now-pay-later industry to self-regulate with a code of conduct and a separate credit bureau. The financial services sector has not been averse to sharing customer information with one another. For example, there is the Singapore Financial Data Exchange, where retail customers can give consent and see their entire investments and savings in one dashboard in any banking app they frequent. When it comes to industry inertia, the regulator is the only one that can push incumbents to move and take action. In most David-and-Goliath situations, the smaller player has little leverage to make the incumbents move. Traditional banks say that there are competition concerns over opening up API access to fintechs, as SME customers could potentially get a loan from these lenders instead of the bank. While these concerns are valid, the onus is on the sector to work out a win-win situation. This could be anything from charging fintechs for API calls on a bank's SME customers to working out a partnership that would allow customers, who might not be as credit-worthy to a bank, to be funnelled into these fintechs. It is now up to the regulator to be the one to draw all these parties to the discussion table to figure out a palatable solution that both banks and fintechs can live with.
Business Times
07-07-2025
- Business
- Business Times
Growth of SME financial services hampered by banks' restrictions on data: report
[SINGAPORE] Local banks' restrictions on small and medium-sized enterprises' (SME) access to their customers' financial data are hampering API access and holding back growth in financial services for these companies, according to a report by think tank Fintech Nation. API refers to application programming interface, a protocol that allows for two different software programs to talk and exchange data. Currently, the major banks in Singapore selectively grant API access to certain platforms. Only one SME accounting platform, Xero, has managed to be publicly listed across the three local banks. The restrictions also apply to the Credit Bureau in Singapore, where fintechs are unable to access credit information on their own customers. This makes fintechs such as alternative SME lenders and even corporate secretaries resort to manually processing spreadsheets and pdf documents from their customers rather than pulling the data from the customers' banks. The lack of access could be seen as running counter to the Monetary Authority of Singapore's Financial Services Industry Transformation Map, which aims to create a more efficient financial sector. There have been consequences to these restrictions in API access. At least six alternative SME lenders have exited Singapore, including Invoice Interchange and Capital Match. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Validus' sale of its Singapore SME lending business also underscores the challenges these lenders face in getting access to their own customers' financial information. 'If (API access) exists and it is being given to somebody, then other companies should have fair and equitable access to the API – what happens is the larger company can do a deal at a preferential term, but the smaller one cannot,' said a spokesperson for Fintech Nation. The think tank says that the issue is not one of customer consent. These SME customers have already consented to giving access to their financial data from their banks for onboarding or credit decisions. The report also profiles two case studies in alternative SME lender Funding Societies and corporate secretary Sleek. Both companies project increased operational efficiencies should API access to banks be granted. Funding Societies predicts that getting API access to their customers' financial information from their banks will improve operational efficiency. The lender expects a 60 per cent decrease in time from application to credit decision, a 40 per cent drop in customer abandonment rate and data processing costs per application, and a projected 20 per cent increase in SMEs financed annually. While there is openness from Singapore banks to explore partnerships around API access, there is a disconnect when the rubber hits the road. 'In our experience, actual engagement has been limited due to considerations around security, compliance, commercial priorities, and the evolving nature of industry collaboration,' said Kelvin Teo, CEO and co-founder, Funding Societies. At Sleek, up to 15 minutes per client is spent downloading, formatting and uploading statements to an accounting tool. With 10,000 customers, this adds up to 2,500 hours per month of manual labour and 30,000 hours per year lost to inefficiency. Neobanks and digital banks are eager to provide API access, said Sleek's CEO and co-founder Julien Labruyere. Traditional banks have been reluctant in general, citing the absence of APIs in their tech stack or wanting Sleek to be their exclusive partner, which is difficult as accountants cannot force customers to a specific bank. 'In all our other markets (the United Kingdom and Australia), banks are mandated by law or regulation to provide API access under the Open Banking philosophy, and this is really a game-changer for innovation in general, and for us in particular,' he explained. Raising awareness To be clear, Fintech Nation is not calling for MAS to mandate local banks to open up API access or for local banks to provide access for free. Instead, this report is to raise awareness of the dysfunction within the current system. 'This is where (the) public and private (sectors) can come together to solve that dysfunction,' said the Fintech Nation spokesperson. There are a number of possible models which could solve this issue, such as an API reseller model, in which a company sells access to the API and helps integrate it into different platforms. Another approach would be to approach the issue in terms of industry utility, and leverage MAS' grant supporting projects that build industry-wide utility infrastructure. On the consumer side, SGFindex allows retail customers to see bank and investment balances across all their bank accounts at different banks. While SME customers will require something with more granularity, including daily transactions, SGFindex proves that such projects can be done, and could represent a third possible business model. 'Whichever is the model, this is a dysfunction in the market from that perspective; it is nobody's fault, (and) it would be helpful for the overall ecosystem if it could be addressed,' added the Fintech Nation spokesperson.
Business Times
08-05-2025
- Business
- Business Times
Validus, Fintech Nation launch US$10 million fund for SMEs
[SINGAPORE] Small and medium-sized enterprises (SME) financing platform Validus and Fintech Nation, a public benefit corporation, announced the launch of a US$10 million Embedded Finance Fund on Thursday (May 8). This fund has completed its first close and has already deployed the first tranche of capital into projects that provide growth capital for SMEs. The Embedded Finance Fund will focus on embedded finance opportunities across sectors such as supply chain, food and beverages, and consumer goods. 'At Fintech Nation, we believe that SMEs are the foundation of sustainable societies – they are the engines of innovation, employment and local prosperity,' said Vanessa Ho, co-founder of Fintech Nation Fund, one of the funds offered by Fintech Nation. Embedded finance is the integration of financial services into non-financial companies' platforms. There is an unmet credit demand from SMEs across South-east Asia, with the estimated SME credit gap exceeding US$320 billion. The new fund will provide financing via Validus' platform in Thailand – Siam Validus – and Indonesia – Batumbu. Ecosystem partnerships and real-time transactional data will be tapped to make the lending process efficient, scalable and with risk mitigation. 'By combining data-driven underwriting models with innovative funding structures, we can build inclusive financial ecosystems that unlock growth and development for SMEs at every level,' said Milena Naitoh, group head of corporate development and capital markets at Validus.
