Better Late Than Never? Brunei and Its Role in the Fintech Revolution

Singapore battles with Australia and Hong Kong to be the region’s leading Fintech hub. She has moved ahead of her Southeast Asian neighbours, including the relative newcomer Brunei. Brunei launched its Fintech office in 2017, after other ASEAN nations. At the same time, it put in place regulatory guidelines. However,Brunei still trails its neighbours. For example, Fintech growth in Brunei has been slow. Brunei’s Fintech ecosystem remains underdeveloped.

The country must start to reduce its economic dependence on gas and oil.Fintech development is one option Brunei is exploring. In March 2017, the Autoriti Monetari Brunei Darussalam(AMBD) committed to Fintech development. The authorities see Fintech as a tool to help stabilise Brunei’s banking industry.

The government included Fintech development as part of Brunei Wawasan 2035. Brunei’s financial sector (FSBP)released its 2016-2025 blueprint. The FSBP wants to create a competitive and forward-thinking financial sector.It cannot meet that goal without establishing and nurturing Fintech. If Brunei is to compete with countries which capitalise on Fintech, it must do so by innovating. It must develop its own Fintech ecosystem. Furthermore,Brunei wants to leverage its flourishing Islamic finance sector. Fintech in Islamic finance is still new. Brunei could gain an advantage by establishing this now.

Brunei has already made excellent progress including collaboration with South Korea. Both countries provided US$ 30 million. They planned to set up a Fintech innovation centre. In return,South Korean companies gained access to the Islamic market. Brunei’s largest Islamic bank, BIBD, launched BIBD NEXGEN, its digital banking concept.BIBD responded to a significant increase in the use of digital banking platforms.The bank aligned the project with Wawasan 2035. BIBD harnessed modern technology to create BIBD NEXGEN.

Brunei is setting itself up for a stable future with these moves. The country wants to continue and build on its work with South Korea. BIBD intends to target the unbanked with NEXGEN.

Brunei could yet set itself up as a regional centre for Islamic Fintech. It is building links with other countries including South Korea and Singapore.

The AMBD and Monetary Authority of Singapore (MAS) announced a significant link-up. They will enable Fintech cooperation. They will share information on emerging FinTech trends and developments and encourage joint innovation projects between both countries. Both will contribute to developing the retail payment ecosystem. Companies will receive help in regulatory compliance.

MAS signed similar deals with other countries, including Great Britain.Brunei coming on board shows the state is serious about Fintech development.It also indicates Singapore’s financial sector has confidence in Brunei’s. The two countries also agreed to work together to combat money-laundering.These deals are evidence of growing cooperation between Brunei and Singapore.

In Asia, only Iran has more Islamic finance assets than Brunei. Experts believe the country has enormous growth potential. Brunei could harness Islamic finance to boost its economy and meet development goals. Innovation,and particularly Fintech development, is critical.

Despite only having a population of about 420,000, Brunei holds a strong position. By 2020, Islamic finance will account for as much as 50% of Brunei’s financial sector. It is one of four countries that can issue Halal certificates for financial products. With this certificate, foreign and local companies can penetrate other Islam markets.Others may follow South Korea’s example and work with Brunei.

However, Singapore is leading the way in Islamic fintech. The new deal between the two countries could lead to more opportunities. There is potential for joint ventures to grow Brunei’s Islamic fintech capabilities.

The most significant challenge for all countries pursuing Fintech is regulating the industry. Currently,there is something of a vacuum which fraudsters could exploit.Those predicting the growth of Islamic Fintech stressed the need for proper regulation. Brunei can now play a role in regulating the industry — or developing “Regtech”.Singapore is leading the way and has already imposed regulations. Brunei implemented its regulatory framework.It will work with Singapore under the newly-signed agreement.

Brunei had clear goals when it pursued Fintech. Companies developing Fintech solutions can help Brunei achieve its development goals. It could help the country reduce its dependence on oil and gas. Brunei could yet become a centre for Islamic fintech and finance.

Working with Singapore should benefit both countries and ASEAN as a whole.For ASEAN to regulate the industry,it must pool resources and deliver a framework that works for all. It will not be easy, but it can collaborate with China and others.

Brunei started their Fintech development late, but could still play a significant role. Brunei is fast catching up with Fintech’s early adopters.

· Source: ASEAN Today