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How to make a small island a big centre for FinTech

One of the discussions at the UN meetings was around SIDS, the Small Island Developing States. I didn’t know much about SIDS but, when investigating further, discovered I did. They range from islands like Belize and Puerto Rico to Mauritius and Barbados to Bahrain and Singapore. That’s a pretty diverse group, especially in Micronesia where places like the Cook Islands and the Marshall Islands form part of the group.

However, it’s obvious that some nations like Singapore are FinTech and Financial powerhouses; Puerto Rico has become the cryptocurrency Puertopia; Mauritius and Belize are key offshore centres for finance; and Bahrain is a potential powerhouse for Islamic FinTech.

The thing is that all of these nations have two key issues:

(a) how to get the people of these nations to be digitally included in finance; and

(b) how to get institutions to be focused upon their development state.

On the both points, it is a critical factor of government co-ordination between the emergence of the integration of technology and finance. In the first instance, I was surprised a couple of years ago to be at a developing state conference where the Minster for Telecommunications and the Minister for Finance both presented. The former talked about inclusion through the mobile network and how the nation had risen from zero mobile data outreach to almost half the population now on the network with access to 3G or 4G data; the latter talked about how well financial services and open banking was developing, but failed to talk about the fact that 90% of the adult population were unbanked or underbanked. In other words, the two ministers responsible for technology and finance were not co-ordinating their efforts when, in all due respects, the natural development of their markets were co-ordinating the integration of technology and finance. Get your act together.

On the second point, it is not something all SIDS need to focus upon. I don’t think the Cook and Marshall Islands will be major FinTech centres, although the Virgin Islands and others have achieved that status, but more for tax avoidance than finance and technology.

Nevertheless, leader of the pack Singapore has achieved this status and did so early on by having a Smart Ministry almost ten years ago.  The Smart Ministry was all about making Singapore a Smart City, and had a vision of technological outreach and co-ordination of finance and technology, long before any other nation in the region. This was then co-ordinated through the Monetary Authority of Singapore (MAS) and others to offer low-tax, high talent capabilities for any companies founded on the island. Add to this other enterprise investment schemes for start-ups and Singapore soon went from a FinTech wannabe to a leader. Could other nations copy such an approach? I said it is possible but only if government is fully behind the structure and could find a differentiation point.

Why would I want my FinTech centre in the Bahamas? Sure, it’s a nice place to holiday, but what is the depth of the talent pool? How easy is it for the movement of people to migrate and emigrate to the island? What is the investment community structure and access to capital like? There are many other questions that would need to be answered and it will not happen overnight.

In particular, there needs to be a specific reason why I would choose the Bahamas over Puerto Rico for example. Puerto Rico became a cryptocurrency heaven because the tax structure for cashing in and cashing out from exchanges gave the young crypto millionaires and billionaires an easy place to avoid the Federal Reserve and IRS in the USA, but still have all the benefits of the American system. Where else offers such capabilities and, now that Puerto Rico has that space, what space can you offer? The Cape Libra opportunity for the next generation of digital billionaires?

All in all, it was an interesting conversation and concluded with on key observation. In my opening keynote, I had made a critical point about every nation, everywhere should ensure that everyone, everywhere is included all the time, anytime in real-time. One of the observers of the audience said to me afterwards that, when I made this point, several audiences turned off, and he felt that was because they were thinking not in my nation as we don’t have the infrastructure.

The question back to those people must be: why don’t you have the infrastructure?

These days the roll-out of digital finance is simple, cheap and easy to anyone with a 2G phone. It can be an old text-based phone and doesn’t need smart facilities, although that makes it more functional. If any nation state or national leader thinks they cannot include their citizens in digital finance, then they are dodging their duties as a leader. Everyone should and can be included. It is not difficult and should be the responsibility of nation states and national leaders to make this happen. So, if any nation thinks they cannot do this as they don’t have the infrastructure, come and talk to me as I will prove you can make this happen and, in most cases, in a period of less than twelve months.

Make it so.

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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