Varun Mittal, Partner of EY Asia Pacific Financial Services Strategy and Transaction Services, talks about all things FinTech. We begin by going over the tech foundation that has been built up over the past decade, which is now enabling a wave of innovation. Varun scans both the start-ups and big tech companies, and details his views on payments, wallets, remittance, regulation, WealthTech, e-currency, and digital banks. We discuss the role of FinTech in levelling the playing field between the wealthy and not-so-wealthy investors, and between those who have access to banking services and those who don’t. As the co-author of "Singapore – Fintech Nation of the World,” Varun is particularly passionate about Singapore’s model of strict compliance and risk mitigation, which he believes is particularly suited for success in the regulated world of FinTech.

1. Refer to important disclosures at the end of this report.
r.
Taimur Baig, Chief Economist
taimurbaig@dbs.com
Varun Mittal
Guest Speaker
Producer: Martin Tacchi
Publication support: Violet Lee and Daisy Sharma
Please direct distribution queries to Violet Lee
+65 68785281 violetleeyh@dbs.com
Group Research January 20, 2021
Economics & Strategy
DBS Flash
Kopi Time Podcast E041 Transcript: EY’s Varun Mittal
on FinTech
• 41st
episode of Kopi time, a podcast series on
markets and economies from DBS Group
Research. Recorded on 20th
of January 2021.
• Youtube link is here. Available also all major
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Amazon, and Google.

2. Kopi Time E041: EY’s Varun Mittal on FinTech January 20, 2021
Page 2
It’s the 19th
of January and you’re listening to Kopi
Time, a podcast series on markets and economies
from DBS Group Research. I’m Taimur Baig, chief
economist, welcoming you to our 41st
episode.
Today, we will take on the highly exciting and
dynamic world of digital payments. The Fintech
maven who will accompany us in that journey is
Varun Mittal, a partner of EY Asia Pacific Financial
Services Strategy and Transaction services. Varun
has extensive experience in digital business and
strategy, proposition development, regulatory
engagement and corporate finance. Prior to EY, he
was the group head of operations and merchant
product management at HelloPay Southeast Asia,
the first Pan Regional Wallet. Varun led partnerships
with card schemes and acquirers to enable
acceptance for them with Lazada and Hello pay in
the region. HelloPay was later acquired by Ant
financial or Alipay. He also has held key roles in
Samsung, SingTel, Microsoft and Gemalto.
Varun is the founding member of Singapore FinTech
Association and founder of ASEAN Fintech Network.
He’s the co-author of two books, Singapore: The
Fintech Nation and 52 Stories of Fintech
Entrepreneurs.
Varun Mittal, welcome to Kopi Time.
Varun Mittal
Thank you Taimur.
Taimur Baig
Great to have you. I've been looking forward to this
chat for a while. We’ve had a few decades of
progress in digital transaction and digital payment
worldwide. Perhaps you can help us start the
podcast with setting some sort of a foundation. Tell
us your view on some exciting and promising tech
developments taking place in this space.
Varun Mittal
Some of the biggest things which have happened in
last five years, which will determine the coming five
is last five years. The foundations for Internet
commerce and Internet finance economy were built
because smartphones became pervasive. The access
to data 3G, 4G and some places 5G became ever
present. There are jokes like they're more data
connections than toilets and health clinic access in
some of these markets. And what that did was a
whole segment of economy came online, came
digital, which brought its own efficiency, helped
people explore markets and services beyond their
immediate physical vicinity.
Financial services was one of the areas where it hit
because now you don't need to only deal with the
branch locally, any bank across anywhere in the
country could support you and probably globally,
depending on what you are looking at. So, that
removing of borders because of multiple sectors of
economy embracing it and built over from the time
of let's say when Uber started it, in Uber and
ecommerce companies and Netflix and Spotify
started, to what happened in last one year; all those
foundations built were put into test that now you
couldn’t do it physically and everything is digital and
there will be a post vaccine phase. I don't say post
Covid phase, because post Covid, we don't know
how it will look like as you have vaccine in each
market for example, UAE will have 40-50% of the
population vaccinated by end of March.
The post vaccine phase when people can still do
physically, but they will have option or they have got
used to digitally, that will bring a sea change in the
way the whole economy works. We already are
seeing cities like Miami saying we are the remote
work capital of the world and the companies will
reorganize. We will have something what happened
post Y2K. Post Y2K, we had a scenario where
companies started offshoring and there was an
offshoring generation post that. What we saw in
1999 - 2000 was broad offshoring while 2020 - 2021
will bring remote work and distributed workforce.
So, this is, I would say, a newer version. We see new
strain of virus, now this is a new strain of work which
will come to impact all parts of life and financial
services being the common thread, when you want
to do anything like that, financial services will have
to be one of the fastest ones to evolve because the
Zoom communications, Slack and all of those, that's
our salt. You cannot do a lot more innovation in that,
you can still work on synchronous and asynchronous
communication because those threads do not have
clear delineation. So, there would be some work on
that.

3. Kopi Time E041: EY’s Varun Mittal on FinTech January 20, 2021
Page 3
But real work would be how their taxes will be
calculated, how access will be calculated because
every country has different principles. So that New
World Order for distributed situation where it's a
remote first and physical will become very boutique,
very specialized, as specialized as buying a shirt now.
So only if you are very specialized and very rich, you
have a custom tailor rest everybody is getting ready
made one. So, we will see a new fragmentation
come out.
Taimur Baig
Very interesting. So, your point is that we have a
foundation for a take-off because I remember, a few
years ago, among economists, there was this
frustration that we see technology everywhere, but
we don't really see it in productivity and growth.
And the pus back against that argument was that
“take it easy, the technology is new. We haven't
built infrastructure out yet. But once infrastructure
becomes pervasive, you will see the returns.” So,
your point is that we're on the cusp, and the
twenties could be very exciting in terms of
unleashing of high productivity.
Varun Mittal
Absolutely.
Taimur Baig
The 2020 episode when we were suddenly caught
up with the Covid disease, I suppose, was a good
stress test for the global economy that our
bandwidth was sufficient to have 10x more video
calls around the world and 10x or 20x more
transactions and looks like we passed the test.
Varun Mittal
In a lot of areas, yes, but in some areas no. I'll show
the reverse side. So the D platform unification of
one app in US actually showed the other side that
everybody relied so much on shared infra that just
if, for example, tomorrow American government
decides we don't like this app and you are knocked
off all app stores and all cloud providers. So, on one
side it showed the positive side, but what it is also
showing is that there will be a decoupling of some
order very soon. People are realizing that stuff they
took for granted that this will always be available
will not and when some apps can go down,
tomorrow it could be your number.
Taimur Baig
Right. I recently read the story about various TikTok
entrepreneurs in India who lost significant amount
of income when the ban came through in India and
that was certainly a big shock for them because
they, like, you said, thought it was going be there
forever.
Varun Mittal
With that reliance on technology, people are
realizing that you need to own your critical
infrastructure and distribution. Just because you can
outsource, doesn't mean you should, because the
day it strikes, you are wiped out, you don't have a
plan B in place; your plan B cannot even get time to
act.
Taimur Baig
So, you are basically making the argument of anti-
fragility that even if it is a little more expensive to
have your infrastructure, you probably should, from
a risk management perspective.
Varun Mittal
I would say that you should have options. You may
not be using it, but you should have options that
Okay, if assuming all American cloud providers shut
me down tomorrow, how will I operate? I may not
be able to bounce back 100% capacity next day, but
the way my infrastructure is designed that I should
be able to find a local Telco to port my stuff and get
back in 48 hours, for example. So, I'm not saying you
should have it, but your architecture should be
designed in a way that let's assume I switch off all of
this, how much time it will take for me to bounce
back to 50 -75% of traffic.
Taimur Baig
Right. As we saw two weeks ago, almost a week and
a half ago when Parler Amazon Web services
withdrew their services. Parler went offline and they
had to sort of scamper. I guess they will be back
online at some point, but they were fully reliant on
the AWS.
Varun Mittal
And not just that. You are reliant on mobile and I
mean, in Asia, we have our own Asian app stores.

4. Kopi Time E041: EY’s Varun Mittal on FinTech January 20, 2021
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But if you look at Southeast Asia, do you know
anybody in your circle who has a non-American
oligopoly app store? Unless you have a Huawei
phone, nobody has. So, you get shot on that. It's not
just the infra layer, it is the distribution layer as well.
Taimur Baig
Absolutely. On your daily job, you look at a wide
range of companies who are at the cutting edge of
Fintech related developments. And, I had lunch with
you recently, and you shared with us very, very
interesting insights on the developments. Give us a
sense of some of the really exciting start-ups out
there that you find particularly promising.
Varun Mittal
The kind of start-ups I like most are the ones which
are going after the scenario that I can open the
access. So earlier, the traditional financial
institutions were serving digital physically, they had
to put artificial AuM numbers on everybody's head.
You are five million, so you are private plus plus, you
are three million then you are this because they had
different level of people serving them, they would
offer only specific products. It was right from a 25-
year-old construct perspective or a 50-year-old
construct perspective.
Taimur Baig
Well, let’s just clear make it clear to our audience.
So, you're talking about the wealth management
industry and by AuM, you mean Asset under
management?
Varun Mittal
Absolutely. And for example, if you look at
remittance for an SME, if you are SME business, who
has 100mn revenue, the kind of services a bank will
offer you, you will be institutional client. But if
you're a small SME at, let's say 15mn revenue,
you're cooperate client. So, the rates, the access you
get are very different. And what we saw in the last
five years, a consumer says, when my Netflix is the
same as yours, my taxi company is same as yours,
my iPhone same as yours, why should my financial
services be different than yours?
People understand and acknowledge that I buy 12
cans of Coke, they are cheaper versus I buy one can
of Coke. So, the bulk pricing being different is
understandable. But just because I'm poor, I should
not be able to buy the same Coke with a rich guy
can, doesn't make sense. The companies which are
using technology to open that access whether it is
for accessing alternate wealth products or for
accessing institutional wealth class products, even
US is passing the new version of the Jobs Act. It's
getting enacted in a few months where anybody
with 100 dollars can start to invest. Because if you're
saying start-ups are going to create wealth and if
you are non-accredited investor, you're not allowed.
So, I have a right to smoke. I have a right to have
marijuana, right to have alcohol, but I don't have a
right to invest 100 dollars in a start-up. It's from that
perspective, unfair. Let me decide what's right for
me. You can stop mis-selling from a regulatory
perspective, so regulations have moved, but the
companies which are enabling that, so if you look at
AngelList, OurCrowd, EquityZen, Force Global, these
kind of companies who are opening access to the
private market for people who earlier could not
even dream of touching those asset classes.
Similarly, companies which are opening paintings,
art, wine, collectibles for retail class, the other
parties, retirement planning or heritage planning or
succession planning. Earlier, any financial institution
unless you are 10 to 20mn dollars worth, nobody is
even talking about will planning and estate planning
for you. Now because it's tech enabled, companies
are bringing that even if you are a few 100,000
worthy, for you that's a lot. So, let us help you plan
that if something unforeseen happens to you, how
do you help. The whole financial planning
management simulation is coming to people at 100k
level something which was two million.
Similarly, I look at lending. Earlier, a lot of SMEs
could not get lending because their data was not
visible. Transactions were happening in cash. So
even if a bank or fintech wanted to underwrite they
couldn't underwrite. Now what they're looking at is
we will help you digitize your business, but don't do
digitization for the sake of it because there are
reasons why they did not accept digital payments
before. I'll give you very simple example. Assuming
you are selling 100dollars worth of product where
5% is your margin. Accepting a credit card in
Singapore will cost you three dollars, so three
dollars and 5 dollars means 60% of your net income
is gone, to accept cards, which doesn't work.

5. Kopi Time E041: EY’s Varun Mittal on FinTech January 20, 2021
Page 5
But the idea is looking at cutting down the cost of
accepting digital payments. When your revenue is
visible, then banks as well as fintech lenders who are
more agile can offer you credit to grow your
business except digital payments. So, companies
who are offering those kinds of solutions where
they're saying I will open that access for you, let me
help you grow your business. So those kinds of
solutions, I feel will, create significant economic
value. They're not value destructive solutions. If I
look from economic perspective, there are value
destructive fintechs, which are only saying I will
reduce the costs of this and there are value accretive
fintechs or start-ups will say I will help you grow
your business, help you achieve more efficiency,
help you sell your excess inventory to create net
economic addition to your business. The net
economic addition for me is the primary driver,
because you can destruct only a limited value. After
that, you destruct yourself.
Taimur Baig
I want to go deeper into the area of wealth
management, etc a bit later, because I know you're
quite involved in all of those developments. But you
began the discussion by saying that we have in
recent decade put a foundation of technology in
place, and now we will need a layer of regulation
around them for the entire ecosystem to flourish.
So, let's talk a little bit about the regulatory
environment and innovation in this area. How are
things coming along?
Varun Mittal
Broadly from a regulatory perspective, the approach
regulators have taken is what they call risk-based
approach. But what in practice, it means, is when
something becomes large enough, we regulate it.
There are territories, which are not worth going in
yet. If it comes to mainstream, then we will step in
to regulate. Security tokens is an example. Once that
became mainstream and loans and different assets
started to become tokenized, regulators came in
and the security tokens are no different than
security, let them regulate it. There are grey parts,
which regulators still haven't figured out. So, they
will probably need to be a newer version of the
Howey test. Howey test was done in 1920s -1930s in
the United States court, where the court ruled that
in following scenarios you will be treated as security
and following scenarios you will not. But that was
done in a very different economic set up, very
different economic culture. I remember a quote
from the movie on the former US Supreme Court
judge who just passed away. She had a quote from
her Harvard professor in the movie that the laws
reflect not the weather of the day, but climate of the
era.
The climate of the era has evolved from 1930s,
when the Howey test happened and there will be a
newer classification on these kinds of things. So,
should companies be able to raise money from their
customers directly, instead of touching the public
markets? Because I'll probably be open to that idea,
for example, the ecommerce company I'm using
every day. Why do they go to public markets?
Because they want to raise capital though existing
customers who are willing. So, these kinds of
models, when they come mainstream, where
customers become part owners of B to C businesses
or B to B businesses. B to B are still easy because
they're more sophisticated than B to C. Those kinds
of new economic models are where the government
needs to factor. Other example is digital currency.
One big challenge, which even MAS had to go
through was assume you make dollars to be fully
digitized. Today, what happens is the banks have to
keep a reserve and the central bank has to pay an
interest on it, that is the structure. But if everything
is digitized, every night you will sweep out
everything to the central bank because every time
you send it back to Central Bank you get interest.
And every morning you will bring it back. Your whole
economic foundations of the interest rate setting,
repo rates and the capital adequacy ratio will need
to rework because now it's an economic problem.
It's not a technology problem. Technology will tell
me that you want me to stop them swiping
everything in, no problem, I will put the rule. But
economists will need to come out with a model that
how will interest rate regime work if you have 100%
fluidity and there is no or minimal cost of moving in,
moving out instead of having that cash movement.
So those are economic problems where regulators
are like we want to solve it, but we don't know how
to solve. We need economists to define the interest
rate regime of future.

6. Kopi Time E041: EY’s Varun Mittal on FinTech January 20, 2021
Page 6
Taimur Baig
I did a fireside chat with Agustin Carstens, Head of
Bank for International Settlements, and he was
making the case that no Central banks have done an
amazing job in the last half century in facilitating
digital transactions at the institutional level, with a
very high degree of precision and security and
massive quantity of transactions getting settled
every day. Then I asked him, so, are you saying that
there are no payments from the central banks that
cannot solve? And he said, well, there are many
problems and Central banks does not need to solve
because private sector is more efficient and more
innovative in dealing with those things and
therefore, we would like to have innovation. So,
then he had a very nice sentence that you would
appreciate. He said, that in the spectrum of money
creation and money spending, it's wide enough that
there's room for both Central banks and financial
technology companies and banks. So, you're right
that a lot of unfinished business remains on the
regulatory side, on payments, on Central banking,
on digital currency. You began touching on the
digital currency issues. So, let me ask about the
cross-border payment question because I see a lot
of innovation happening within a country, even
China, massive fintechs out there, dealing with
hundreds of millions of customers, billions of
transactions every single day. But when it comes to
cross border payments, life gets a little more
complicated because at the end of the day,
authorities worry about money laundering. They
worry about illicit transactions. Hence, they want
oversight, and they want to thread that balance,
which is on one hand, I want to promote innovation,
on the other hand, I want to make sure that security,
transparency, oversight is there. So, walk us through
where are we on cross border payments, and are we
going to see any breakthroughs? Or is this one area
where regulation will remain fairly overbearing?
Varun Mittal
The reason why regulations are or have been
overbearing on cross border payments is because of
the concerns around terrorist financing, money
laundering and what happens is the cost of that is
typically borne by the weakest customer, not the
strongest customer, because the strongest
customer has a lot of other vehicle structures to
manage. But the last mile labourer who is earning 10
dollars a day on sending back 5 dollars a day. Is this
micro transaction? And again, I'll go back. The
current cross border system was built on foundation
inbuilt in 1950s and 1960s when you do not have
micro transactions and when the transactions were
very large value. So, the system was never designed
for micro transactions because the system had a
fixed fees component and the fixed fee components
kill the micro transactions. So, which is why what's
happening now for past 4-5 years, Asia, Europe,
some parts of US, US was one of the most backward
when it comes to innovation and cross border
payments from that perspective has been that
fintech companies are saying we will have a train
and we will let the small customers put a cabin at
the back so that you can ride the same institutional
rail we are building on. You can achieve the cost
benefits, of course, there are challenges to it. So one
challenge is what they're trying to achieve is if you
can achieve significant net offs in descending
country and receiving country and you can bring
close to balance, you can never balance it fully
because there will always be more money going
from say Singapore to Philippines than money
coming from Philippines to Singapore and so they
cannot achieve fully, but whatever they can. That's
one side and the other side is the cost of
compliance. That's where the local regulators are
coming in. Local regulators are helping digitally KYC
the customers, so they reduce the cost of tracking,
on boarding and maintaining compliance. What I see
is SWIFT bringing out GPI and all of those initiative.
So, the existing financial institutions are looking at
from a perspective of, can we embed ourselves into
lives of people who have to do these remittances?
Why do they need to get into another app to do
remittance? Because then you can take off the cost
of marketing, onboarding, acquiring and remittance
becoming an embedded solution. So, the way I look
at it, the way you walk off cab without worrying
about payment. Payment became an embedded
layer. Cross border payments will go close to that
level where the cross-border merchant transactions
will become just the payment seamless like and
companies have already done that in most markets,
and they're going further. But for physical, actual
money movement, the bottom of the pillar
collaboration, we'll see cross border corridor
alliances come up where regulators are keen to
enable it. In my time, when I was running the fintech
analysis, we saw that if Philippines can cut down the
cost of remittance by 1%, today the last mile takes

7. Kopi Time E041: EY’s Varun Mittal on FinTech January 20, 2021
Page 7
2% to even give the cash out to you. If they can just
cut down that 1%, they will be able to add 2.5% to
their GDP because that money circulates back. But
when they're getting into those companies, these
are international companies and it's just wasted
away and it leaves that money, leaves the country,
it never stays in. That money is spent locally and will
vitalize local economy so that local alliances and
local regulators saying I will take care of your
dissemination of money easily. I will give you insta
pay access to all the fintech so that you can send the
money directly to people's wallets and bank
accounts so that you don't need convenience stores
who charge 2.5% to disseminate the money. So that
is where the innovation comes in, technology wise,
there is not significant innovation needed. I mean, a
Blockchain company can say we will do this. Most of
the Blockchain companies don't have liquidity, don't
have that level of transparency and they cannot
handle it. Their one-year volume is less than one day
volume of the existing channels. So, when you have
tokens, whose value goes up or down 5 -10% every
day, I don't want to expose my family to that level
of risk if I'm sending them livelihood money. So, I
don't see Cryptocurrencies bringing like a
technology evolution there. It's one of the several
channels, but the real innovation is on the risk
regulatory compliance, on the termination and the
origination ends.
Taimur Baig
You mentioned Philippines. I was thinking about
South Asia that between Shri Lanka, Bangladesh,
India and Pakistan, more than USD100bn worth of
remittances take place every year. Even five years
ago, it was being done the way it was done 30 years
ago. You know, Hundi and Hawala and sometimes
through formalized banking system with massive
amount of spread. But today things have changed
very significantly because the advent of the
smartphone and some of the digital e-wallet, but
still, I think, as you said, it's not the technology. It is
the enabling regulation and more interoperability
that would probably create even more value and
certainly reduce the cost of that last mile person, as
you said.
Varun Mittal
Absolutely. The challenge that has emerged is there
are local reasons why sometimes regulators are
nervous to push hard for those changes because
there are local lobby groups who do not want that
to happen. So, imagine if everybody could get access
to everything seamlessly, you will have a lot of
middlemen who will lose value. We see more of the
economic structural challenges because you need to
create jobs for those people whose full-time job was
money remittance agents. If you look at Southeast
Asia, you will have examples, just take Singapore’s
example. Singapore has 4000 physical money
changers where you change cash. 4000
moneychangers mean 14 to 15,000 employees. You
can imagine that these are not PhDs. These are not
the most skilled, not the most educated. Let's
assume in Singapore you bring as much digitization,
nobody who's traveling out of Singapore needs to
do changes. What will you do for these 10000-14000
people? There are structural changes also. Let's
assume government pushes all of this hard. What's
next? How are you going to create jobs? At a lot of
places while I may be frustrated that they're not
pushing hard enough. But when I stood on the other
side of the table with them, I can't create 14,000
jobs tomorrow morning. It will take me a few years
to reskill these people.
Taimur Baig
Absolutely. I remember the first time I noticed this
money changer phenomenon in Singapore, I was
quite taken aback. On Fridays if you walk around, for
example, Raffles Place, Change Alley, there are long
lines, in 2020, for people, trying to convert their
currencies and sending it through them. I thought
that Singapore was like all smartphone and all e-
wallet, it not the case. And if that is Singapore, which
has one of the highest smartphone penetration in
the world as a share of population, you can imagine
how much more progress or how much more
development we have to go in other places in the
world?
Varun, you briefly touched on crypto currency in the
context of cross border payment. I want to talk
about one specific issue and then I want to talk to
you in general, about crypto currency. The specific
issue is Libra, Facebook floated the concept and got
a lot of pushback from regulators, but I think there's
a software version of Libra coming out at some point
this year. The idea behind Libra was to address that
concern that you just mentioned that I don't want
to use token which has a very volatile value, goes up

8. Kopi Time E041: EY’s Varun Mittal on FinTech January 20, 2021
Page 8
and down. Libra wanted to be a stable coin. It was
going to be backed by US Dollar. So, if indeed a US
dollar back digital currency was out there, would it
not solve the problem of volatility of, say, Bitcoin or
something like that. At the same time, given
Facebook is ubiquitous around the world, would it
immediately become a channel where everybody
would be transacting?
Varun Mittal
Not exactly and even they had to change the name
of the project because there were challenges. One
of the very large Chinese big tech owned the
trademark for the word Libra. They have to change
the name of the project now. But what they have
also figured out is that doing a USD only doesn't
work. And that's why a lot of European countries
and Asian countries said No, because imagine, as a
Central bank, you are giving up your monetary
sovereignty in the hands of another country, which
can decide to print as many dollars as they want,
which is why the only scenario it could work is you
have country specific stable coins which are held
corresponding to a basket approved by the local
Central Bank. Because if it is US dollar or any single
currency, that's equivalent of that currency, a
foreign currency becoming a quasi-legal tender in
your home jurisdiction. So that's a non-negotiable
argument from an economic perspective. As a
Central bank, I would say, I don't even want to
discuss, this doesn't work. You cannot replace my
currency in my market. I control the supply, period
over. You are saying you will hold my currency as a
repository in banks I regulate in my jurisdiction and
then you want to have a digital version. So
technically, from a regulatory perspective, it's a fully
one to one backed with the fiat, digital versions. For
them, it's e-money when it's e-money, which is
backed by 1 to 1 fiat and so they have control over
visibility and supply, that is an equivalent of e-
money and then they can have access and full
visibility on M1 (money supply). The reason Chinese
regulator freaked out they lost visibility on M1. So,
what regulators have learned under no
circumstance shall we ever cede control of M1
supply, visibility to any private player, no matter
who they are. So, which is why any U. S dollar
denominated stable point doesn't help.
Taimur Baig
We suggest to make it a little more clear for our
audience that you basically brought up the issue of
once you allow foreign companies to carry your
transaction within your own borders and get settled
in foreign currency, you are losing control in your
own domestic monetary activity because all of a
sudden transactions are taking place in your country
based on foreign currency, which is not allowed
right now. And unless you have an extremely liberal
regime let’s say Argentina, where Dollar and Peso
are used interchangeably, that's fine. But in most
countries in the world, authorities don't allow that.
Then you took us into the issue that I want to
actually get into, which is that in case of China
because you have extremely large financial
technology companies which are taking deposits
and extending credit, they are in a way, becoming
banks without being banks and are of course,
completely divorced from the fractional reserve
system that the Central banks typically used to
create money in the economy. So, M1 that you're
talking about is, currency plus deposits was
something that Central banks want to have control
over through monetary policy. In the case of China,
the fear was they were losing control. Thanks for
bringing that in, because that's exactly where I
wanted to go. Tell us about your view on this whole
digital currency initiative that is going on in China.
Varun Mittal
The Chinese digital currency initiative is example of
what I mentioned, one to one backed, regulators
have full control, full visibility over that. All it does is
it reduces the cost of moving physical cash at the
end of evening for settlement and it reduces the
cost of storing currency in a currency chests and
stuff. That's what it is solving for. But regulators
have full visibility, and it's a 1 to 1 denomination.
Nobody's able to leverage or deleverage it. So, the
fractional reserve control is with the government.
Technically, these are digital and from a regulator
perspective, it's e-money. It's equivalent of a wallet
balance, which is held in a regulated financial
institution, one is to one, you can't put that in
money market. You can't even do an overnight repo
lending. It's sacrosanct, you can't touch it, which is
for a regulator that doesn't destroy the foundations
of the economic system.

9. Kopi Time E041: EY’s Varun Mittal on FinTech January 20, 2021
Page 9
The moment people say, can I do overnight lending,
I remember German bank failing one night. I
remember 2008 where overnight stuff failed. And so
even if you're doing overnight lending, it doesn't
work, and you cannot lend. So, the foundation of the
Chinese system is you can't lend that money, that is
sacrosanct, and this is just a digital version of our
currency, which we control. That's okay. Every
regulator in the world is saying we're fine with that.
Even US, when they announced that US regulated
institutions are allowed to transact in US dollar
denominated stable coins, OCC gave out this ruling
two weeks back because they're fine. That's
equivalent of giving a digital version of money you
are holding physically.
Taimur Baig
Could the Chinese model also be extended to cross
border payments? I read somewhere that whoever
is having this RMB e-wallets, so sitting in Africa, if
you want to trade with the Chinese company, you
can do a transaction in RMB. But it would of course,
require the government in that country to be okay
with this and that all of a sudden, ceding control of
your money supply to China. But do you see the
eRMB initiative also being extended to cross border
payments?
Varun Mittal
I'll go back one step behind. The way countries will
have to do cross border trade and the country's
control because they put capital controls to manage
the stability of the domestic currency. So, they
control how much dollar is going out, how much
RMB is going out. The premise is that if the country
is a net importer of Chinese products and the
Chinese exporter offers two terms. If you want to
pay me in USD, here's my price, because even if he
receives in USD, he has to convert to RMB because
his labour, worker and everything downstream is in
RMB. Depending on what you are importing, say for
example, if you are importing Chinese services.
Imagine I'm a country X and I'm importing Chinese
services then I don't mind paying in RMB. I will get a
better price from the Chinese exporter because if I
pay him in USD, he has to again convert it to RMB.
But what if I'm buying is a processed good. For
example, I'm buying clothes from China. China
doesn't manufacture all the cotton. China has to buy
its cotton from other markets which it may have to
pay in USD, so that exporter will try to hedge. They
can say I can have half of my payments in USD and
half in RMB for my local spending. So, the countries
will have to decide based on how many RMBs they
need. How much is the net country RMB, the budget
they need, and can they extract better terms for the
stuff they are importing? If they can extract better
commercial terms for the stuff they have to import
from China, it makes sense. But if they do not have
an advantage of that, then it doesn't make sense.
The other parties, some countries may look at it as
a hedge, they may reverse it. They may start quoting
to their export partners that if you want to sell us,
quote as RMB price also as we have enough RMB
supply now because of the products. It's a two-way
thing. So, if the regulators decide that they want to
broaden the currency basket, Europe is looking at
some level of de-dollarization. I mean, they can’t do
de-dollarization, but they're diversifying the basket.
Singapore is a perfect example. In 1965 when
Singapore became independent, British pound was
one of the largest components in the Singapore’s
chest and over the next 15 years from 1967- 73
currency crisis, Bretton Woods, they reduced
exposure. Of course, nobody knows exactly how
much that is split, but Singapore acknowledged that
Pound is not the largest for sure. This is why
countries historically have taken a time and reserve
currencies have evolved. The Singapore does a
basket. Some countries do not so a complex basket,
but baskets will evolve, and it will be driven by what
terms you get for your exports, imports and what is
your leverage on those?
The RMB is no difference and historically, every 100
years, the Central reserve currency changes before
USDD, it was British pound, at some point it was
French, Spanish, Portuguese, Denmark. So, it
changed every 100 years.
Taimur Baig
I appreciate the way you cut it down, that it is really
about the bottom line. If countries can get
preferential rates and find savings, then of course,
they will be very happy to engage with China, which
is, of course, there in most cases, in the world's
largest trading partner. I'm going to pivot a little bit.
You have been involved with the digital banking roll
out process in Singapore. 2021, 2022 are the two big
years here having the licenses being given out. Can
you give us a sense of how things are there and how

10. Kopi Time E041: EY’s Varun Mittal on FinTech January 20, 2021
Page 10
you see the digital banking landscape involving in
the coming years?
Varun Mittal
Absolutely. Singapore will have two full banks by
next year, one Internet only bank most likely and
two wholesale digital banks. That is, in addition to
all the new banks which are coming in, which don't
have a license but used the infrastructure from the
existing banks to offer financial services. So, from a
service provider landscape perspective, we will have
more than enough options to come here and
Singapore, I would say is significantly a bank
country. So, the kind of needs and solutions which
will be coming in Singapore and market will be
slightly different than, let's say, Indonesia, where
super apps perhaps just acquired banks and where
100 million people don't even have bank accounts.
But they have access to those Super App. So, the
needs and aspirations for markets like Indonesia,
Philippines are that the mobile phone was the first
time they accessed internet, Super App will be
probably the first time they access formal credit and
formal financial services. They will jump a
generation and that will be life changing for a lot of
those.
What will happen more from a Singaporean
landscape perspective is that niche players and this
is a testing ground for a lot of these players to test
out these models because we already are digital KYC
full cloud, much more mature regulatory infra. So,
there will be a lot more innovation around
international trade because it's a trading hub.
International trade, international wealth
management and those kinds of things. I do not
expect dramatical innovation in cards because
average Singaporean has 3 to 5 cards and cards,
payments will not be a dramatic innovation, but real
innovation will be stuff which is aligned to the
international nature and the international character
of the business. There are, however, areas which
have not been served. I'll give a simple example.
Singapore has about 340,000 foreign construction
workers, another 340,000 foreign maids and about
430,000 gig economy workers. These are people
who are delivering Grab food, shopping parcels,
freelance photographers and dance studio people.
Now everybody is teaching dance and acrobatics
and all of this on Zoom, freelancing people is a big,
big challenge from economic perspective. They
don't have CPF. CPF is the Singapore Mandatory
Retirement Plan where your employer has to
contribute, and you have to contribute, and
government guarantees some level of returns.
So, we have 400,000 people who, if you count their
families in, that's roughly 30 -40% of Singaporean
population who will not have a retirement kitty and
we are extrapolating. So, while some of the western
countries are facing the scenario, they say 2030 –
2035, we cannot fund our pension. Singapore can
already see that we have a segment which will reach
that problem. What can we do upfront? Can we
have the Super App platforms who are serving this
to institute some kind of retirement planning, some
kind of nudge. This is Asian culture, in the Western
culture they will probably scoff at forced saving, but
it's not so bad for a nation culture perspective. A bit
of nudge forced saving is fine. How can we do that?
Tharman announced very clearly that Singapore
doesn't encourage value destructive competition.
Singapore encourages needs of such segments to be
addressed. So, which is why I say, if any of these
digital banks will go say, head onto the incumbent
banks, they will fight at the top end of the segment.
People do not have an urgency to switch, but if they
can go after this, I just listed out a million people
population. They can solve these and of course they
can go after other access issues and stuff I
mentioned. But these are actual social needs if they
can address while, of course, the existing banks also
needs to work to address this. This is a social
problem. For Singapore, having more mobile apps
and getting more bank accounts was not a priority
for digital banks. In Singapore, if you really want a
bank account, you can have one versus an Indonesia
motivation or Philippines motivation. So, which is
why I would say Singaporean context is that bottom
segment of the society to prepare them for 20 years
out. Everybody worries about the 65-year-old
auntie who is picking up your utensils in the food
court. You don't want to have a 5x that size of
problem in 20 years from now, so we have to act. So
that's from that provider perspective.
Taimur Baig
Well, that's great. I'm glad that you brought in the
issue of digital banking with implication for inclusion
and that even in a wealthy society like Singapore,
the financial inclusion is an issue. Doesn't matter if
everybody has access to banking account. It's a

11. Kopi Time E041: EY’s Varun Mittal on FinTech January 20, 2021
Page 11
question of having wider range of financial services.
So, I'm glad that you brought it out, which, of
course, underscores the point that in developing
world, the needs and the school for work is even far,
far greater. In this conversation, several times you
have talked about wealth management. So, here's a
chance to actually get deeper into that I saw on your
Linked post a couple of days ago. You were talking
about how the world of robo advisors can even have
performance-based fee structure and how that
could disrupt the wealth management industry. Or
rather, I think you used the phrase democratize
wealth management industry. So, go ahead, tell us a
little bit about this area.
Varun Mittal
Traditionally, what happened was the performance
based structures were available only to super rich
people because they will have specialized fund
managers who will employ specialized tactics, for
example, hedges, shorts etc to generate returns
beyond the normal. While for average people, there
would be normal index funds, ETF revolution and so
you have passive funds. Passive funds are not bad.
They're good for most of the people. But for people
who have slightly higher risk tolerance and who
have specialized needs, for example, they have
currency exposures and they want to hedge. There's
the traditional performance based because
somebody needs to be compensated. If they're
going to put additional effort instead of just tracking
the index for you to generate additional returns, you
pay. I would say it goes back to the older times when
you used to have the carry concept where you
would hire a bunch of sailors and they go to fish the
fish for you in the high seas and whatever stuff they
bring back, they keep 20%. So, the principle of 20%
carry was performance based. You catch more, you
get more. That was the origination and of course
that came to both public markets and private
markets. And, while robo advisers were still doing a
fine job, and I personally still use a lot of them. But
what they're doing is they're charging you a fee for
advice and execution and they will say we will map
the index; we will track the index and we will have a
stable growth. There are people who say I want to
put 10% of my assets in performance based whether
it's investing directly in start-ups, but they say, can I
have that for public markets?
So now robo advisers are saying we will offer you
that also, we will build it in house or partner with
those people and this is one of the example of if
people are saying, if you think it's right, we're not
saying you should do it. We're not saying you should
put 100% of your portfolio in performance based,
but if you think you should do it, we will ensure that
we enable access to you instead of we telling that
you don't deserve it and don’t try to do. Giving the
power of decision making to the end consumer by
supposedly the traditional passive institutions is
really valuable. The key question is, how is the
performance base executed? Will it also be passive?
Robo advisors are saying that our algorithms are so
awesome that they will be able to beat the market
returns and then you pay us for that. Time will tell
vs. some of those other fintech start saying we will
employ really humans who will actually do active
trade for you and prove their terms Active people
say last 10 years was a bull run, monetary easing
policies, so all boats rise when Fed pumps USD5trn,
the active will bounce back. There are generations
active one and then passive one for 10 years and
now active building. I'm nobody to say whether it's
right or wrong, but performance-based fees will stay
and will become a larger portfolio. Some people will
do it by saying algorithms are awesome. Passively,
we will generate more returns. Some people will do
by active and Fed will tell how much more money
they pump.
Taimur Baig
That's right. You recently published a book and you
are a co-author of the book called The Fintech
Nation. You also have this Fintech Nation project.
Can you tell us about that?
Varun Mittal
Absolutely. I was one of the original founders of
Singapore's Fintech Association 5 to 6 years ago and
at that point, it was not even called fintech. It was
just a bunch of payment. People come together and
say, we need a formal structure to convey our
needs, coordinate with the regulators and stuff. We
brought that together. Over the last 5-6 years,
things evolved and in 2019, I was in Israel and Israel
is known as the start-up nation, and I saw how the
culture was built. How the whole country came
together, and I actually read that book twice
because once was not enough. The word start-up
nation comes from a book written by two Israeli
people about how they did it. I reflected and said,

12. Kopi Time E041: EY’s Varun Mittal on FinTech January 20, 2021
Page 12
we have actually done something very similar for
Fintech. We have three principles on which the
whole financial services revolution in Singapore was
built. And the core DNA, Israelis are successful in
start-ups because of what they say ‘chutzpah’.
They're fearless, they will just go fight it and they're
not scared of failure. Singapore is reverse, Singapore
is ‘kiasu’, we are nervous about failure, we are
scared about failure and we will put all the checks
and balances in place to prevent a failure. And that
fear became the strength of Singapore. In a
regulated industry, which is one of the most fiercely
regulated, that fear or consciousness of not violating
the regulation created a culture of supporting that.
Of course, macroeconomic factors, historical trading
post, English as a language and high education level
helped.
What crystallized over the last few years was three
principles which made Singapore as the Fintech
nation. One, I simplify as a ‘right first, fast later’, very
Singaporeans way. It’s ok, Singapore was not the
first one to bring digital bank regulation. That's fine.
We need to do it right, in a way that’s right for us.
We don't need to race with Europe to bring the
regulations. Singapore was not the first one to bring
the open banking regulation. Last year, the findex
came in to help people judge about their financial
health. We don't need to rush, let's do what is right,
even if it takes longer so right first, fast later. The
second one is what I say ‘singanomics’. That's what
I coin, singanomics is a Singaporean model where
the government will have a nudge. They will let
private players compete and do everything. But
when it comes to building critical infra, they can
jump in, they can nudge. They can nudge state
institutions to play. So, there is a silent hand to
ensure the everything goes well. It's contrast with
the new liberalism in some parts of the world and
extreme state controlled from the other side. It's a
fine balance. And the last one I say is ‘garden
innovation’ because Singapore doesn't have a lot of
resources. Every few years they pick; for next few
years these things are priority. Then we'll throw
everything. Five years ago, it was payments and
Blockchain. So then Project Ubin, Fast, PayNow
happened. Last two years, they said, Green finance
sustainability. That's our focus. All energy goes
there. So, there is a central decision that this is the
priority, we will not stop anybody, but this is the
priority. We will throw everything we can at it. So
those three principles and the project is about
bringing out the stories of those real start-ups, real
companies trying to adhere to it. So, we're bringing
a lot of regulators all over the world to learn from
this. So, I'm actually advising at least eight
regulators all over the world who want to pick the
best practices from this. So, the book is the journey
encapsulated where the Central Bank Governor,
Ravi Menon wrote the foreword himself and the
project is about bringing these stories and spreading
love all over the world.
Taimur Baig
You're doing fantastic work at a very exciting time in
this era. I wish you the best of luck. And we look
forward to hearing more fintech stories from you in
the coming years.
Varun Mittal
Thank you so much Taimur.
Taimur Baig
Great to have you. Thanks to our listeners too.

13. Kopi Time E041: EY’s Varun Mittal on FinTech January 20, 2021
Page 13
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