MD of Singapore's STACS tells how fintech can help save billions for capital markets
By Celine Chen
SINGAPORE, NNA - Hashstacs Pte Ltd (STACS) is a Singapore fintech development company that provides ready next-generation platforms that make global markets simpler and efficient for financial institutions.
Among its clients and partners are global investment banks, national stock exchanges, custodian banks, asset managers and private banks.
STACS was twice awarded the Monetary Authority of Singapore’s Financial Sector Technology and Innovation Proof of Concept grant in 2020. It was also a global finalist at the UBS Future of Finance Challenge in 2019, and first runner-up in the 2020 Longhash Blockchain For Good Hackathon.
NNA speaks to Benjamin Soh, STACS co-founder and managing director, on what has driven him to come up with blockchain solutions to help institutions in their digital transformation.
Q: Kindly share with us the accomplishments in your area of expertise.
A: Apart from being the co-founder of STACS, I am also a serial fintech entrepreneur and previously founded a multinational, regulated B2B fintech firm with more than 500 employees in six countries. That previous venture served the needs of more than 100 financial services firms worldwide, with a focus on fintech, blockchain and information security sectors.
I became an investor and founded an investment firm serving multi-family offices focused on technology and real estate investments.
Q: There has been much talk about fintech acceleration because of the pandemic. How outdated has been the infrastructure of capital markets?
A: Capital markets infrastructure can be slow, expensive, and complex for the global financial institutions that rely on it. These include investment banks, stock exchanges and central securities depositories, custodians, brokers, asset managers, and private banks. Trade settlement infrastructure, specifically, often runs on decades-old technology that is now inefficient, and also, costly.
There is a clear opportunity for trade settlement to be re-designed from the ground up with the latest technology available to capital markets. Rather than using old legacy systems, financial institutions should now be empowered with the latest infrastructure technology to deliver faster, more efficient, and more transparent trade settlements.
Q: How costly has been trade settlements using old infrastructure? How can institutions boost their profits with new tech?
A: The banking sector’s profitability continues to come under pressure with rates down at all-time lows, COVID-related loan loss provisions, and decades-old infrastructure. Outside financial circles, few people are aware that every major bank around the world has to set aside tens of billions of dollars with clearing houses as part of trade settlement requirements.
This is money that cannot be put to work to earn bank interest, make investments, or be used by their own proprietary trading teams to capitalize on financial market volatility as witnessed during COVID and the recent U.S. elections. The Bank For International Settlements estimates $800 billion is being set aside by banks globally on a total of $6.25 trillion in capital — or roughly 12 percent. This number is only growing as time goes on.
However, many banks’ proprietary traders can earn far more than 5 percent during turbulent markets as we’ve seen from the increased profitability of players like Goldman Sachs and Deutsche Bank in recent quarters. If banks adopt a blockchain solution that does away with the need for settlement-related capital buffers and costs only a fraction of the opportunity cost, they can unlock a massive value and opportunity.
Q: Can you name some of your top clients and what STACS solutions are they using?
A: Gibraltar Stock Exchange is using our technology for the tokenization of assets like bonds and funds, which will allow for more efficient settlements. EFG Banks in APAC have used our platform for smart structured products, which allows greater efficiency in transactions and increased capacity.
We are also working with Bursa Malaysia, the country’s stock exchange and partnering various other institutions, ranging from global investment banks and to national stock exchanges and asset managers.
Q: Can you give an update on the development of the bond trading platform for Malaysia?
A: We recently completed a blockchain proof-of-concept with Bursa Malaysia to facilitate the development of a bond marketplace platform for the Labuan International Financial Exchange. The concept was tested together with Bursa Malaysia, the Labuan Financial Services Authority, Securities Commission of Malaysia and banks like China Construction Bank Corp. Labuan Branch, CIMB Investment Bank and Maybank Investment Bank.
We are working towards the creation of an industry platform to offer issuance, trading, settlement and depository of bonds to fulfil the needs of the industry. We look forward to further collaboration and implementation of new technology to expand the Malaysian capital markets, and also to empower the industry to discover new opportunities.
Q: What drove you to create simpler, more efficient platforms and technologies for financial institutions?
A: I have always been interested in technology. In fact, I got into the fintech business after I was piqued by my own personal experience 15 years ago when I first started trading in Singapore stocks. Back then, the process was highly manual and cumbersome. Everyone had to fill out paper forms, and trades were executed over the phone with a broker.
That was also the time when retail trading on the internet started picking up and I saw an opportunity, which is how I started my first fintech business related to providing electronic trading platforms to brokerages and trading houses. Through this, I have always remained fascinated by how technology can play a key role in making lives better, increasing access, allowing inclusion, and simply benefiting society in general.
Q: What circumstances led you to form STACS?
A: Fast forward to 2017. While still in my previous fintech business, I started to see lots of interest from institutions to start exploring blockchain technology. I led a team to start design and development work for an exchange, and in 2019 STACS was founded.
At that time, there were already other blockchain options, but there wasn’t any ready solution. Institutions were already interested in blockchain, and more than a majority of them already had dedicated resources to looking into it, so there wasn’t much difficulty in talking to them about this technology.
Q: So, how did you manage to persuade them to adopt your solutions?
A: The challenge was that they did not know how to start, as typically to embark onto a new technology they had imagined it would cost them years and tens of millions of dollars. Hence, we designed our products in a manner that they are able to offer a complete solution.
Because we provide a complete suite of solutions instead of just an underlying blockchain system, we are able to help financial institutions enjoy the benefits of our technology immediately. They are able to come to us and get access to our live platforms immediately. This has been the reason why many institutions have been speaking to us about using our products.
Q: What's the global outlook for the fintech and blockchain markets?
A: Based on industry reports, the global blockchain market size is expected to grow from US$3 billion in 2020 to $39.7 billion by 2025, at an impressive Compound Annual Growth Rate (CAGR) of 67.3 percent during 2020–2025. The global fintech market was worth $127.66 billion in 2018, with a predicted annual growth rate of about 25 percent until 2022, to $309.98 billion. It is still very small compared to the global financial services market.
Q: How do you see the place of blockchain solutions in the growth?
A: The financial industry is a key strategic pillar of society. The capital markets provide financing for infrastructure, economic progress, and impact people’s lives directly. Looking ahead, there is a need to continue developing the market in a green and sustainable manner. We see our technology as a key enabler in ensuring the financial industry continues to grow in a more sustainable manner.
With our technology infrastructure being able to interoperate with other technologies like Internet of Things (IoT), data analytics, and machine learning, we see our offering as having the potential to grow further to support financial inclusion, sustainable investments, and the UN sustainable development goals.