Our guest for this #FintechInterview is Oi Yee Choo, Chief Commercial Officer at ADDX (previously known as iSTOX), a new securities exchange based in Singapore that provides innovative investment products based on blockchain securitization.
Thank you for joining us today in this interview! First of all, can you tell us something about your background?
After a few years in an accounting firm and an MBA in Manchester, I returned to Singapore and joined Schroders, which was the start of my career in investment banking. What interested me from my vantage point in Singapore is that Asia was still a relatively young market compared to Europe and the US. Since the younger companies in Singapore needed capital, a lot of the work in the last 20 years in South-East Asia was done in capital raising. The real estate market was particularly interesting, especially the emergence of REITs (Real Estate Investment Trusts), which made possible the democratization of real estate investments and created a new way of financial structuring and engineering. Investors then started to look into alternative investments. Therefore REITs, private equity, hedge funds and other private forms of investing benefited from big capital inflows. But there wasn’t a clear structure in the private markets, because it wasn’t needed yet. Today, the democratization of finance is reaching the private markets as well, because technology is now able to provide solutions that previously weren’t feasible. That has enabled the tokenization of securities, and ADDX has harnessed that technology to offer new financial products to accredited individual investors.
Why did you decide to switch from big financial institutions to a fintech startup?
Banks today spend a lot of time on paperwork, reporting and regulatory issues. This can be frustrating if you are trying to make a bigger impact. There was also a sense that banks weren’t doing enough to fundamentally change the shape of the capital markets. So when the opportunity came, I decided to join ADDX and to do something new. With my 20 years of experience in banking, I understood the market and could also approach things with a different perspective: how do we do things better?
What kind of contracts and relationships do you make with the issuers of financial securities?
It depends on the kind of securities they are seeking to list on ADDX. For example, when fund managers seek to raise capital, we can create a new class of securities to be tokenized, or we can use an SPV (special purpose vehicle) to secure an allocation of fund units to be digitized. In the case of bonds, an issuer can either issue the full bond directly as digital securities or tokenize a part of the bond via an SPV. The platform and the service run efficiently because all the investors on our platform have gone through a KYC and onboarding process, so they have been verified as accredited investors. With regard to the quality of the issuers, we first take a commercial view of the product, to figure out whether they are suitable for our investors and would appeal to them. We also carry out due diligence to understand the structure and the business of the issuing entity. Eventually, the proposal goes to a listing committee which decides whether to approve the product to be listed on our platform. In a traditional venture capital, private equity or hedge fund, the fund manager would never take small investors on board, because he doesn’t have either the people or the technology to manage them. But our platform is built to overcome this problem. We ensure it is a win-win: the fund manager is able to raise capital in a very efficient way, and investors are really excited to get some exposure to these types of funds.
How can the Singapore financial market continue to stay relevant when it faces realities such as Singaporean companies sometimes preferring to list in the US?
There are different angles to consider. Firstly, Singapore has become a global hub for Asian capital and a lot of individuals, funds and family offices may be based here but actually invest outside of Singapore. Secondly, the Singapore Exchange is actively rolling out changes, including technology changes such as blockchain and tokenization. Thirdly, there is a lot of creativity and innovation happening in the Singapore financial system, whether it is digital securities or cryptocurrencies or ESG products like green bonds. This is why the Singaporean market will continue to stay relevant. Singapore remains ahead of many Asian countries in financial innovation.
What differences do you see between European and Asian markets?
First of all, Asia is not homogeneous. For example, we don't speak the same language, we have different cultures and different laws, even within ASEAN which is supposed to be a trading block. Just like Europe, Asian countries would do better if they can harmonize rules across the continent to a larger extent and forge greater cooperation. If you look specifically at financial regulations, the EU is trying to harmonize that, but in ASEAN this is not happening yet. Another difference between Europe and Asia is the mentality or the attitudes of investors. Asian investors are risk takers to a bigger extent than European ones. A lot of wealth clients in Asia are young and have become rich in a short time. This often means they are not as keen to invest in, say, bonds that yield 3%. But cryptocurrencies may be interesting to them. In Europe, on the other hand, one finds more wealth management experience and a deeper wealth preservation mentality.
What are your plans for Europe? Are you ready to expand in our continent and in Italy, too?
We are already a global platform, with investors from 24 nationalities, including Europe, Asia, the Americas (excluding the US), Australia and New Zealand. We do have investors from Italy as well. The problem we are trying to solve is certainly a global one – inefficient private markets. That affects investors in both Asia and Europe. We’ve applied the latest technology to build an infrastructure that can solve the problem – although we are also conscious that investors are often not so interested in the specific technology, as long as it works and can open up access for them. What they are interested in are the financial products and how the products can enhance their portfolio.
How is the M&A activity shaping the Asian Fintech industry? What trends will we see in the coming years?
At the moment, the SPAC trend is driving a massive shift in the way M&As are being done. There is a huge market for SPACs these days, and it remains to be seen how this will pan out in the coming years. In fintech, we see many companies expanding into financial services – using their existing platforms to market financial products to their customer base. Tech companies have in some cases acquired or merged with traditional banks to help them expand into fintech and use tech to compete.
What is your view on the increased popularity of SPACs? Can they represent a more efficient way of raising capital for start-ups?
SPACs will surely help many large companies raise capital, especially those that have been around for years but may not be making money yet. One question for companies thinking about listing via a SPAC is timing. Companies should really be at least at the Series C round, with a core product range, defined growth areas and perhaps 5 years of track record before they consider a public listing. Opening equity to retail investors does after all entail additional responsibilities.
What advice would you give to young students willing to enter the fintech world, and more specifically to the ones interested in coming to Asia?
For anyone going into fintech, my advice is that to truly understand a fintech business, you need deep knowledge in finance. You won’t regret investing time developing that understanding. For those interested in coming to Asia, one potential route is to start at a global bank or financial institution and look for an opportunity to be posted to Asia within the company.
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