Our call continues with returning guest Tianwei Liu, Deputy CEO of Southeast Asia fintech group Fazz, the company behind stablecoin issuer StraitsX. In 2023’s Singapore Fintech Festival, StraitsX received in-principle approval by the MAS for the issuance of XSGD and XUSD, opening up opportunities we covered in the first half of our call with the seasoned fintech entrepreneur.
This second half goes more into his learnings developing regulatory and compliance maturity from more than seven years pioneering fintech infrastructure solutions out of Singapore and more than ten years of entrepreneurship.
(00:00) Catch up on episode one;
(01:25) Next Generation Cross-Border Payments with XUSD;
(04:19) Learnings on Building a Compliant Fintech;
(15:46) Reflections on a Decade-Long Entrepreneurial Career;
(21:12) Rapid Fire Round;
5 learnings on regulatory and compliance maturity from 10+ years pioneering fintech solutions out of Singapore
(1) Continuous dialogue is key.
“…for compliance and fintech, talking to regulators, having an open dialogue and showing consistency and showing them who’s the person behind the company and what are you trying to achieve here and having a constant clear dialogue with them to build trust and credibility. A lot of these things really take time…”
(2) Ingraining a culture of customer-centric compliance and patience. In a world of distributed workforces, this is even more important to set the tone for when developers are several layers away from end-consumers.
“…“move fast and break things” does not apply here. In payments and fintech, you can’t break things. If things go wrong…someone’s going to get really hurt…you do really need to be patient. There are certain things that we know what the goal is, but you need to know that you can’t do this overnight. You actually have to set the culture to do things right the first time and consider the impact on the customers and on people…”
(3) Participate in regulatory sandboxes and make the most of regulatory openness to experimentation.
“[They] allow you to basically do the smallest field experiments, with the blessing of the regulators, to demonstrate certain things before having that actually getting to your bigger customers…”
(4) Regulation opens doors to previously inaccessible market segments (e.g., FIs and banks) but the product makes the first step.
“It’s not something that can be done overnight, but getting these licenses and compliance helps to give you a stamp of approval. It is not enough, but it’s definitely more helpful to at least help education move along. It also means that institutions are able then to adopt this blockchain technology…Having a regulation compliance on a FinTech side, from a competitive advantage side of this, means that you can then serve a wider customer that traditionally would either be fearful or unable to reach.”
(5) Time and place matter when it comes to regulation. There are also blue oceans / market gaps as well when it comes to regulation and this factors into the growth potential of the business.
“Singapore is in a perfect position to do it, because of the regulation regime where you probably would think about China and other jurisdictions being geopolitically sensitive as well…there’s a huge opportunity in being able to be a regulated stablecoin issuer in Singapore. But potentially, this means for the whole entire region there will be a lot more adoption given that now Singapore has set the bar down. We have seen this happen before.”
About our guest
Tianwei Liu is the Deputy Group CEO of Fazz and Co-founder of StraitsX. Fazz is a regional fintech group offering an ecosystem of financial services for businesses, especially the underserved. The group consists of Fazz Agen (previously Payfazz), which offers financial services to the underbanked and unbanked population in rural Indonesia, and Fazz Business (previously Xfers), a fintech API company, and StraitsX, a digital asset infrastructure platform, the latter two which Tianwei co-founded.
Fazz Agen leverages its network of agents to distribute bill payments and enable domestic remittances. It also built a POS-based payment system used by small merchants, a consumer lending arm, and a payment-as-a-service API. It empowers the livelihoods of more than 300,000 agents distributing to over 80 million end-users across Indonesia. The group has evolved to include a lending platform and a digital assets platform.
Prior to Xfers and Fazz, Tianwei has had more than a decade as a software engineer and entrepreneur. He started his career working on developer tools at WIMM Labs, a start-up that built the world’s first Android-based smartwatches. After WIMM Labs’ acquisition by Google, Tianwei worked at Amazon Lab126 from May 2012 to June 2015, building the big data ingestion infrastructure that allows for real-time processing and analytics of the health status of all Kindles devices used daily by Amazon’s customers. Tianwei holds a Bachelor of Engineering (Computer Engineering) in 2011 from the National University of Singapore. Tianwei also spent a year working at Silicon Valley while studying at Stanford University under the NUS Overseas College (NOC) Programme.
The content of this podcast is for informational purposes only, should not be taken as legal, tax, or business advice or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any Insignia Ventures fund.
Next Generation Cross-Border Payments with XUSD
Paulo: Moving on to another aspect of the news that we’ve been talking about in the development for StraitsX is the XUSD side of things.
I’m interested to know what is the rationale behind developing XUSD as well, apart from SGD and IDR, and what are the implications?
Tianwei: I talked about the last time around that it is impossible for US dollars to be used for payments across the rest of the countries that are in this part of the world.
It’s a sovereignty issue and there’s a lot of other regulation-related problems. You want to defend your local currency, but the truth of the world is that 90 percent of the global trade is still settled in US dollars.
The FX that you have when you’re going overseas. Some countries have bilateral agreements like Singapore does with Indonesia. We can just do a direct FX swap between Singaporean dollars and Indonesian rupiah. But a lot of other currencies are actually still settled through US dollars.
You would use Singaporean dollars to buy US dollars and US dollars to sell for another currency. That is the situation of how the world works. This is why we realize that in order to continue this part of the expansion and innovation, a US dollar stablecoin is just needed.
It is currently still the largest market cap. Like I mentioned, I think today there’s about 130 billion US dollars backed stablecoin. And I think 95 percent of that is fiat-backed. That is where the biggest market opportunities are because the world is still using US dollar limited currency for trading.
So having that is the first piece that we need to fix in order to facilitate faster settlement and actually allow the FX swap and pricing to be done for currency pairs that are not able to directly do with Singaporean dollars initially.
But the plan is also still making sure that the other curriencies will all have their own stablecoins, where then they will be able to mirror the normal transactions they’re doing today. If you can convert directly from the same dollar to that currency.
But if you can’t, you might have to go to an intermediary stablecoin. And that is where we want to continue bringing that and make sure the contraction completes on the chain. And you can just use the blockchain with its liquidity and the instantaneous settlement — all these features that have been built around it — to ensure that happens.
That’s why a US dollar stablecoin is extremely important for this ecosystem to complete and that’s what we with our licensing. We now know that we can do this. And from our experiences, we’re going to be making sure that piece of infrastructure is very strong and set up in the next coming year.
Paulo: It goes back to that whole pain point of accessibility. And ultimately goes back to the thesis on local currencies. Because if you’re able to create those bridges through XUSD, then cross border payments will be a lot easier with various other local currencies that maybe you will be developing in the future.
Tianwei: Because the US dollar is still the reserve currency of major countries, so if you’re talking about cross border, even for companies, sometimes they will hold a reserve in US dollars before they settle a local currency for the actual payment side.
That’s why our XUSD will be poised to do so as well, in order for them to quickly jump between currency pairs with a safe haven of a currency that most of their accounting and trade settlements can be done on.
Learnings on Building a Compliant Fintech
Paulo: I know you’ve talked about this at length in terms of a story that you told with how you guys got an e-money license and MPI license, and then now going into the IPA as well and you really painted that story of the compliance journey of StraitsX and of Fazz.
I also wanted for you to maybe package it for our audience in terms of learnings. What are some of the biggest learnings that you’ve had in terms of developing these financial services to be really compliant, that perhaps can help other founders out there, fintech founders that are also innovating really ahead of the curve and trying to figure out how to deal with regulators and how to deal with institutions.
Tianwei: I think it has been a long journey for us. I’ve been doing this payment space for almost close to 10 years now. I feel really old about this, but at the same time it’s also a personal journey for me.
For those that know my background, I was a software engineer before this. I was working at Amazon and I love the technical stuff and I spend time writing code. I am more productive that way.
But I think the first key lesson you need to learn is that continuous dialogue is actually key. You need to actually constantly talk to your customers. And in this case, for compliance and fintech, talking to regulators, having an open dialogue and showing consistency and showing them who’s the person behind the company and what are you trying to achieve here and having a constant clear dialogue with them to build trust and credibility.
A lot of these things really take time. If you think about central banks or regulators, their number one KPI really is not innovation. Singapore and the MAS — kudos to them again — they have been doing a lot of work.
But if you really think about the order of priorities for auto regulators around the world, I’m pretty sure it’s always going to be the same. Innovation is not the number one. Number one is stability. Making sure that the economy is sound and nothing goes wrong is actually a topmost priority.
Then with that kind of thing, then you need to understand how they will then go about doing things. There will be regulators that are more forward-looking like Singapore and a few other countries. But at the same time, they will not be able to bridge the fact that they need to make sure that there’s the ability for everything you do. And that is why trust and credibility become something that’s super important.
You only can build those things through consistency, through time and dialogue. You can’t blame them. If you’re just a guy that just came out yesterday and they start talking about this great innovation that you have, they’re going to be skeptical.
So it takes a lot of time and also continuous dialogue to actually explain to them your objective and how this thing will benefit the industry as a whole to get them supportive of any initiative that you’re thinking about.
So that’s actually the most important first piece that you have. To actually understand that you need to spend a bit, quite a bit of your time having that open dialogue with them, showing up, actually explaining to them, building a relationship with them to let them know that you are credible, you are trustable, and they can actually have insight from you and learn to grow this industry together.
The second piece of this is then looking inwards. Culture is actually very important. Developing internal culture that understands the importance of this industry. I’m a tech guy, when I first went into fintech itself, I thought it’s just tech, right?
But, what was famously said by Mr. Mark Zuckerberg, “move fast and break things” does not apply here. In payments and fintech, you can’t break things. If things go wrong, somebody ends up in jail. Someone’s going to get really hurt. So that is not going to be something that you can just 100 percent apply and hope that everything just moves fast.
One thing I constantly told a lot of our guys and now I’ve been doing for 10 years is you do really need to be patient. There are certain things that we know what the goal is, but you need to know that you can’t do this overnight.
You actually have to set the culture to do things right the first time and consider the impact on the customers and on people when things go wrong. Most of the time we will think that it’s a very glamorous job. I’m doing tech stuff. I’m going to be working with cool developers.
But the ones that end up being [affected] are just going to be the uncles and aunties of the communities. And we have seen that happen a lot of time, and you’ll see that we’ve been spending a lot of time on that part of the industry, making sure that those folks are taken care of.
We’re collaborating with Singapore Police to ensure that the fraud and all those things are taken care of and that is something that we highlight quite a bit in our internal culture and our folks are recognized when they’re making that kind of effort to protect the consumer. That is always going to be a key center of a culture that you need to continue building.
Then the third and final piece is probably just being more customer-centric and think about how it affects your customers and participating in regulatory sandboxes to allow you to basically do the smallest field experiments, with the blessing of the regulators, to demonstrate certain things that we talk about before having that actually hitting your bigger customers as a whole.
Paulo: I think we’re really lucky to have you as an engineer as well talking about this because I was also curious to know what does this then mean for the product development side of things as well.
With startups, we often talk about speed as being essential. And so how do you balance that speed with also pacing out things from the regulatory standpoint as well?
Tianwei: This is always a struggle. As a founder, as a VC-funded company, we always have pressure for time. Time is something that’s ticking, we’re always thinking about progress and innovation around that.
But I think the way that we at least try to get folks to be grounded and think about things is to think about these customers as, your parents, as a family, right? Would you be doing the same thing?
I often tell this story internally in the company that we are sitting in an aircraft room very comfortably writing code that potentially has a huge impact. We think we are doing a killer job, but actually the guy that’s gonna be facing the brunt of this thing might be just the customer support officers on the ground or so in some sense, because in Indonesia, we have a very large agent network, the agents, the guys that’s facing the customers.
While we are shielded from the layer of that, just being the guys behind the scene. So I think that’s where we try to make sure that we continue telling people and sharing the war stories in some sense for every new guy that joins the company.
This needs to continue, no matter how far we come along. We need to think about the fact that you don’t forget our roots. You don’t forget why you are doing this. You don’t forget the impact of your work no matter how glamorous you might seem we’re on the day-to-day life of individuals out there.
Paulo: Yeah, there are very real lives being impacted.
Paulo: I think fintech is one of these sectors that has been really rapidly growing, not just from a VC funding standpoint, but in terms of even adoption.
I already talked about embedded finance essentially and how fintech is everywhere essentially being embedded everywhere.
So what does, you’ve talked a lot about compliance, what does this mean for fintechs from a competitive standpoint?
Tianwei: It helps you stand out for sure for credibility. Once you are properly regulated, it’s a stem of approval. There’s more trust. Actually the whole entire financial space is built on trust.
This is why even with decentralization, they are fundamentally trying to solve the trust problem. We don’t live in a pure virtual world. There’s going to be humans involved and ultimately the way that this will bridge between the Web2 and Web3 is having trust anchors and having institutions that’s trusted.
That will come very strongly from a regulation point of view and compliance. Once you are regulatory compliant and have a track record of doing that, you can help bring the mainstream audience into this field.
That’s where we have a competitive advantage being around for the longest period of time. And we’re probably one of the more credible guys who have been doing this on the ground for the last five to 10 years.
It’s not something that can be done overnight, but getting these licenses and compliance helps to give you a stamp of approval. It is not enough, but it’s definitely more helpful to at least help education move along.
It also means that more institutional guys are able then to adopt this blockchain technology. Potentially, there’s going to be a Bitcoin ETF approval, but it’s the same concept. Can you already mostly buy Bitcoin? By having an ETF, what does it mean? Institutional guys now know that they have a way that’s compliant and proper to purchase this on their balance sheet.
So the concept is the same. Having a regulation compliance on a FinTech side, from a competitive advantage side of this, means that you can then serve a wider customers that traditionally would either be fearful or unable to reach.
Paulo: But again, on the other end of things, it also doesn’t necessarily mean that you will readily win those customers still,
Tianwei: Exactly. It is a door to just open, but whether you can get through that door really depends on how good you are. There’s a lot of work that still needs to be done, but it is a starting point.
We’re not saying that we’re going to be the only guys, but we’re one of the first few guys to have a shot and truly try to do this.
Paulo: And looking into 2024, it’s a new year as we’re recording this.
What is one regulatory development, apart from the framework that’s being developed, that you’re excited about for the space in Singapore, Indonesia, or other Southeast Asian markets?
Tianwei: I think on the stablecoin side, it’s something that I’m just really excited about. Singapore is on the roadmap again to be one of the first in this whole region or even the world to actually regulate stablecoins.
It puts Singapore and its global positioning in a perfect space to basically allow for success. If you think about it, at least on the US dollar, I mentioned earlier, it has a 130 billion market cap right now.
From a Singapore perspective, I think there is a demand. There’s going to be definitely a 10 to 20 percent demand for all of the US-regulated stablecoin. The US is a big enough market. Circle is going to spend a lot of their time, and they’re going to probably win it for making the most regulated stablecoin out of the US.
But due to the geopolitical situation, due to the regulation, and being just nearer to the market, the world is big enough. And they will be looking for a regulated stablecoin that is based out of the US, because of the banking risk, geopolitical situation, and just not being able to become a US citizen in some sense to be able to get access to the stablecoins.
And Singapore is in a perfect position to do it, because of the regulation regime where you probably would think about China and other jurisdictions being geopolitically sensitive as well. Whereas Singapore is right at a place where it’s neutral, and it’s where the East meets the West.
I think there’s a huge opportunity in being able to be a regulated stablecoin issuer in Singapore. But potentially, this means for the whole entire region there will be a lot more adoption given that now Singapore has set the bar down. We have seen this happen before.
When Singapore came out with new regulations, the rest of the region can then look into this. We are supposed to be the testing bed for a lot of things. Once they see that this thing works out, it is okay. You will see a lot of the regulators around the world follow suit and also adopt the same innovation, which then on a whole is great for the industry.
Then we will start seeing this thing move in that direction. I’m convinced that this is something that will be financially huge in the next five to 10 years’ time. And we’re definitely moving in the right direction with Singapore taking the lead on this right now.
Reflections on a Decade-Long Entrepreneurial Career
Paulo: We’ve seen it with digital banking. We’ve seen it with data privacy, and we’re now seeing it now with stablecoins as well.
So we have a few more minutes left. I wanted to take this time to maybe do a little bit of reflection. You did mention you’ve been in the industry for 10 years. You’ve been in Fazz for seven years already.
So maybe you can share, for our founders out there — compared to previous years, it is a lot more challenging now, especially in the capital markets. Maybe even a lot more challenging in terms of monetization, trying to get people to pay for things, especially for SaaS or B2B.
So definitely all around there are challenges already, but it’s even more challenging with the macro. But maybe you can provide some context and some inspiration maybe from some of the war stories that you’ve gone through.
Tianwei: On the topic of stablecoins, we don’t think StraitsX is super successful right now, but it has come a long way. But I would be the first one to tell you guys that there are multiple discussions over the last five to 10 years that we should abandon this project, right?
There were moments multiple times in the company deciding whether this is something that we should be doing? Are we too early? Are we trying to do something that’s too innovative or too [cutting-edge] that potentially might kill us?
And every single time I think the team huddles back down and discusses, what do we believe in? Do we have conviction that this is going to be working out? And that’s where I went back to the first thing I was talking about earlier on about being persevering and being patient. If you believe in something and you want to do something, you must know that there’s going to be a lot of struggles along the way.
And I know times are bad. In fact, the times are very bad right now from a fundraising perspective. The market is not the best situation, and that’s where the best entrepreneurs will survive, and the best companies will survive. This is where you need to really get your back against the wall, innovate and think about whether this is truly something that you want to do, convince your team.
A lot of time it’s really — as the company grows bigger and bigger, 90 percent of the problems are not technology.
People [tend] to really be the problem. And we need to make sure that you can align your people and deal with people. That is actually the number one reason most early stage startups fail. Making sure your guys are sticking together, making sure that everyone believes in the vision and can be aligned and working on a common goal.
And keep going at it. You only fail when you give up. And if you can continue pushing the team, hopefully one day you will see the sunlight and things will get through.
Paulo: Definitely a lot to think about for our founders in the audience and certainly hard-earned more experiences, make or break moments as you’ve come to this point.
But again, the story’s not over, right?
Tianwei: So there’s still a lot. We’re not done yet. We’ll probably just open the door and there’s more work there. The only easy day is supposed to be yesterday.