Singapore: Monetary Authority announces S$225 million initiative aimed at driving FinTech innovation

24 July 2015

Koh Chia Ling, Oh Pin-Ping

The Monetary Authority of Singapore recently announced a S$225 million initiative aimed at driving financial technology (or "FinTech") innovation. With this initiative, FinTech looks set to take off in Singapore in a big way much as it already has worldwide. In this article, we consider the various options and strategies for intellectual property (IP) protection of FinTech.

FinTech - The new buzzword

The Financial Sector Technology & Innovation (FSTI) Scheme will help financial firms set up innovation labs, as well as to fund institutional-level projects and industry-wide initiatives.

This initiative is timely as "FinTech" has in recent years become the new buzzword in the financial sector. 

According to a report by Accenture, investment in financial technology trebled last year, exceeding US$12 billion (about S$16 billion) worldwide in 2014. 

So far, much of the activity has been concentrated in Silicon Valley, New York and London, but Asian countries are jumping on the bandwagon led by Hong Kong and Shanghai, both of which have vibrant FinTech start-up scenes. Singapore, on the other hand, has been identified by industry players as having the best ecosystem for FinTech startups.

As it is, Singapore FinTech startups have been in the news. An example is Nearex, a mobile payments startup based in Singapore which has come up a product (called Xip) which works with mobile money service providers to enable cashless transactions between consumers and merchants. The product is targeted at markets like Africa and Latin America where consumers have no or limited access to traditional cashless payment systems like credit or debit cards. The product began pilot testing in Africa last year.

With the FSTI Scheme now coming into the picture, FinTech looks set to take off in Singapore in a big way.

So, what exactly is FinTech?

FinTech essentially refers to technological innovation in the financial services context. FinTech includes both innovation which improves the current processes (eg, more secure payment systems or improved fraud detection tools), and innovation which challenges the fundamental business models of existing financial service institutions (eg, bitcoin wallets).

FinTech market segments run the gamut from payments (eg, payment systems, P2P currency exchanges), digital currencies, lending (eg, P2P financing, crowdfunding), personal finance / wealth management, to institutional tools (eg, data and analytics), just to name a few. There may well be a need to create new market segments in the future for yet-unforeseen innovations.

Protect your FinTech!

FinTech most typically takes the form of new software or business methods. The most common forms of protection for such innovations are by copyright, patent and trade secret. The different forms of protection protect different aspects of the innovation, have different requirements and come at different costs. Also, while copyright protection can co-exist with patent or trade secret protection, the latter two forms of protection cannot co-exist (because of the strict disclosure requirements for obtaining a patent). 

A FinTech company must decide what the best option, or combination of options, would be for its purposes, taking into account its resources and the nature of its offerings. The peculiarities of each option for protection are considered below.


Software is automatically protected by copyright from the time the work is created and fixed in a tangible form. Registration is not required, which means that protection is essentially free-of-charge. Protection lasts for 70 (or in some jurisdictions, 50) years from the death of the author, which is expected to far exceed the commercial life of the FinTech offering. There are, however, some limitations to copyright protection.

Copyright protection only protects original expression but not ideas, and it only protects such expression from copying. This means that:

  • Copyright will potentially protect the source code, object code, program structure, sequence and organisation of the software (assuming there is sufficient originality in the same), but not its underlying functions.
  • There is copyright infringement only if there is copying and substantial similarity between the original work and the infringer's work. If there was independent creation of the same or a similar work, or if there was copying but the infringer made substantial changes to his algorithm, there would be no infringement. If the software was written in a different programming language, there may or may not be infringement.

Given these limitations, a FinTech company or an investor may wish to think twice before deciding to rely solely on copyright protection for its most valuable IP.

Trade secret

Software can be protected as a trade secret if the aspect of the software to be so protected is not readily known to others (including by lawful reverse engineering), and reasonable measures are put in place to maintain secrecy. On the other hand, this form of protection is unavailable where the innovation is a method of doing business, given that the business method will become public knowledge once it is put into use.

Some examples of measures to maintain secrecy include ensuring that all employees and external parties to whom the trade secret is to be disclosed sign confidentiality agreements before receiving the information, restricting authorised access to the information, and putting in place measures to prevent unauthorised access (eg, password protection). Protection is against unauthorised use of the information.

One major advantage of trade secret protection is that it is potentially indefinite. On the flipside, protection is lost once the trade secret becomes public information. Also, like copyright, trade secrets cannot protect against independent creation, so that there is no right to stop a rival from doing the same thing if he came up with it himself.

As mentioned above, trade secret protection and patent protection cannot co-exist. This is because the requirement of sufficient disclosure to obtain a patent is the direct antithesis of the requirement for secrecy for trade secret protection. A comparison between some key features of trade secret and patent protection is found below. A more detailed discussion of the features of patent protection is found in the next section.

  • Feature: Term of protection
  • Trade secret: Potentially perpetual so long as secrecy is maintained
  • Patent: 20 years from date of application

  • Feature: Nature of protection
  • Trade secret: Unauthorised use of the information; no protection if rival independently developed the same technology
  • Patent: Monopoly rights to use the invention, and to restrain all others from using the same

  • Feature: Secrecy/disclosure requirements
  • Trade secret: Information must be not readily known to others, and measures must be put in place to maintain secrecy
  • Patent: Requirement of "sufficient disclosure" to obtain a patent

Given the limitations of both copyright and trade secret protection, a FinTech company may wish to seriously consider patent protection at least for its most valuable innovations. While the relative high costs and long application time to obtain a patent may put some (particularly FinTech startups) off, the costs and wait are more often than not justified by the increase in value of the IP that patent protection can confer.

Patents protect different aspects of software than copyright. While copyright protects only the form of expression found in the software, patents can protect the underlying ideas and functions. Patents can therefore protect FinTech inventions more meaningfully than copyright as well-drafted patent claims can potentially cover rivals' activities even if their codes are written differently, so long as they perform the same functions. Also, patents are the only way to protect innovative business methods.

Patent protection for software and business method inventions varies from jurisdiction to jurisdiction. Both software patents and business method patents can be obtained in the major jurisdictions in the world including EU and US, as well as in Singapore. There are, however, different requirements as to how the patent claims are to be drafted and what is to be included in the description. For example and very briefly:

  • In Europe, computer programs and methods of doing business as such are not patentable. Software and business methods can be patented to the extent that they provide a "technical contribution" to the prior art.
  • In the US, software and business methods are not specifically excluded from patentable subject matter. Business methods are patentable if they produce a "useful, concrete and tangible" result. Software, on the other hand, used to be patentable as long as computer-implemented. However, the recent Supreme Court decisions of Alice Corp. v. CLS Bank 134 S.Ct. 2347 (2014) and Bilski v Kappos 561 U.S. 593 (2010) have significantly narrowed the scope of patentability of computer-related inventions.
  • Singapore, like the US, does not exclude software and business methods from patentable subject matter. However, the technical features of the invention, which may be expressed in structural, functional or mathematical terms, must be expressly claimed.

An experienced patent attorney will be able to advise on the requirements of the different jurisdictions.

As mentioned, patent protection lasts for 20 years from the filing date. This is a relatively short term compared to that for copyright and trade secrets, but not likely to be a problem given the fast-moving nature of the FinTech industry so that the protected technology is likely to become obsolete long before the patent term expires. Another angle is that a FinTech company may wish to periodically review the scope of the patents in its portfolio to ensure that they continue to cover any updated or upgraded versions of its offerings.