Reply to Parliamentary Question on financial literacy of adults in Singapore
QUESTION NO 3413
NOTICE PAPER 1965 OF 2020
FOR WRITTEN ANSWER
Date: For Parliament Sitting on 3 February 2020
Name and Constituency of Member of Parliament
Miss Cheryl Chan Wei Ling, MP, Fengshan SMC
To ask the Prime Minister (a) what is the current financial literacy of adults in Singapore and what has been the trend in the past decade; (b) what has been done to increase financial literacy; and (c) whether a national framework is in place to measure the impact of digital finance on businesses and individuals.
Answer by Mr Tharman Shanmugaratnam, Senior Minister and Minister in charge of MAS:
1. Singaporeans’ understanding of basic financial concepts is good, has been improving, and can certainly improve further to help them better plan for their future.
2. A Financial Planning Attitudes Survey commissioned by MoneySense in 2017 showed that about 9 in 10 Singapore residents understood that an investment with a higher return often comes with higher risk. This is significantly higher than the 6 in 10 in a similar survey conducted in 2013.
3. However, only about 1 in 5 feel that they are knowledgeable about investing. Some Singaporeans also have misconceptions about when to start planning for their finances. 1 in 5 feel that they would only need to do financial planning when they are looking to retire; and half of young working adults aged between 17 and 29 have not started thinking about financial planning because they think it is still too early to do so.
4. That is why we must continue our work through MoneySense, to raise the level of financial literacy amongst Singaporeans, to help them make prudent decisions relating to their savings, investments, insurance, house purchase, retirement planning, and not to fall for scams. MoneySense takes a multi-pronged approach, reaching out to Singaporeans at different stages of their lives.
5. As for the impact of digital finance on businesses and individuals, it is generally positive, because it brings about greater convenience, more accessibility, and in some instances, lower pricing, to banking and financial services. However, it can also mean that consumers are more exposed to products with higher risk, and which requires them to have a higher level of financial literacy.
6. MAS has been closely monitoring these trends and continually updating its regulatory policies to promote digital financial services, while guarding against risks. Let me cite a few specific areas where our policies have been evolving.
7. First, e-payments. We have been driving e-payments because it enhances consumer convenience and business efficiency. Today, more than 3 out of 4 Singaporeans between 20 and 75 years old have registered for PayNow, and an estimated 60% of active businesses have registered with PayNow Corporate. The total monthly transaction value is S$1.6 billion compared to S$1 billion six months ago, so adoption and growth is strong.
8. But cybersecurity is a concern in e-payment. MAS has issued guidelines for e-payments user protection and technology risk management by financial institutions. Financial institutions have to ensure that they implement robust cybersecurity measures. Parliament also enacted the Payment Services Act, so that we have fit-for-purpose regulations that set cyber hygiene standards for different payment services licensees. For consumers, MoneySense is also stepping up education to users, to practise good cyber hygiene such as setting strong passwords and keeping them secure, and being vigilant against phishing and other scams.
9. Second, we are also promoting other digital financial services, such as investment advisory and insurance offerings. Consumers can benefit from a wider choice of more customised products that match their risk profiles, investment goals and life needs. At the same time, MAS has provided more clarity to the industry on the areas that warrant greater oversight, to provide better safeguard for consumers.
10. Third, MAS will be issuing up to 5 digital bank licenses by the middle of this year. They can potentially provide greater funding access for underserved smaller enterprises, as well as low-cost investment solutions and convenient new banking experiences for consumers.
11. Standards in managing and using data are critical in all of this. Digital banks and other digital financial services are likely to use far more data in their operations than traditional financial services. MAS therefore worked with the financial industry to develop principles to guide the responsible use of artificial intelligence and data analytics in financial services, in a way that promotes fairness, ethics, accountability, and transparency in the use of data by financial institutions.
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