With the Lunar New Year fast approaching, the Year of the Tiger is set to live up to its name as a time of high energy, tenacity, and risk-taking. For Singapore fintechs, there will be plenty of Tiger-style adventure and opportunities in the next stage of digitisation:
Re-bundling of financial services around fintech
Legal firm Linklaters said the supercharging effect of the Covid-19 pandemic on financial market digitalisation has seen a power shift from finance providers to consumers.
“The biggest theme in finance is ‘the great unbundling of financial services’, and its re-bundling around a digital architecture, putting fintech at the heart of the industry,” Linklaters said in its Fintech-Year-to-Come report for 2022.
Singapore’s Minister for Manpower Tan See Leng said the financial sector is one of the strongest and most highly competitive sectors of the country’s economy.
“In 2020, the financial and insurance sector grew by 5.1 per cent even as the overall economy contracted,” Dr Tan told local bankers in a speech, and in the first three quarters of 2021, “the sector grew by about eight per cent”.
That growth, combined with strong support for innovation and for attracting new players, is set to keep Singapore’s fintech hub booming in 2022.
So too is the trend to embedded finance, where financial services are increasingly offered by non-financial companies embedded on non-financial platforms.
“The number of ways in which customers can access financial services will continue to grow as more financial institutions partner with non-financial players to expand their reach,” Dr Tan said.
Digital payments unlimited
Digital payments are set to explode further, with Singapore well ahead in digital adoption.
Data group Statista expects Singapore’s total transaction value of digital payments to grow more than 20 per cent annually over the next three years.
In the latest VISA Back to Business study, almost three-quarters of global small businesses say these new forms of payment are fundamental to growth, while 84 per cent of consumers in Singapore (compared to 68 per cent globally) say Covid-19 has permanently changed how they pay.
Volumes and values in Singapore’s real-time payments system, PayNow, have been doubling in the past two years, and will be boosted even further when the latest cross-border partnerships kick off in 2022. Phased linkages of PayNow will start with other regional real-time payments systems this year, including with India’s UPI and Malaysia’s DuitNow.
Bigger fintech share of financial funding
In its latest APAC Regional Fintech Rankings report, research and analytics firm findexable said Asia is now home to almost half of the top 20 global fintech hubs. Singapore ranks second in the Asia Pacific fintech rankings after Hong Kong, with Sydney in third spot.
Private equity firms and venture capitalists are expected to keep moving to Singapore because of the robust fintech environment, which saw record funding of US$3 billion in 2021 – mostly in the areas of blockchain and cryptocurrencies, as well as payments and remittances.
This month’s market debut of Singapore’s first special-purpose acquisition companies (SPACs) gives fintechs even more fundraising options. SPACs, or so-called ‘blank cheque companies’, list first – in this case, on the Singapore Exchange – and then find private tech companies to acquire.
In addition, there is still huge interest in trading crypto assets, despite the recent two-month slide in the global cryptocurrency market.
More licenses to provide these digital payment tokens (DPTs) services are expected to be issued by the Monetary Authority of Singapore (MAS) this year under the Payment Services Act after just four were granted in 2021.
Singapore is clearly concerned about who should be investing, with new guidelines from the MAS in January aimed at deterring DPT providers from promoting high-risk crypto assets to the general public.
Climate fintech
But one fintech investment with more universal application is ‘green finance’. Following COP26 climate talks in 2021, financial solutions providers are looking to ‘climate fintech’ to tackle the challenge of sustainability and net zero emissions.
Last November, the MAS said it was partnering with the industry to pilot four digital platforms under Project Greenprint to ensure better data on sustainability. Under the pilots being carried out this year, financial institutions can direct capital towards sustainability projects in a more scalable way, monitor sustainability commitments, and quantify the risks and real-world impact of their portfolios.
One fintech area under fire for the real-world impact of its activities is the crypto market. Blockchain technology incurs incredibly high energy usage through crypto data mining, but Jason Lee, chief operating officer at the Algorand Foundation, says ‘greener’ blockchains are on the way.
“First generation blockchains which operate today can consume electricity as much as a small country,” Lee told a blockchain webinar in Singapore.
“But next-generation blockchains may consume the same [electricity] as just a small community of homes – in the Singapore context, maybe just one set of HDB flats. So blockchain progress in the future does not want to come at a cost to the environment.”