Singapore sees record rise in fintech fundraising in 2021

Singapore fintech fundraising

Singapore is on track to see a record level of fundraising in its fintech sector this year despite the pandemic. This flurry of activity comes as more mainstream institutions move into the sector, and demand for digital payment systems and wealth management services grows.

The Monetary Authority of Singapore (MAS), the island state’s central bank and main regulator, estimates the fintech sector had already raised more than S$650 million (US$480m) by the end of the first quarter of 2021.

This puts the investment level on track to exceed the record S$1.4 billion raised by fintech firms based in Singapore during the whole of 2020, itself an increase of more than 30 per cent from 2019.

To put that into perspective on the world stage, research firm CB Insights notes that fintech companies globally attracted more than US$20 billion in funding during the first quarter of 2021 alone.

Nevertheless, with Singapore’s track record in financial services along with its institutional support for innovation, the potential for fintechs is clear.

In 2020, the financial services sector in Singapore grew by 5.1 per cent even as the overall economy contracted. MAS estimates the sector grew by about 6 per cent in the first half of 2021.

“Technology will reshape financial services in the next 10 years, much more profoundly than it has in the last [five] years,” said Ravi Menon, managing director of MAS when releasing the central bank’s annual Report for 2020/2021.

“The financial services and fintech sectors together created 2,500 net new jobs last year and financial institutions expect to create another 6,500 new hiring opportunities this year, with strong demand in areas such as technology, wealth management, corporate banking, and insurance,” he said.

Covid Support

The MAS is pursuing a strongly supportive approach to developing Singapore’s fintech industry, especially in helping companies through the pandemic.  It has provided a S$125 million support package for the financial and fintech sectors to deal with the immediate challenges from Covid-19 and to position strongly for recovery and future growth.

The central bank also helped launch a $6 million FinTech Solidarity Grant to help Singapore-based fintechs sustain operations, retain staff, and offset proof of concept (POC) costs.

These efforts by the MAS are part of a broader push by Singapore to fortify its position as a global financial centre, a hub where banks and tech firms can offer competitive services to both consumers and corporates. At the same time, MAS maintains its role as the industry regulator, upholding Singapore’s strict rules against activities such as money laundering.

Finding the balance between encouraging entrepreneurship and regulation is key.

The MAS is currently processing the applications of companies seeking licences to operate services in payments and crypto-exchanges in the city. Those applying for licences have been operating under a grace period since a new Payment Services Act came into effect in January 2020, and the central bank is currently reviewing how best to speed up the licencing process.

More than 300 companies have reportedly applied, including entities of prominent groups such as Alibaba Group Holdings and Ant Group, Binance Holdings, and Alphabet Inc.

Industry participants say Singapore’s efforts to grow the fintech sector are starting to take effect.

“Singapore is one jurisdiction moving ahead quite rapidly,” said Malcolm Wright, chief compliance officer at 100x Group, a company founded by the people behind the cryptocurrency derivatives trading platform, BitMEX.

Wright said the main focus of the whole cryptocurrency market right now is how to stop illicit transactions – a big part of the new regulations put in place by the MAS.