KGI Blog | Fintech in Singapore

Published by Christina Chua, 22 August 2020

Financial Technology, otherwise known as Fintech, has been evolving rapidly in recent years. Digital advancement appears to be challenging the current operations of the conventional financial services industry. It has drastically altered how financial services are being presented to customers and continues to reshape the financial industry every day.

Be it whether sophisticated solutions in wealth management or other financial services such as insurance and loans, financial institutions are developing more cost-efficient and flexible solutions to deliver financial services to their customers around the world without human intervention.

In Singapore, Fintech is a space where a wide range of companies in different industries competes. These include traditional financial services companies, technology firms, e-commerce and telecommunications companies, infrastructure operators and so on. All these companies are competing with a common intention to react to the evolving needs of their clients effectively. From a traditional bank offering digital banking services, to a Robo-advisory firm providing investment management services without human interference, Fintech is altering the way we think about creating, developing, and managing financial institutions.

Fintech is the umbrella term which is used to classify an extensive range of new financial products and services made possible with the use of technology. Separately, it also refers to a large digital ground in which the differentiation between companies or providers in the financial sector and non-financial sector are no longer clear-cut. (PwC Singapore, 2016).

Singapore has been at the forefront of Fintech innovation in Southeast Asia region. In late 2019, more than 600 Fintech companies had set up their offices in Singapore, an increase of 500 companies since 2016. Financial establishments such as banks and insurance firms are at various stages when it comes to digital transformation, and more than 30 of these firms have set up their innovation labs in Singapore.

The growth in mobile small and medium-enterprises (SME) lending is one of the most revolutionary development. Typically, smaller businesses seldom possess a credit record or collateral to obtain access to traditional bank loans. Grab Holdings Inc., commonly known as Grab, is a ride-hailing firm headquartered in Singapore with presence in multiple Southeast Asian countries. They are currently offering financial services like insurance and SME lending on their mobile platform. Other excellent examples of companies in Singapore that utilize Fintech to serve clients are Singapore Life, Singapore's first fully digital insurer, and StashAway, an online investment management company based in Singapore that provides Robo-advisory services.

Fintech a disruptive industry, and therefore, it requires a reasonable degree of regulation as a framework to ensure its operations are sound in the financial services industry. Consequently, if regulatory systems fail to provide clarity to Fintech's operations, ambiguity may potentially arise, which may eventually lead to fraudulent activities and cybercrimes. Singapore's central bank and financial regulatory authority, the Monetary Authority of Singapore (MAS), has adopted a proactive stance on setting up an environment conducive to Fintech innovation. The Fintech & Innovation Group ("FTIG") established by MAS serves as a key point of coordination for Singapore's Fintech projects, in particular the development of Fintech-related regulations and the implementation of technological innovation in the financial services industry.

Many observers have disputed that there is a limit to what technology can accomplish when it comes to providing financial services. Others say that robots or algorithms cannot fully replace the role of human beings when it comes to risk assessment and management, as well as the structuring of sophisticated contracts. Judging by where we have come so far in the Fintech space, especially when it comes to payments-related services, we might as well get ready to embrace situations in which the most of processes in financial services will be managed by technology.

Jim Marous, co-publisher of The Financial Brand, says that consumers' ever-increasing desire for digital financial services will be urging many traditional financial institutions to propel digital innovation efforts rapidly.

Furthermore, the current COVID-19 pandemic has also sped up the secular trends in Fintech, especially at a time when the authorities are encouraging citizens to limit physical contact. With lockdowns enforced throughout the world, many digital payment platforms have prospered, and the most efficient businesses are turning towards Fintech use in the highest demand.

It is heartening to know that the financial industry in Singapore has been extremely resilient amidst COVID-19 as it is well-plugged into digitalization, and most financial institutions are able to conduct their business activities through digital platforms instead of meeting their clients in-person (BIS.org).

The Deputy Governor of the Bank of Japan, Hiroshi Nakaso, published a presentation in 2016 under the headline; 'Fintech, Its Impacts on Finance, Economics, and Central Bank'. His presentation mentioned three technological innovations behind the growth of Fintech, which include: Blockchain and Distributed Ledger Technology, Artificial intelligence and Big Data Analytics, and Cellphones and Smartphones (Hiroshi Nakaso, 2016). Innovations in all these groups seem to be still in progress. Therefore, it is safe to say that the degree to which the development and advancement of Fintech are still underway.

According to The Business Times, more than a thousand Fintech jobs are expected to be created every year in Singapore. Therefore, it is currently the appropriate time for employees to upskill themselves in Fintech-related expertise so they can be ready for the boom in the Fintech sector, and stay relevant in the ever-changing digital landscape. The different stakeholders from the institutes of higher learning to non-profits like NTUC, Singapore FinTech Association, and the Institute of Banking & Finance, are all working hand-in-hand to upskill and retrain financial sector workers and develop the future pool Fintech talent (The Business Times, 2019).

I am certainly looking forward to the exciting opportunities that Fintech will be creating in the future and how it will reshape and reinvent the client experience in the financial sector, especially with the recent announcement that Singapore will be investing S$250 million in the following three years for Fintech innovation (Fintech Zoom, 2020).

What about you? What are your thoughts on Fintech?

References

1.     Chia, H. (2019). Singapore's Fintech Ecosystem and Its Role in ASEAN. The Business Times. Retrieved from: https://www.businesstimes.com.sg/hub/sff-x-switch-2019/singapores-fintech-ecosystem-and-its-role-in-asean

2.     Grab SG. (2020). Our Products | Grabfinance | Grab SG. Retrieved from: https://www.grab.com/sg/merchant/finance/hub/products

3.     Menon, R. (2020). Ravi Menon: Singapore's Financial Sector Agile and Resilient Amid Covid-19. Bis.org. Retrieved from: https://www.bis.org/review/r200604b.htm

4.     Min-seo, J. (2020). Singapore parks $182M for fintech innovation, with particular deal with AI. Fintech Zoom. Retrieved from: https://fintechzoom.com/fintech_news_fintech/singapore-parks-182m-for-fintech-innovation-with-special-focus-on-ai/

5.     Nakaso, H. (2016). Fintech – Its Impacts on Finance, Economies and Central Banking. Boj.or.jp. Retrieved from: https://www.boj.or.jp/en/announcements/press/koen_2016/data/ko161118a.pdf

6.     Pwc.com. (2016). Blurred Lines: How Fintech Is Shaping Financial Services. Retrieved from: https://www.pwc.com/il/en/home/assets/pwc_fintech_global_report.pdf

7.     Pwc.com. (2016). Global Fintech Report Executive Summary: Singapore Highlights. Retrieved from: https://www.pwc.com/sg/en/publications/assets/fintech_singapore_exec_summary.pdf

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