Singapore fintech proves resilient

2019 was a banner year for Singapore's fintech industry, with investments having doubled to more than US$861 million compared to the year before, and more than 40 innovation labs being set up to drive innovation within the traditional financial institutions and facilitate collaborations with fintech firms.

The nascent Singapore fintech industry has expanded to an estimated 1,000 firms, making it the largest hub in South-east Asia in terms of total fintech-investment dollars as well as number of fintech firms.

Covid-19 has caused worldwide disruptions, quickly evolving from a pandemic to a global economic crisis. Fintech firms have not been spared from the economic drawbacks of Covid-19 either.

Plenty of projects have been re-prioritised or delayed, investors have turned cautious and imposed restrictions on international travel by many countries has significantly curtailed business development activities.

In a survey conducted by the Singapore FinTech Association (SFA) among its members in mid-March 2020, close to half of the respondents reported that Covid-19 had a significant impact on their businesses, with key concerns in areas of business cost, fund-raising and sales. In Q1 2020, Asia saw a 69 per cent drop in fintech funding to US$883 million.

In early April 2020, the Monetary Authority of Singapore (MAS) rolled out a S$125 million Covid-19 Support Package for fintechs, to deal with the immediate challenges from the coronavirus and to position them strongly for recovery and future growth once the threat of the virus subsides.

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By mid-April, AMTD Group and Razer had announced S$50 million and S$68 million of funds respectively, to support fintech startups with bridging loans, equity investments and convertible loans.

We did our part and earlier this year in May, along with SFA, MAS and AMTD announced a S$6 million FinTech Solidarity Grant.

This grant is aimed at helping Singapore-based fintech firms maintain their operations, retain their employees, as well as enable them to continue to innovate in partnership with financial institutions and create opportunities for growth.

To date, 206 fintech firms have been awarded a total of S$1.5 million under the Business Support Grant.

Earlier in June, SFA also rolled out a Compliance Readiness Framework and self-assessment tool, to upskill its members to be more effective at servicing financial institution clients, as Covid-19 had accelerated their digitalisation needs.

As a world's first, SFA started providing a fintech certification service to companies looking to be certified, as well as to empower them to apply for some of the various grants and funds from the Covid-19 Support Package. As at November 2020, SFA has certified a total of 450 fintech firms in Singapore.

Recovery in sight

Covid-19 has accelerated the adoption of digital finance by consumers across all age groups and businesses of all sizes. As a result, financial institutions are also doubling down on their digital transformation efforts.

For example, founder and CEO of fintech firm MatchMove Shailesh Naik was recently quoted as saying that they stopped making cold calls to potential customers as the number of enquiries from companies wanting to digitise their payment systems had shot up significantly from the beginning of the year.

Fintech investments have started recovering since April to hit S$462 million in the period to June 15, up 19 per cent, against the first half of 2019. It is likely to hit a record high this year.

The issuance of digital bank licences is likely to drive the next phase of fintech development in Singapore.

In the short run, consumers and businesses will not be disappointed in terms of higher interest rates for their deposits and lower rates for their loans. In the long run, the dynamics of financial services will never be the same, but it will be for the better.

The outcome of competition and challenges from digital banks will eventually result in better products or more efficient processes, leading to better customer experiences and services. Traditional financial institutions will increasingly turn to digital means to compete better.

More importantly, the battleground of fintech firms will be expanded to cover the South-east Asia region, and more jobs will be created to accommodate the growing popularity of the fintech industry.

To conclude, some likened Covid-19 as the crisis of the generation, but some would say it could be the opportunity of the century as well for Singapore.

We are fast becoming a safe harbour and a growing hub of the digital economy - this being clear as companies such as ByteDance and Tencent are planning to invest billions and move their regional headquarters to Singapore.

According to the recent e-Conomy SEA 2020 report from Google, Temasek Holdings and Bain & Company, South-east Asia saw 40 million people come online for the first time in 2020.

The future prospects of economic opportunities for growth will be especially bright in South-east Asia. As for the future of Singapore's fintech industry, the best is yet to come.

The writer is founding president of the Singapore FinTech Association (SFA), a cross-industry non-profit organisation set up to support the growth of the FinTech ecosystem. SFA currently has more than 850 corporate members and has established international partnerships in 40 countries.