Fintech market in Singapore

Executive summary

Singapore is well on its way to becoming a Smart Nation with a digital economy, government, and digitally-enabled society. The FinTech industry is seen as a critical component of that growth. As such, the Monetary Authority of Singapore (MAS), Singapore's central bank and financial industry regulator, has kept a laser focus on developing the foundational digital infrastructure backbone and creating supporting institutions necessary to grow a digital financial economy.

Through this proactive regulatory approach, well- established technology infrastructure, and a large talent pool, Singapore has established itself as a leading FinTech center in Asia and globally. At the end of 2020, over 40% of Southeast Asia's FinTechs were based in Singapore which was Asia's highest-ranked FinTech city in Findexable's Global FinTech Index, ranking 4th behind San Francisco, London, and New York. Startup Genome's Global Top-20 FinTech Ranking also rated Singapore the top Asian ecosystem and 4th overall behind Silicon Valley, New York City, and London.

The forward-looking developmental approach towards FinTechs has extended well beyond creating a FinTech friendly regulatory system. In addition to regulations and regulatory easing to make room for experimentation and innovation, the MAS has invested funds to nurture and protect its FinTechs.

The 2015 Financial Sector Technology & Innovation (FSTI) scheme was a $225 million commitment for setting up infrastructure and innovation labs. The FinTech and Innovation Group (FTIG) was simultaneously set up to help enhance efficiencies and strengthen competitiveness in the financial sector. Its focus also extended to better-managing risks and developing strategies and regulatory policies for technology and innovation.

In June 2020, early in the COVID-19 pandemic, after the results of a Singapore FinTech Association survey showed the dire strait of the FinTech sector, the MAS rushed to offer a $125 million COVID-19 support package for FinTechs in the form of subsidies and grants. In August 2020, FSTI 2.0, the follow-up to the FSTI scheme, committed a further $250 million until 2023 to accelerate financial sector technology and innovation-driven growth by enhancing the vibrancy of the innovation ecosystem. FSTI 2.0 is expected to strengthen the pipeline for Singaporean FinTech talent and support large-scale innovation projects.

To build on the Smart Nation Initiative of 2014, Singapore has established many organizations to support and develop its FinTech sector. These include the Singapore FinTech Association and the FinTech Office, a virtual one-shop entity for all things FinTech. In 2018, the MAS launched the ASEAN Financial Innovation Network (AFIN) with the ASEAN Bankers Association (ABA) and the International Finance Corporation (IFC). The API Exchange (APIX), launched the same year, is an online global FinTech marketplace and sandbox platform for financial institutions. It is considered the world's first cross-border, open-architecture platform and already has a global membership. The year 2020 saw the Singapore Financial Data Exchange (SGFinDex) launch, another platform to help drive FinTech growth in Singapore through open banking and data access.

To further burnish Singapore's FinTech reputation, the Singapore FinTech Festival was launched in 2016 and has become the most significant FinTech festival in the world. The annual festival hosts thousands of global visitors and dignitaries and has become one of the 'must do' FinTech events, even in 2020 when the event was pushed online due to COVID.

The development of Singapore's FinTech ecosystem has also attracted a significant amount of venture capital (VC) interest. Investment into Singapore's FinTech industry in the first half of 2020 hit $462 million, and between 2015-2019, Singapore attracted 65% of the total FinTech funding in SE Asia, almost four times more than Indonesia. This growth comes at the expense of VC investment into Greater China and India, which is slowing due to geopolitical considerations.

Nearly all of Singapore's FinTech industry segments included in this study are growing steadily:

• Lending
• Payments
• InsurTech
• WealthTech
• RegTech

Singapore's domestic addressable market is relatively small compared to some of the city-state's nearby Southeast Asian neighbors. Still, Singapore's geopolitical stability, clear regulatory environment, and robust infrastructure have made it attractive to FinTechs setting up a regional HQ, especially in the payments segment, where many FinTechs focus on cross-border use-cases.

For Canadian FinTechs looking to expand into Asia, Singapore may be the most logical choice for many of the reasons mentioned above. It is, however, essential to establish a local presence. Even with many commercial discussions shifting from face-to-face to online, as the region comes out of the pandemic it is expected that business travel will increase and, at least for initial discussions, face-to-face may still be vital.

Having a legal presence can also help in regulatory and administrative matters.

Despite the welcoming environment, it is not to say that launching in Singapore means that a Canadian FinTech will automatically be successful. The FinTech market is very competitive with both foreign entrants and home- grown competitors fighting for market share in both the business-to-consumer (B2C) and business-to-business (B2B) spaces.

For B2C, the Singapore market is relatively small, and nearly every segment of the industry has a plethora of competitors competing for a population of just under 6 million people. For B2B, the financial sector is dominated by large established financial institutions such as Southeast Asia's largest bank DBS. These players have hitherto been relatively slow to innovate and adapt, but the pressure of industry competition and the eminent launch of digital banks incentivizes them to change. Despite this, FinTech sales cycles are long and sometimes costly, especially as the banks all have their choice of many vendors eager to sell to them.

FinTechs wanting to enter Singapore will do well to benchmark themselves against the winners of the Singapore FinTech Festival and look in the FinTech Hackcelerator problem statements to see what the key opportunities may be and how they match up. A FinTech with the ability to solve a key problem statement will likely have a better chance of success.

Singapore is an excellent incubator for startups, but it is a small, relatively saturated market. Therefore, FinTechs who set up in Singapore should plan to use it as a gateway to the ASEAN region and the 4.5 billion population Asian market beyond. Most importantly, Canadian FinTechs must remember that Asia, especially Southeast Asia, is not one monolithic region and therefore requires particular country by country approaches. Cultures, regulations, consumer habits, and business norms vary widely, so there is no such thing as a singular Asia Strategy, but rather country- specific approaches that consider the nuances of the market.

For a full copy of the market profile, please contact SPORETD@international.gc.ca.