With a steady stream of investments pouring in, Singapore is solidifying its position as the financial technology (fintech) hub of Southeast Asia. The government has also been actively promoting its #fintech industry, offering a range of incentives to attract startups and global companies alike. As a result, Singapore has emerged as the go-to destination for fintech firms looking to expand in the region. With a supportive regulatory environment, top-notch infrastructure, and a pool of skilled talent, Singapore is well-positioned to maintain its leadership position in #ASEAN’s fintech landscape. In this article, we will be looking at how Singapore is ideal for Fintech firms to thrive.
In the previous article, we talked about Indonesia’s booming Fintech industry, in this article, we will be focusing on Southeast Asia’s Fintech Hub, Singapore. Though both are part of the Association of Southeast Asian Nations (ASEAN), Singapore and Indonesia have very different macro environments and pose different opportunities for Fintech investments.
Firstly, Singapore has a much smaller population of only 5.4 million compared with the 273.8 million in Indonesia. Secondly, Singapore also has a relatively more mature financial system, especially in terms of financial regulation. As such, when compared to Indonesia, Singapore has a smaller population of underbanked and unbanked. Despite the seemingly smaller market size which may be deemed as unattractive for Fintech firms, Singapore has successfully anchored its position as Asean’s Fintech hub and is now home to 40% of the region’s Fintech firms. Even during the pandemic, Singapore continues to bag nearly half of ASEAN’s Fintech funding, making her the top fintech investment destination.
There may be several reasons why Singapore has risen to become Asean’s Fintech Hub. We outline 4 below.
- In FinTech as in many other parts of the financial services ecosystem, Singapore is recognised as the “springboard” for Fintech firms to access other ASEAN markets, rendering moot her constraint of having a small market size. Often, Fintech firms looking to expand into the ASEAN market will choose to leverage the country’s pro-business policies and set up their regional headquarters in Singapore. One such example is Futu Holdings Ltd., a Hong Kong-based Fintech firm focusing on investment offerings for retail investors. When asked about the rationale behind the move, Leaf Hua Li, CEO of Futu Holdings Ltd., said that “expansion into Singapore is a strategic decision to serve as a bridge into the rest of Southeast Asia.” Executives’ confidence in Singapore further reinforces its status as an attractive regional investment hub despite facing strong competition from Hong Kong, our Asian counterpart, which has also been dubbed one of the top financial hubs globally.
- Despite the fact that Singapore’s population is very small, it is actually very diverse. Specifically, the country is home to one of the largest expatriate and migrant communities in Southeast Asia. For some Fintech firms, this characteristic makes the country an ideal destination as these communities are the target users of their home country’s Fintech offerings. One prominent community in Singapore is the community of Chinese nationals, which supposedly constitutes 18% of the country’s foreign-born population. This has contributed towards an influx of Chinese Fintech firms to serve Chinese citizens and Chinese firms in Singapore. The above phenomena can be observed from the presence of remittance fintech firms such as Panda Remit. Backed by Lightspeed, Panda Remit aims to provide safe, convenient, low-cost money transfer service to overseas Chinese.
Frequent visitor’s to Singapore’s Chinatown may have noticed the numerous Panda Remit advertisements in the MRT station and around People’s Park Complex (see Figure 1). As its name suggests, Chinatown is where many Chinese nationals and Chinese vendors congregate, and naturally, Chinese Fintech firms will focus on places commonly frequented by Chinese nationals for their marketing efforts. Once again, this shows that the diverse Singapore population brings opportunities for overseas Fintech firms who want to expand and serve their citizens abroad.
- Singapore’s growing wealth management sector also poses a great opportunity for many local Fintech firms. Today, we see that many of Southeast Asia’s top Wealthtech firms are based in Singapore (see Figure 2). According to a report from KPMG and Endowus, venture funding for WealthTech in Singapore has increased by sevenfold from $23 million in 2017 to $161 million in 2022. Apart from having a diverse population, Singapore is also home to a significant pool of high net worth and ultra high net worth individuals, allowing the country to be the 3rd largest wealth centre in the world. According to PwC, high net worth individuals are enthusiastically adopting technology and that 47% of HNWIs under 45 who do not use robo-services would consider using them in the future. This would translate into willingness to pay and strong domestic demand for Wealthtech offerings, which has also allowed Singapore-based Wealthtech firms to thrive. Over the years, we have seen that these Singapore-based Wealthtech firms are making their strides in terms of expanding into other regions. For example, since its inception in 2015, Funding Societies has also expanded into the Malaysia and Thailand markets, making it the largest SME financing platform in the region.
Fintech Firm | Country of Origin | Funding |
|---|---|---|
Funding Societies | Singapore | $560.1 million |
ADDX | Singapore | $140 million |
Pluang | Indonesia | $113 million |
Ajaib | Indonesia | $90 million |
StashAway | Singapore | $73.7 million |
Endowus | Singapore | $67 million |
Finhay | Vietnam | $26.1 million |
Coins.Ph | Philippines | $40 million |
Hugosave | Singapore | US$10.5 million |
PitchIN | Malaysia | RM 12.3 million |
Figure 2: Top 10 Wealthtech Companies in Southeast Asia (Source: Fintech News Singapore)
Singapore’s dominance as the region’s Fintech hub is also evident in the surge of applications for digital banking licences by Fintech firms. When the Monetary Authority of Singapore opened the call for applications, it received 21 submissions, including from major corporations such as Greenland Financial Holdings and Ant Financial Group. This strong interest is a testament to the market confidence in Singapore being an ideal breeding ground for digital banking.
- Singapore’s advanced Fintech regulatory framework makes Singapore a good place for technology test-bedding. In a bid to establish its position as ASEAN’s Fintech hub, the Singapore government has been very supportive of the Fintech industry by launching several initiatives ahead of its ASEAN peers. Notably, in 2016, Singapore is the first country to have established a regulatory sandbox for Fintech startups. The regulatory sandbox provides a safe space for Fintech firms to test the feasibility of the product using real money and clients, without worrying about the complete set of regulatory guidelines during the sandbox period. Over the years, we have seen some notable Fintech companies making use of the Regulatory Sandbox. One example is DigiFT Tech, which has been admitted into the sandbox since June 2022, enabling it to be the first regulated decentralised security token trading platform.
Singapore’s business-friendly policies are also attractive to Fintech firms. Even when facing an economic downturn during the COVID-19 pandemic, the government launched a S$6 million MAS-SFA-AMTD Fintech Solidarity Grant to support Singapore-based Fintech firms in maintaining their operations by overcoming short-term financing gaps caused by the pandemic. In terms of network, the Singapore FinTech Association has also grown to be one of the largest FinTech associations in the world and the annual Singapore Fintech Festival has seen record turnouts, making it the world’s largest and most impactful Fintech event.
With the above mentioned, it is evident that Singapore has a vibrant entrepreneurial ecosystem, which makes her a desirable destination for a Fintech hub. Singapore’s advantageous population composition and business-friendly climate, compared to other ASEAN countries, will continue to position it as a leader among Fintech hubs and take advantage of the growing demand for Fintech offerings in the region.