Singapore has become the hub for the nascent fintech industry with 52% market share in South East Asia (SEA). Presently, there are 490+ startups in the country and the top 3 biggest sectors are payment, lending and investment sector. Personal finance is the upcoming biggest sector of the country. Singapore has always been the very first choice of MNCs and financial institutions for their headquarter for Asian operations. It is the technology capital of Asia because of its deep roots in technology and innovation though they have tried their hand on the fintech sector very late. Still, the country has established itself as the “Fintech Hub” of South East Asia with the support of regulators and the Singaporean government.
In 2017, the Singaporean fintech market crossed $83 million. According to KPMG International study- Pulse of Fintech – the investment in Singapore based fintech companies was dropped in 2016 by 65% (US$605 million to US$214 million) and the number of deals decreased by only 2 to 28. Complication in the authorization process for fintechs is one of the major treason for the fall in the fintech industry in Singapore. In 2017, the total investment made in the fintech industry in Singapore was US$ 141 million. The most active investors of the industry were Wavemake Partners, Startupbootcamp, and GMO Venture Partners. In order to attract more fintechs in Singapore, the Monetary Authority of Singapore (MAS) is continuously working to streamline the authorization process. The country has established itself as the “Fintech Hub” of South East Asia with the support of regulators and the Singaporean government.
Singaporean Government’s Initiate to the Fintech Industry:
The government has a strong policy for the Fintech industry startups to promote innovation and financial inclusion. Singapore has become the leader in South East Asia because of the regulatory body Monetary Authority of Singapore (MAS) backed the fintech industry right from the get-go. In 2017, MAS announced to invest US$ 164.2 million (S$ 225 million) under the Financial Sector Technology and Innovation (FSTI) scheme to foster the innovation ecosystem in Singapore over the next five years. Also, developed the roadmap for the central bank to move toward an open Application Programming Interface (API) architecture and released a consultation paper on proposed guidelines for a ‘regulatory sandbox’ for the financial institutions (FIs) and non-financial players to provide them with a platform to experiment with financial technology (Fintech) solutions.
Fintech industry startups are expecting more supports form the regulators and policymakers. Singapore-based fintech startups find that the regulatory confirmation relatively less complex than other markets but still there are so many loopholes. 32% of fintech startups find easy, 43% find moderate and 25% find difficult to conform to local financial sector regulations. To create a sustainable financial services ecosystem and to foster innovation government support, regulation and policies are key elements. To promote innovation MAS has announced the opening of “the looking glass” a fintech innovation hub. Singapore is proactively backing a Fintech push and has taken a number of regulatory steps to promote innovation.
It is a peer-to-peer lending online marketplace for SMEs in Singapore and Southeast Asia, founded in 2014. Capital Match provides affordable working capital from professional investors through its online platform to SMEs. It serves to both group of customers; borrowers and investors. It offers loan duration ranging from 3-12 months SMEs and business loans and invoice financing facilities of S$50,000- S$200,000. Since inception, it has raised S$ 1,000,000 from three investors; Innosight Ventures is the lead investor and has facilitated over S$60 million in cumulative origination.
It was founded in 2016 by a team of former bankers with more than 155 years of collective experience in corporate and structured finance. Minterest is a peer-to-business financial technology platform offers various flexible funding options with interest rate as low as 1% and loan terms ranges from 3-12 months. It is recognised as Asia Pacific’s Top 25 Fintech Company by APAC CIO Outlook. It is building tomorrow’s financial ecosystem – one that serves rather than rules. It is regulated by the Monetary Authority of Singapore that holds Capital Markets Services Licence to deal in securities under the Securities and Futures Act.
It was founded in 2016 by a team of experienced founders and executives who have extensive fintech and financial experience across various international markets and raised S$ 700,000 as seed funding. SmartFunding is a platform that provides trustworthy alternative financing solutions that are 100% focused on small and medium businesses. It offers Peer-to-Peer (P2P) financing to SMEs and reduces the SME funding gap and translates it into high returns investment opportunities for global investors who want to make attractive returns while supporting Singaporean businesses.
The startup offers a peer-to-peer invoice-trading marketplace that provides working capital solutions to fund growth for small to medium-sized enterprises. Also, InvoiceInterchange offers both selective invoice discounting and the whole turnover invoice discounting to SMEs. It pays bills or overcome seasonal cash flow fluctuations by freeing up cash locked up in invoices due 30, 60, or even 90 days. It provides a simple and straightforward platform where the SMEs can choose invoices that they want to sell, as many or as few as it wants, when it wants and there are no charges when they don’t. The investor fee is hardly between 0.8% – 1.5% (per 30-days) of the advanced amount and the transaction fee is typically between 1.0% – 1.5% of the invoice amount.
Challenges in the Singaporean Fintech Industry:
Most of the fintech industry startups feel that there is a shortage of required talent in their respective countries. For most of the fintech startups retaining and attracting high-quality technical talent is one of the most prevalent challenges, globally. For the success and future growth of the startup is the availability of the right talent. The challenge is across countries though in varying degrees, such as shortage of technology and software, product management, and sales and marketing skills, etc. Most of the startups are looking for recruiting foreign talent, which is also a major challenge and startups are still rely on personal connections (57%) and recommendations (48%) to hire talent.
Fintech industry has enough channels of funding available and is able to obtain funds easily to keep the growth operating. Most of the fintech startups rely on self-funding or bootstrapping, they agreed that there are enough funding channels are available but finding them is difficult for them to obtain funding. Fintechs expects that the next round of funding to be greater than US$ 1 million to operate their functions smoothly. Data Scientists, Financial Engineers, Mobile Marketers and Computer Programmers are another major challenge to find technical talent, and they are trying to import their technical talent from other countries.
Opportunities for Fintech Industry in Singapore:
Singapore provides exponential growth and possibilities for the fintech startups in the ASEAN region. A fintech startup can access a single market size of over 625 million people in the region through Singapore which is greater than the United States of America (319 million) and the European Union (504 million). The country serves as a gateway for FinTech companies to explore ASEAN’s emerging economies; they do not have enough mature financial markets and are on the verge of a digital revolution.
Singapore has 20% of fintech startups; payments as a subsector of fintech have achieved significant scale in the certain developed market. Social media platforms, e-commerce players and on-demand service providers (e.g., ride-hailing) with large captive consumer bases already have started to offer payments as a differentiated service to its consumers. The trend is successfully entered in the SouthEast Asia region has yet to play out in the western world. A few years back, fintechs and financial institutions are supposed to be rivalries, but the innovation swept across continents, both sides realized that collaboration and not competition is the way forward.
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