Singapore fintech sector lays groundwork for Smart Nation ambition

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Since launching the initiative in 2014, the city-state has made tremendous progress in its mission to become the world’s first smart nation by 2030.  The fintech sector is leading the charge.

Editorial

Singapore is on its way to becoming the world’s first smart nation. Prime Minister Lee Hsien Loong launched The Smart Nation initiative with the goal of developing and deploying information and communication technologies (ICT) at the national level to improve the quality of life in Singapore.

The top sectors for fintech innovation in Singapore are investments platform, payments and lending and the emerging sector is personal finance management.  The fintech industry’s explosive growth will challenge the Singapore’s exceptional banking sector to embrace these emerging technologies or else they risk irrelevance.

The fintech ecosystem in Singapore has tremendous opportunities, and this has led to major venture capitalists such as Golden Gate Ventures making major investments. It has some Singapore fintech startups in its portfolios such as Moneysmart and Codapay. In 2015 and the first half of 2016, $345 million went to fintech funding out of the overall $3 billion venture capital financing in the Southeast Asia.

One sector ripe for disruption is the remittances market. SingX wants to be the Airbnb of global payments. Former DBS bankers back up this Singaporean fintech startup. The edge they have over banks is their price. They have a very small transaction fee of 0.5% of the transaction.

Atul Garg, SingX’s CEO, says, “We are targeting consumers and SEMs, the segments we believe are underserved and are paying the highest rates for remittances. SingX’s technology can provide them with a smarter way of moving their funds, swiftly, smoothly and cheaply. They will no longer need to queue up at bank branches or fill up forms.”  SingX will soon expand outside Singapore and India. According to a 2016 report by the Boston Consulting Group, the cross-border payments market is a US$30 trillion market.

The banking sector is also making headways regarding integrating fintech into their business models and supporting entrepreneurial initiatives that will boost the nation’s drive to become a Smart Nation. DBS Bank has started a pre-accelerator programme called DBS Hotspot, aimed at helping homegrown startups thrive.  One of their latest innovative products is the DBS Paylah! Mobile wallet app which is rapidly growing in usage. The wallet app is in line with Singapore’s quest to build a smart financial centre. DBS Bank has also created a 16,000 square feet innovation centre called DBS Asia X to boost innovations in digital banking.

Other banks like OCBC have used the popularity of the Apple Watch by creating a banking app for it. OCBC clients will be able to access their bank accounts using the app and locate the nearest OCBC branch or ATM. They have also become a bank pioneer in Southeast Asia in using an open Application Programming Interface (API) platform that allows developers to create applications and programmes that integrate well with the bank’s products and services.

A big reason why fintech is thriving in Singapore is that there is a significant effort from Singapore’s regulators to help fintech companies navigate the regulatory landscape. For example, the Monetary Authority of Singapore (MAS) gives guidelines on the usage of cloud services and a regulatory sandbox to encourage and enable experimentation of technology applied to financial products or services.

To enable fintech to flourish in the country, MAS will facilitate internships and joint projects with fintech companies that will allow students to apply their technical skills in areas such as data analytics and cyber security. MAS has pledged a total of S$225 million for the development of the fintech industry and has a purpose built fintech innovation hub known as Looking Glass @ MAS.

The banking sector is also helping boost fintech innovations. OCBC Bank started its fintech accelerator programme called the Open Vault. The program mentored eight start-ups, and they were allowed to use OCBC Bank’s data sandbox to test their technologies. UOB on the other hand has participated in a financial services fintech accelerator programme with Infocomm Investments, a unit of the Infocomm Development Authority of Singapore.

The fintech industry is a core component of Singapore’s Smart Nation initiative. Singapore is one the world’s largest financial sector making it a hotbed for financial technology. The digital transformation led by the fintech sector will spillover to other sectors as it transforms the way businesses and consumers transact with each other.