Lee Li
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Investment in fintech is surging back following a brief but notable drop during the COVID pandemic. As a result, countries worldwide are seeing a large influx of capital for fintech ventures, and both investment totals and deal counts in the fintech space are increasing rapidly.
Although a large part of fintech funding focuses on countries such as the United States and the United Kingdom, smaller countries, particularly in Asia, are making their presence known. This is hardly surprising given that Asia leads the world in fintech adoption rates.
Singapore is one country building a solid reputation as a hub of fintech activity, and this reputation is generating substantial investment.
Singapore’s fintech investment surges forward
According to KPMG, total fintech funding worldwide in the first half of 2021 reached $98 billion from 2,456 deals, rebounding strongly from the COVID-inspired investing dip of 2020.
Not surprisingly, the U.S. accounted for most of the total investment at $42 billion. However, fintech funding also recovered well in Asia and the EMEA region.
For the first half of 2021, Asian fintech funding activity amounted to $7.5 billion despite the lack of any notably large deals. CBInsights estimates that Asian fintech funding in Q3 is strong at nearly $6 billion, trailing only the U.S.
Despite its small size (less than 5 million total population), Singapore is quickly reaching investment levels of countries many times its size. Although the KPMG data shows only $614 million during the first half, the Singapore Monetary Authority’s chief fintech officer, Sopnendu Mohanty, suggests a strong surge in the second half, pushing Singapore’s total to $3 billion. Given the record number of deals in the first half of 2021, Mohanty’s optimism seems justified.
Compare Singapore’s total to countries like Canada and the major European countries. In the first half, Canada’s total investment was $4.8 billion, while France and Germany were each in the $2 billion-$2.5 billion range. But these countries are six to 10 times the size of Singapore and have similarly larger GDPs.
Singapore’s investment level is also notable among countries in the Asia Pacific. The two most populated countries, China and India, generated only $1.3 billion and $2 billion, respectively. Australia had less than a billion. Singapore is swinging well above its weight when it comes to fintech investment.
Fintech adoption drives investment
Fintech adoption continues to grow rapidly, and the pandemic only provided additional fuel for the fire. Adoption rates in Europe, for example, accelerated by 72% in 2020 alone.
Singapore sat just outside the top 10 countries with an adoption rate just below 70%. But what is truly notable is how rapidly adoption skyrocketed. Just two years prior, adoption was less than 25%, so Singapore tripled its rate in only two years — a stunning increase.
With the fintech market expanding rapidly and plenty of room left for growth, the opportunities for continued investment in Singapore are promising.
Singapore’s support for fintech attracts investment
Singapore’s fintech industry has strong support from all corners. Its government actively promotes the fintech sector, making it an attractive investment opportunity. According to the Monetary Authority of Singapore (MAS), their goal is to become a “Smart Financial Centre” based on innovation in the fintech arena. The government is investing heavily in fintech and creating a wide range of incentives for fintech companies to reach this goal.
One of the most significant actions the government took was assisting the fintech sector to not only survive but to get stronger throughout the COVID crisis. MAS instituted a $125 million support package for fintech firms and financial institutions in the process of implementing fintech initiatives.
The package covered employee hiring and training, operational costs, digital acceleration and more. In addition, MAS, along with the Singapore Fintech Association (SFA) and the AMTD Charity Foundation (the social responsibility arm of Hong Kong-based AMTD Group), supplemented the initial investment with an additional S$6 million Fintech Solidarity Grant.
While the MAS-SFA-AMTD Solidarity Grant also provided means for fintech firms to attract and retain employees and continue operations during the pandemic, much of the money focused on fintech innovation. In particular, funds from the grant were designed to help fintech organizations work with established financial institutions to develop proof of concept solutions and bring them to market.
Singapore’s fintech industry spans every possible application of fintech, from payment systems to robo-advisers, which are becoming an increasingly popular investment option as investors enter markets at younger ages. With continued government support, the industry should continue to grow quickly.
The greening of Singapore’s fintech
Realizing that environmental concerns and climate change are rapidly changing the corporate social responsibility landscape, Singapore has also made a substantial push for green and sustainable fintech solutions. MAS estimates that the ASEAN countries will need $200 billion annually in green funding through 2030. To do its part, in 2019, Singapore launched its Green Finance Action Plan.
The plan has four major components:
- Strengthening resilience to environmental risks: Focused on ESG analysis and reporting, along with corporate stress testing against various climate scenarios.
- Developing sustainable markets: A S$2 billion green investment program, along with sustainability loans and grants.
- Harnessing technology to facilitate sustainable finance: A $1.75 million fintech innovation challenge known as the Hackcelerator, which received more than 300 entries from 55 countries.
- Developing a robust knowledge base on sustainable and green finance: Formation of the Singapore Green Finance Centre in conjunction with the Imperial College Business School in London.
Flowing from the Green Finance Action Plan was Project Greenprint, which focuses primarily on developing fintech solutions for green finance and, in particular, building the data sources necessary to support green finance. Under Project Greenprint, Singapore intends to create the Greenprint Marketplace, an “open marketplace to connect Green Technology providers with investors, financial institutions and corporat[ions].”
While not specifically related to green finance, another area of social responsibility garnering attention is how fintech can help resolve issues of financial inclusion. As with environmental responsibility, providing support for those with limited opportunities will become a higher profile goal for fintech firms in the coming years.
With substantial support from the industry coming directly from the government, as well as industry organizations like the SFA, you can expect Singapore’s fintech funding to keep growing.
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