Necessity driving innovation: Fostering Singapore’s fintech ecosystem

This success is not accidental, but the result of a concerted effort to build a collaborative ecosystem where banks, fintechs, and government agencies work together to drive digital transformation and economic growth. However, as Singapore aims to further cement its position, it must constantly reinvent in navigating a landscape rife with challenges and opportunities.

Since the launch of the Financial Sector Technology and Innovation Scheme by the Monetary Authority of Singapore (MAS) in 2015, Singapore’s fintech market has seen remarkable growth. This initiative, along with the development of new regulations, innovative tools, and strategic partnerships, has attracted over 1,300 fintech firms to Singapore, with investments reaching a three-year high of US$4.1 billion in 2022. Key decisions such as appointing a chief fintech officer and adopting a fast-follower approach to replicate best-in-class initiatives like sandboxes have contributed to this success.

The Singapore FinTech Festival (SFF) and the Singapore FinTech Association have played pivotal roles in nurturing stakeholder alignment and creating an open ecosystem. MAS’ establishment of Elevandi in 2022 further underscores this commitment. Elevandi, an independent entity, fosters active dialogues between the public and private sectors, and drives the growth and adoption of new technologies through international platforms, education programmes, research, and white papers.

Looking ahead, Singapore’s fintech ecosystem has ambitious goals. At a roundtable hosted by HSBC at Elevandi’s Insights Forum during SFF 2023, the participants, which included regulators, banks, investors and fintechs, discussed targets to achieve up to US$10 billion in investments and to double the number of fintech firms in Singapore over the next few years. To achieve these goals, stakeholders must continue to identify areas for improvement and redefine strategies for international growth.

Five key pillars are vital for building a thriving innovation ecosystem:

1. Human capital: Singapore boasts a pool of skilled individuals with diverse expertise, supported by collaborations with leading technology providers and academic institutions. Convenient access to the Stem talent pool in pivotal markets such as India, China, and South-east Asia is also advantageous.
2. Financial capital: Singapore’s robust funding ecosystem and a strong presence in Asian bond listings provide access to adequate funding for fintech firms. Additionally, the availability of venture capital, private equity funds, angel investors, family offices and financial institutions focused on funding fintechs, and digital economy players contributes to a vibrant ecosystem. The Financial Sector Development Fund’s S$2 billion top-up announced during Singapore Budget 2024 will further support sector growth through building capabilities and capitalising on emerging opportunities.
3. Regulatory framework: MAS proactively supports innovation with forward-looking regulations that promote future innovation and ensure compliance and security. The government has also been implementing regulatory frameworks to support startup growth, while agencies such as Enterprise Singapore have been tirelessly working with startups across different sectors to scale up.
4. Partner ecosystem: Singapore’s network of strategic partnerships and collaborations amplifies the impact of innovation, enabling scalable and sustainable growth in the fintech sector. Key market players – including MAS, investors, financial institutions, ecommerce, and the robust fintech community – will continue to support Singapore’s rise as a hub for fintech development.
5. Market access: While Singapore’s market is relatively small, it serves as a good reference point for innovators looking to diversify into other markets. The digital economy intrinsically is not limited by geographical proximity, so Singapore fintechs are equally capable of serving markets like the Middle East, Latin America, and Africa regions.

To further cultivate Singapore’s fintech ecosystem, both the ecosystem and the government has to recognise the opportunities available to overcome challenges within the space.

While we boast a pool of skilled talents, empowering mid-level employees with the requisite skills and helping them to cultivate a more global perspective, identifying potential market disruptors that may come after the integration of artificial intelligence, ESG, and the like, will be crucial for sustained growth.

Singapore’s growth path clearly lies in international partnerships, and another opportunity would be for the government to collaborate with other countries to explore how successful or highly promising fintechs can gain access to an expedited sandbox in other markets. Startups will gain significant advantages when the goal of establishing seamless market access and connectivity across Asean is achieved.

In promoting fintech for good, Singapore is already establishing itself as an ESG fintech hub, and the convergence of fintech and climate tech will further solidify this position.

Collaboration between the government, regulator, and financial institutions is crucial to position Singapore as a global benchmark for a thriving fintech innovation ecosystem. This means creating a regulatory environment that is conducive to innovation, fostering a culture of collaboration between banks and fintechs, and providing the necessary support and infrastructure for fintech firms to thrive.

The Singapore Budget 2024 included measures for navigating the challenges and opportunities in the fintech sector, such as supporting innovation with targeted investments and a focus on cybersecurity to ensure safety in our digital infrastructure.

Apart from the S$2 billion top-up to the Financial Sector Development Fund, a commitment of S$3 billion to the Research, Innovation, and Enterprise 2025 plan was also announced. These investments are expected to fuel advancements across various national priorities, including sustainability and the digital economy, which underscores the importance of research and development in driving economic growth and innovation.

Necessity and the will to continually evolve to remain relevant to the world have been a great motivator in driving Singapore’s fintech plans and will continue to do so. Equally important ingredients for success will be the ability to build a collaborative and supportive innovation ecosystem. This needs to be a layered approach to ensure Singapore can maintain its leadership position and drive sustainable economic growth.

A contribution piece by Shayan Hazir, Chief Digital Officer, Asean, HSBC and Pat Patel, Executive Director, Elevandi. This piece was first published in The Business Times on 30 May 2024.