Historically, Asia’s biggest financial institutions looked towards Hong Kong – thanks to its historical links with London and the incredible growth it experienced during the second half of the twentieth century.
But more recently, another former British trading port has emerged to challenge the city’s place as the finance and trading hub of Southeast Asia. Singapore has, as of this year, more than 200 banks with assets collectively worth $2 trillion choosing to locate operational headquarters in the city-state.
Global financial institutions like Mastercard, UBS, DBS Bank, OCBC, Wells Fargo and Citigroup have established innovation labs and accelerators in Singapore along with making sizeable investments in the country’s ecosystem.
The Monetary Authority of Singapore (MAS), Singapore’s central bank, has been driving change in the Singapore fintech sector via the FinTech and Innovation Group. Its main task is to act as a key advocate of the country’s economic and legislative stability, while also helping startups in the ecosystem access funding and resources. And it appears to be working.
In a February study carried out by Ernst & Young, it ranked the Southeast Asian city fourth among global fintech hubs, while Hong Kong came seventh. Singapore, it emerged, has become the “preferred gateway” into Asia, the report said, highlighting the city’s “increasingly progressive regulatory regime.”
The MAS has created a “sandbox” environment that allows Singapore fintech experiments to explore specific use case without the need to satisfy licensing requirements.
This input from the Singaporean state is unparalleled in the rest of the world, and why financial institutions are looking at Hong Kong in a less favorable light when it comes to all things fintech.
Companies and investors poured more than $10 billion into fintech in the Asia-Pacific region in 2016, some $2 billion more than in the Europe and the U.S. combined, according to Accenture.
In addition to private investment, the MAS has taken steps to maintain Singapore’s leading position as a global FinTech hub. It has committed $225 million under the Financial Sector Technology & Innovation (FSTI) scheme, as well as launch the fintech and Innovation Group (FTIG) and the FinTech Office. But MAS hasn’t stopped there.
It’s also created a FinTech regulatory sandbox, moved towards an open-API architecture, setup the “Singapore Payment Roadmap” and opened Looking Glass @ MAS, the first Singapore fintech innovation lab.
It’s little wonder, 10 of the 15 most funded startups in Asia all call Singapore home. Fastacash, an online payments platform that allows users to send and receive money through a variety of apps, has raised more than $23 million.
MDAQ, a tradition service that makes cross-border securities trading more efficient, has raked in $17,500,000 in investment, giving it a valuation north of $250 million.
TradeHero, a stock market trading simulation that draws from real market data to provide a true-to-life experience has recently raised more than $10 million in a Series A. As of 2017, some $98 trillion worth of transactions have been generated by users, with $7 trillion of that actual cash. The company was acquired by ayondo, a social trading technology developer for an undisclosed fee last year.
Areas of Expertise
Online payments and trading are areas Singapore does well, as highlighted with the big valuations for Fastacash and MDAQ. However, one area where Singapore is leading is in blockchain.
There are a broad range of startups in the blockchain Singapore fintech ecosystem such as Attores, CoinGecko, Dragonfly Fintech and KYC-chain among others. This has brought a raft of larger companies into the space.
Late last year, IBM announced its own blockchain project with Singapore FinTech startup KYCK. OCBC Bank became the first in Southeast Asia to use blockchain tech for cross-border payments and transfers and financial innovation firm, R3 launched its first dedicated blockchain center in Asia in the city-state.
The Singapore state’s heavy involvement in the ecosystem presents challenges. Government financing is not nearly as flexible or fast as private (especially earlier-stage) financing.
Moreover, private sources of capital generally possess a far greater appetite for risk, specialized skills, and strategically valuable networks in their partners and portfolio companies.
To counter this, Singapore’s most prominent schemes are public–private partnerships allowing private funds to leverage government money and provide more agile financing options.
Singapore has been busy forging partnerships with rival fintech hubs to help accelerate the flow of new companies wanting to use the city-state as a jumping off point for accessing other Asian markets.
Other strategies for expansion have included building a ‘tech bridge’ with London, arguably the world’s biggest fintech market. These bridges are designed to give companies in either ecosystem access to funding, expertise and favorable regulatory frameworks.
This gives Singapore’s startups a giant leg up into both Europe and London, as well as greasing the wheels for UK startups looking to expand into Asia.