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Deep-Dive Into Singapore’s FinTech Landscape – Investment Perspective

Over the next few weeks, MEDICI brings you a series of articles, exploring FinTech in the ASEAN region. The articles, each focused on a different ASEAN country, provide comprehensive insights into the FinTech investment landscape in the region.

ASEAN in figures

ASEAN (the Association of Southeast Asian Nations) is the third-largest Asian region. It is home to more than 630 million people. One-fourth of the population lives in urban areas. ASEAN has an annual growth rate of 4.7% and USD 119.97 billion in FDIs; it is also one of the fastest-growing regions as well as the seventh-largest economy globally.

Its population is young and educated with a literacy rate of over 80%, phone-savvy with more than 0.5 phones per person, and enjoys a low-to-mid unemployment rate of 0.5%–6.9%. ASEAN members also have an average to a high life expectancy of 69–82.7 years, and a gender parity of 49.9% males to 50.1% females.

The previous week, we took a look at Thailand, to understand its FinTech investment landscape. This week, we take a look at a fascinating and dynamic country in terms of FinTech growth: Singapore.

According to SmartKarma’s Co-founder & CEO Raghav Kapoor, There’s no other city in the world where you have such a progressive government when it comes to supporting innovation today – be it grants, to having funding vehicles to operational support.

Singapore in figures

The 5.7 million inhabitants’ city-state tops the ASEAN region in terms of literacy (96.8%), life expectancy (82.7 years), cell phones per person (1.46), internet connectivity (82.1%), and urban population (100%). Singapore also has one of the lowest unemployment rates (2.8%) and is regarded as one of the easiest countries to do business in (ranked second worldwide), with a 100% foreign ownership regulation. The corporate tax rate is also favorable with a gradual rate of up to SGD 290K of chargeable income and 17% flat above this amount. Besides, the city has a negative inflation rate of 0.6%, and a limited annual growth of 2% compared to its counterparts.

Snapshot of Singapore’s Financial Sector

Trends

Singapore is the fastest-growing private wealth hub in the world. The industry turmoil in Switzerland has driven investors to shift their wealth to Singapore, and funds from flourishing ASEAN economies have also contributed to the sector’s expansion.

Singapore banks are expanding their wealth management business as foreign players exit. Foreign banks struggling to achieve sufficient scale and profitability have been exiting their private wealth businesses in the country, while local banks have acquired the wealth businesses to build the scale they required to overcome the challenges that their foreign counterparts faced.

Family offices are favoring private-equity over hedge funds and reported that clients’ disappointment with high fees & average returns of hedge funds have prompted them to make greater allocations into private equity. The mounting risks in China’s debt market are also reinforcing this shift.

Challenges

Regulation and governance requirements continue to put pressure on fund managers. According to a survey released by the Investment Management Associate of Singapore (IMAS), 40 out of 57 fund managers (70.2%) regarded rising costs of governance to be the biggest threat to growth in the next three years. About 64.9% of respondents believed that mounting regulatory obligations could impact their business.

Big data and risk/compliance talents are in short supply. The increasing use of data analytics and compliance demands in the industry are posing a challenge for fund managers as they struggle to find people with the appropriate skills to meet demand.

Hedge funds are facing considerable pressures, with demand declining driven by investors’ aversion to paying high fees. Additionally, stricter regulations have driven up the cost of operations and robo-advisers are threatening business expansion.

Opportunities

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