How the fintech industry is booming in Singapore

Autumn is coming, but not in tropical hot Singapore where startups and financial institutions prepare for the annual appointment with Fintech Festival, one of the world’s largest events in the industry. The Monetary Authority of Singapore is once again establishing the global prominence of the city state.
A recent report by Accenture revealed that FinTech investments in Singapore nearly quadrupled to $453 million (SG$630 million) in the first half of this year, up from $118 million in the same period a year ago. The number of deals closed in Singapore rose by 55 per cent to 48, from 31 in the first half of last year. This has placed Singapore as the third largest FinTech market by funds in the Asia-Pacific, just behind China and India.
But not only the industry players are riding the wave, everyone in Singapore experiences fast innovation in the transition between money and e-money. In a Keynote Speech by Ong Ye Kung, Minister for Education and MAS’ Board Member, at the 45th Annual Dinner of The Association of Banks in Singapore on 20 June 2018, Ong has shared that the take-up rate of e-payment has been outstanding.
Across all demographics, consumers are increasingly preferring e-payments. More than 8 in 10 consumers in Singapore have adopted e-payments and almost 3 in 5 Singapore merchants are accepting e-payments. On its own, the value of e-payments measured by FAST and card transactions has been growing by more than $10 billion every year.
Singaporeans are making more contactless payments using credit and debit cards, including via Apple Pay and Google Pay, QR payments via e-wallets, and PayNow. As a result, the ratio of cash and cheque usage relative to e-payments has decreased significantly over time.
The use of cash and cheques has been reduced steadily in recent years. Cash withdrawals at ATMs have been going down by more than $300 million every year. Singapore is also targeting to totally remove cheques from circulation by 2025 and reduce ATM usage to 20 per cent of all digital transactions by 2020.
Singapore’s e-money journey began in 1984, when GIRO was launched, as a low cost means for billing organisations to collect recurring payments. As all innovation that eventually succeed, GIRO too was feared and ridiculed. Elderly would have insisted that in order to pay, one must take out the wallet and be able to touch the banknotes.
A similar stand to those who would have swore that e-book were doomed to fail because of the lack of physical touch on the pages. Others would have feared the loss of money enabled by the “digital bugs”.
The human instinct of distrusting the unfamiliar, especially when it concerns hard earned money, has not changed. But over time, the public has learnt to trust and embrace the convenience of digital money.
In 1986, NETS introduced the Electronic Funds Transfer at Point-of-Sale so that consumers could use their bank-issued ATM cards to pay for their purchases at shops and restaurants by keying in their personal identification numbers (PINs).
In the late 1990, with the implementation of the Electronic Road Pricing (ERP) system, a conscious decision was taken by the Government to use the ERP to promote e-payments in Singapore.
So NETS launched the CashCard in 1996. It can be loaded up to SG$500 to pay for ERP and car park fees, but unfortunately did not have many uses beyond that. The 2002 EZ-Link card facilitated transactions for public transport. In 2009 FlashPay by NETS managed to unite the services, as one card being able to pay for both private and public transport.
One of the major turning points was 2014, when the payments Consumer to Consumer (C2C) became largely adopted with FAST. Until that point, if I had a meal with a friend and needed to split the bill, I could have only settled in cash.
Then, the FAST infrastructure, enabled the widespread of PayNow, which is currently my favourite way to transfer money to friends and family as well as paying businesses for goods and services. In a country with less than 6 million people, currently 1.5 million users have registered for PayNow, having transacted nearly a billion dollars in the first year since launch.
The Monetary Authority of Singapore is now crusading against too many POS. I recall a couple of years ago, at the cashier of a cafe’ at the Changi Airport having seen 9 different POS to accept payments. MAS is now pushing for a Unified Point of Sale, where one device can address all payment methods.
Also, the QR code payment system is actively on the agenda of MAS. With the launch of SGQR: a unique national way of sorting and displaying QR codes for merchants. Singapore aims to a granular adoption of QR code payments, following the example of China, that have managed to implement it to near perfection. But Singapore is already deploying the idea one step ahead.
While QR code payments in China take the money from an intermediary wallet, those in Singapore debit the transaction directly on the bank account of the consumer.
The Fintech Festival will bring once again the global spotlight of finance and technology on the little red dot on the map called Singapore.

stefano@virgilli.com