Increasingly, the South-East Asian city-state of Singapore is building a lucrative financial technology (fintech) sector. Singapore’s efforts have proved so successful, a new study confirms, that the city-state is now contending with London to become the world’s top fintech hub. Htet Tayza comments.
Thriving financial markets
In a recent study from think tank Z/Yen Group, Singapore was deemed Asia’s top financial centre. Scoring 755 out of a possible 1000 points, the city-state is a triple A-rated economy, with deep liquid and capital markets, providing easy access to the continent’s four billion strong populace. Singapore also has over 200 banks, a rising number of which are choosing to base their Asian headquarters there.
But London was named the world’s largest financial centre, with a staggering 800 points. Retaining pole position from Z/Yen Group’s previous study, London is a leading worldwide hub for banking, foreign exchange trading and cross border lending, with a favourable regulatory environment and the ability to provide easy access to massive European markets. London is also rapidly developing a profitable fintech sector, which Virgin Business Media estimates could be worth over £48bn by 2017.
Top fintech hubs
New research from Deloitte, a UK-based financial services firm, indicates that London is the world’s top fintech hub, out of 21 surveyed. In order to compile these rankings, Deloitte used three existing indices; the Doing Business index, the Global Financial Centre index and the Global Innovation index.
Deloitte did not directly rank all the fintech hubs. However, it did assign London a score of 10 – a better ranking than any fintech hub studied except Singapore, which also scored 10. Commenting, Deloitte wrote in their report: “Singapore is a leading international financial centre and a serious contender for the global number one spot in fintech.” Deloitte praised Singapore’s regulation, government support, access to expertise, also noting that it came first on the Doing Business index.
Develop favourable environment
The city state’s central bank, the Monetary Authority of Singapore (MAS), has taken great pains to establish a favourable environment for fintech firms. It has cultivated guidelines for cloud computing, devoted S$225m to fintech project development and established a sandbox regulatory environment to aid fintech experimentation, unimpeded by existing financial rules. Explaining, Deloitte wrote:
“The move by the MAS to bring in industry talent to drive fintech forward paid rich dividends and positioned the MAS as the leading regulator to drive progressive thinking in fintech innovation.” Adding further, Deloitte’s Global Banking Sector Leader, Jim Reibach, noted: “Regulators clearly have gotten smart. They are moving from a posture of putting walls up, to encouraging innovation… Regulatory posture is changing to drive fintech.” But Singapore still has serious hurdles to overcome.
Tackling key issues
Deloitte named an underdeveloped start-up scene, cultural aversion to risk and a need to provide consumer access to services as pressing issues. Commenting Neal Cross, Chief Innovation Office for DBS Bank, said: “We’ve got a real chance of being the world’s fintech hub… [but] You can’t do a big-scale product. They’ve got to build in Singapore, and quickly get out to Association of South East-Asian Nations member states.” An advantage Singapore has over London, investment group Marvelstone’s Chairman Joe Seunghyun Cho said, is that it provides access to new markets like Indonesia and China.
Elaborating, he said: “The social impact driven by fintech innovation will be much bigger in emerging markets, when compared to the ones in developed markets like London.” Explaining London’s advantages, Deloitte wrote: “London has the world’s largest financial services sector, supported by a booming tech sector. The ecosystem has the ‘fin’ of New York, the ‘tech’ of the US West Coast, and the policymakers of Washington, all within a 15 minute journey on public transport.”
Going on, Deloitte noted: “These factors make London one of the greatest connected global cities in the world with the key ingredients for digital success: capital, talent, regulatory and government support and demographic diversity.” London’s key challenges in maintaining global fintech supremacy include high costs of labour, doing business and living, which keep rising, along with the UK’s recent decision to leave the EU (Brexit). The latter issue, experts believe, may persuade fintech firms to desert London, as it will no longer be able to provide easy access to important European markets.
It is not surprising that Singapore is vying to become the world’s top fintech sector. It is increasingly attracting fintech ventures, with IBM recently choosing to open its first blockchain research and development centre in the city state. Singapore has issues, but Brexit has provided a new opening for the city-state to compete with London. As Singapore continues to turn itself into a cashless society, the city-state will come to rely more and more on financial technology, naturally boosting its fintech sector to new heights, potentially allowing the city-state become a world leader in this field.