After years-long effort at bolstering Singapore’s fintech prowess, its fintech industry has advanced to a new phase of growth that tilts towards consolidation and profitability, according to a recent report.
While the number of fintech companies in the city-state is likely to ratchet down, the existing ones are set to expedite expansion, finds the FinTech’s State of Play 2.0 report by PricewaterhouseCoopers (PwC), which surveyed more than 160 Singapore fintechs to study their business focus, growth trajectory and industry prospects.
Operation of Singapore’s fintech industry witnessed a sweeping shift, from growth-oriented strategies to concentration of services and products. “Firms are,” the PwC report notes, “working towards profitability through cost efficiency and sustainable pricing, doubling down on existing markets, and enhancing product offerings and service efficiency through acquisitions.”
Along the path to solidifying the business model, more than three-fourths of the surveyed companies adjusted their product offerings in the last three years. The majority of respondents expect artificial intelligence (AI), blockchain and other technologies to underpin their expansion.
This burst of innovation has sparked interest from traditional institutions and large financial service companies to deepen their partnerships with fintech companies. For instance, Visa partnered with payments service provider dtcpay to roll out crypto credit cards for high-net-worth individuals, joining other payment giants to authorize crypto transactions.
Although fintech investment fell in 2023 and 2024, Singapore cemented its position as the largest fintech hub in the Southeast Asia region, drawing half of all investment in its six major markets. An ample sum of available capital boosted fintechs’ confidence to stand a gain, as 46% of the respondents nudging profitability expected to breakeven in the coming 12 months.
Mature sectors, namely that of payments, gave a strong backing to the robust fintech industry. The payments sector led the field in merger and acquisition deals, with firms setting their sights on consolidation. This sector, according to the report, led the fintech industry in the city-state, recording the most firms with billion-dollar valuations.
As well, a regulatory shake-up has largely eased the hurdles in the diversified digital payments business, with, for instance, the Payment Service Act building a solid foundation for tokens and stablecoin payments.
Apart from the overall sector and the Web 3 area, insurtech and ESG tech are expected to experience burgeoning future development. The former gets a boost from the heightened awareness of data security and integrity, pushing the subsector’s estimated investment value to more than US$225 million in five years, and it is projected to expand at a compound interest growth rate of 9.64%.
Given the more stringent and widespread disclosure requirements in the ESG tech subsector, this area has experienced perpetual demand for related technology to revamp data transparency and quality. In line with this, the Singapore government has also rolled out funds and knowledge platforms to facilitate ESG understanding – a move that has significantly contributed to the rosy future of ESG tech.
Innovative trends
Following the overarching AI deployment in the financial industry, other advanced technology trends are becoming part of the innovation picture.
Attention in the fintech industry has started to focus on the quantum computing space, a newly developed area of computing that relies on a wider range of input and delivers more varied possibilities. In contrast, the rise of new computing field has raised concerns over its threat to prevailing cryptographic algorithms.
The Monetary Authority of Singapore has recognized the significance of buttressing post-quantum cryptography capabilities. This includes allocating S$100 million (US$75.1 million) of investment for financial institutes to strengthen capacities in AI and quantum computing, and ringfencing S$300 million for use as part of the National Quantum Strategy over the next five years. In addition, three national platforms were launched to bolster Singapore’s capabilities in quantum computing.
And Singapore is listed among the 30 nations those governments have committed a total of US$40 billion to devising quantum computing strategies.
The PwC report concludes: “In preparation for ‘Q-Day’ – the day quantum computers become mature enough to pose a threat – financial services firms must not be caught unprepared, which could lead to a collapse of the existing financial system.”
