Singapore and London dubbed model cities for fintech activity

Singapore is home to two in five, or 39%, of ASEAN fintechs according to UOB.

Singapore and London excel as fintech hubs thanks to their convergence of five key factors - markets, talent, capital, regulation and government support, according to a fintech innovation report.

The research report, carried out by the Institute of Chartered Accountants in England and Wales (ICAEW) and the Institute of Singapore Chartered Accountants (ISCA), highlighted that when these given key factors are brought together in one location, interaction and learning is encouraged between regulators, innovators and established players.

Singapore is home to two in five, or 39%, of ASEAN fintechs according to UOB, whilst the percentage of funding for Singapore fintechs between US$5m to US$10m as a share of total deals steadily grew from a measly 5% in 2014 to 18.2% in 2017. 

“Both London and Singapore benefit from having all five elements in a single location,” the report noted. 

Whilst the US is still the leading location for fintech in regards to value, the sector is still split in terms of location: Silicon Valley is centre for technology and capital, New York is home to the country’s established financial sector and skills, whilst Washington DC holds the regulatory functions.

Singapore’s fintech industry builds on its existing strength in financial services, the report said. As the largest hub in Southeast Asia, the Monetary Authority of Singapore (MAS) set up a fintech and innovation group in 2015 as investment started to grow.

Also read: Chart of the Day: See how fintech funding in Singapore recovered in Q2

In less than two years, Singapore FinTech Association has grown into one of the largest FinTech associations in the world with more than 300 corporate members and international partnerships in more than 30 countries the report noted. It also drew on Singapore-based companies V-Key and LALA World as examples of firms which found success locally and internationally thanks to the country’s fintech industry.

In 2016, funding for Singapore's fintech firms hit US$310.5m versus Hong Kong's US$191.2m. Because of its increasing investments which followed on in 2017, the country dethroned Hong Kong as Asia’s top fintech hub.

Also read: Are Singapore's fintech startups hoarding capital?

In addition, the report underlined how Singapore and London’s established pool of financial services specialists and positions as ‘magnets for foreign talent’ allowed them to get a head-start in the industry.

“However, to manage the political pressures around migration, they both have a long-term focus on training more domestic workers with relevant fintech skills, as well as collaborating with other hubs to deliver work,” the report said.

Meanwhile, government support is fundamental to the fintech industry, and the report also highlighted how the industry is part of the Singaporean government’s ‘Smart Nation’ initiative which aims to digitalise government services and make better use of data and new technologies to improve citizen services.

Also read: Singapore Fintech Festival lures $8.54b investments for ASEAN enterprises

“Today, services including payments, insurance, lending, capital raising and investment management have all benefited from the boom in fintech,” the report said. “These opportunities are reflected in the fast growing investment value of the fintech sector, with global fintech investment almost doubling to US$38.9b between 2014 and 2017.”

London and Singapore show the importance of tailoring detailed measures to reflect local differences, the report revealed. Singapore puts stronger emphasis on collaboration between startups and the established sector, and acts as a gateway to new markets across Southeast Asia, whilst London pushes for startups to disrupt incumbents and places more focus on scaling up fintech businesses.

“For countries aspiring to be a centre of fintech innovation and reap the potential benefits of the industry, it is important to learn from successful fintech hubs such as Singapore and London and for governments to invest funds or programmers to support the growth of the sector,” ICAEW’s technical manager Kirstin Gillon said.

ICAEW and ISCA partnered to undertake the joint research to understand and highlight the strengths of Singapore and London as leading fintech hubs amidst the challenges they face.