, Singapore

Singapore Fintech in a Time of COVID-19

By Elango Balusamy

Fintech flourished in the decade after the 2008 financial crisis, but how will the industry fare in the face of the COVID-19 outbreak?

At the time of writing, the Coronavirus Disease 2019 (COVID-19) has resulted in the deaths of 119,719 globally, with Italy, Spain, Mainland China, US and France accounting for the brunt of the casualties. This is on top of the roughly 1.9 million confirmed—and growing—cases around the world. With the World Health Organization finally declaring COVID-19 a pandemic on 11 March, the virus is showing no signs of slowing down. The Singapore Prime Minister has declared circuit breaker measures on 3 April closing most workplaces and schools islandwide with mandatory social distancing measures. This is a precautionary step as COVID-19 infection has spiked up to approximately 1,000 active cases.

Aside from straining already vulnerable healthcare systems, grounding the airline industry and entirely changing the way we live and work, another casualty of the pandemic so far is the financial industry.

A game of numbers
After years of cautious anticipation, a recession is now looking likelier than ever—and the numbers are already showing. When COVID-19 made landfall in the US earlier this year, Wall Street was left ‘dazed and confused’ after its worst day in three decades, as reported by Reuters. The same trends have been observed across the world as well, including Japan’s Nikkei, which saw the worst trading day in three years. In Southeast Asia, Singapore’s stocks, too, reached a 10-year low on 13 March. In a recent interview with CNBC, Singapore’s Foreign Minister, Vivian Balakrishnan, warned that the world must be prepared for ‘the economic aftermath of the outbreak’ to last for at least a year. It’s official: the drill is now a reality.

Banks are usually the first to feel the pinch. Aside from fewer loans and lesser revenues in the short term, government bonds are likely to lose value, causing the banks’ capital assets to be eroded. Then there is the drop in productivity to contend with. Since workers now have to adapt to new ways of working – by working from home or being quarantined altogetherthe fall in productivity along the supply chain will surely put pressure on the economy at large.

With that said, a slowdown is not necessarily bad news for everybody. In fact, the 2008 financial crisis, for example, was a primary factor that sparked the rise of fintech.

Rolling with the punches
The 2008 financial crisis was a hammer blow to the global economy, wiping out US$8t in value between late 2007 and 2009. Banks’ credibility, too, took a hit, with confidence in financial institutions at an all-time low. This prompted banks at the time to consider fintech as an investment that would give them an edge over their peers and improve overall customer experience—and the plan worked. In a recent article by Forbes, Victoria Treyger, general partner and managing director at Felicis Ventures, explained that fintech companies achieved “lower fraud rates, higher approval rates and better authorisation rates”, which in turn “demonstrated that they create significant value over existing solutions”. Coupled with the proliferation of smartphones, the 2010s was the decade when fintech truly took off.

As for the COVID-19 outbreak and the resulting recession ahead, fintech will continue to adapt to the times. With countries pooling together their resources to fend off the virus, it is very likely that individuals will look to digital platforms to fulfil their payment needs. For example, in cities and countries facing lockdowns at the moment, people are more inclined to use digital payment platforms, such as digital wallets. Companies operating in that space, then, will have the opportunity to meet the demand and fill that service gap.

Insurtech, too, might gain new grounds, considering the heightened demand for health insurance and innovative products during the COVID-19 pandemic. Meanwhile, cybersecurity will remain a safe harbour for fintech companies that operate there, simply because the risks exist with or without a pandemic at hand. Additionally, working remotely has created new avenues for exploitation by hackers, hence the increased need to be secured and certified. With consumers and investors looking at longer-term views and buying gold ETFs, personal finance-related fintech, too, will remain strong. As consumers tighten their purse strings, fintechs that deal with expense management and cost management, too, might gain widespread appeal in the years ahead.

For more evidence on how fintech adapts during times of crisis, we need to look no further than 2016–at India, to be exact. In late 2016, India demonetised its ₹500 and ₹1,000 banknotes overnight. Chaos quickly ensued throughout the country, with people queueing for days on end to exchange old notes for new ones. However, the widely criticised move did lead to faster and wider adoption of electronic payment methods in the country.

Keep calm and carry on
Fintech’s agility is certainly going to help the industry weather the storm – but what about upcoming fintechs like virtual banks?

This time last year, before COVID-19 officially entered the public lexicon, conversations about virtual banking were enthusiastic across the Asia-Pacific region. Hong Kong, for one, placed its chips on virtual banks in May 2019, followed closely by the Monetary Authority of Singapore (MAS). The city-state, in particular, had plans to begin virtual banking operations by mid-2021,

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