Even though Singapore is a poster child for the adoption of digital payments, it has long struggled to persuade its traditional businesses, like food hawkers, to accept payments other than cash. Circumstances changed last year, and one can now pay for a plate of chicken rice by scanning a QR code or swiping a credit card. While the country has no immediate plans to pulp its notes and melt its coins, the Monetary Authority of Singapore has spearheaded several initiatives that are changing how people use money in the city-state. Along the way, it is creating a fertile ground for a burgeoning fintech industry.
The peer-to-peer fund transfer service PayNow is one recent innovation. Launched by MAS in 2017, PayNow is integrated into the banking apps of 11 local financial institutions, as well as payment providers such as Grab Pay and Singtel Dash. MAS says that 80% of Singapore’s population is using it for small payments and instant transfers of as much as SGD 5,000 (USD 3,700)—some banks log even higher amounts. In 2020, the service added 1.6 million individual users and signed up more than 200,000 new businesses. The system linked up with Thailand’s PromptPay in April, making it possible to send money across borders with just a few taps.
Another initiative is the Singapore Financial Data Exchange, which was established in December. It allows residents who hold a SingPass, a form of digital ID, to aggregate their personal financial data from bank deposits, loans, investments, and retirement savings accounts in one place. Apps like the government-run MyMoneySense can collect the data and analyze a user’s financial situation if he or she issues authorization. Banks like DBS have already started offering advisory services based on these datasets.
The MAS has been pushing for an open and innovative banking sector for some time, encouraging established players and fintech startups to be part of new developments. Open banking APIs—application programming interfaces—facilitate the flow of data within the sector. They make digital services more convenient for customers and increase banks’ overall efficiency.
The MAS-backed ASEAN Financial Innovation Network, which counts the ASEAN Bankers Association and International Finance Corporation among its founders, created the API Exchange in 2018 to help banks connect with fintech firms. A bank can post a request, like for a credit-scoring algorithm or an e-KYC tool for its app, and tech firms can respond with possible solutions. Both sides can then collaboratively develop and test the new feature.
Shailesh Naik, founder and CEO of the six-year-old banking-as-a-service company MatchMove says that banks initially only offered very basic APIs that could, say, confirm a person’s name. “Fintech firms were disregarded,” he said regarding fintech’s early days in Singapore. For him, that perception changed about two years ago and banks are now willing to cooperate.
The processes developed by fintech firms have become much more attractive for the conventional finance sector and are now being adopted to drive innovation. “Traditional banks reached out, as they are finding it difficult to compete with neobanks,” said Daniel Stuart-Smith, MatchMove’s chief strategy officer. “We can help them be competitive, lower customer acquisition costs.”A recent report by consulting firm Oliver Wyman found that BaaS services can lower costs for customer acquisition from USD 100–200 to as low as USD 5–35.
“Financial institutions can open new revenue lines at attractive margins and gain a much deeper understanding of consumer behavior through financial data,” said Andrew Tan, managing director of Singapore-listed banking software provider Silverlake Axis. Banks can accordingly grow their “digital books” to gain access to digital lenders and online wealth managers.
But BaaS firms aren’t just providing plumbing for big banks. Lending and BNPL—“buy now, pay later”—services are where MatchMove sees the most demand for its APIs, followed by crypto and insurance firms. The company offers bank accounts, virtual and physical cards, international transfers, and other data-related services.
“We increasingly see large organizations looking for banking technology” to move money across borders, said Naik. “They need something safe, compliant, and regulated as they don’t have the license or capability.” One of MatchMove’s clients in the transportation sector integrates cards and new bank accounts for ticket bookings and refunds but banks are unable to provide certain services because of legacy systems, old tech, and a business focus on high-margin clients.
Foreign BaaS players are attracted to Singapore as a financial hub and the prospective of growth in surrounding countries. Nigel Verdon, the co-founder and CEO of London-based Railsbank, says that its Southeast Asian business has tripled since launching in Singapore at the end of 2019. “We are seeing exciting use cases in insurance, lending, wealth management, travel, and payroll,” said Verdon. Banking-as-a-service and cards-as-a-service offerings provide quick and easy access to banking services in markets that are normally underserved, he said.
The global “embedded fintech” market offers immense potential; Bain Capital estimates the overall value to be USD 3.6 trillion, leaving plenty of room for fintech upstarts to grow. Temasek-backed Nium, which boasts 65 “real-time payments corridors,” just made its first acquisition and is planning for a US listing before the end of next year. US-based Marqueta raised USD 1.2 billion earlier this month from its IPO on Nasdaq, valuing the company at USD 15 billion. Shortly after, MatchMove said that it received a USD 100 million investment from Nityo Infotech, which values the firm at USD 600 million.
At the end of this decade, the branch-banking mentality will have dissipated, Stuart-Smith predicts. “Banking will be embedded in the brands that you use for the day-to-day transactions you need.” As we’ve seen with Grab, which started in ride-hailing and is now also a financial services provider, more firms may add fintech to their repertoire. Andreesen Horowitz general partner Angela Strange already envisions that every company will be a fintech company. We will likely see many more banking innovations in the years to come.