Opportunities for Fintech Startups in Singapore
The “American Dream” was one of those overused buzzwords until a few decades ago. That promise of “No matter who you are, where you come from, if you work hard to reach your goal, you can achieve success” drew several aspiring entrepreneurs to the land of opportunities. Due to the drastic and dramatic changes in the American society over the past few decades, the dream has started to deteriorate into nothing but a faraway memory.
Though Silicon Valley still holds the throne as “Startup Wonderland”, its Asian and European counterparts are giving it a serious run for the money. Speaking of which, did you know that our Lion City, Singapore has managed to knock the Tech Mecca down a peg in the Startup Talent Pool?
With its innovative policies and startup-friendly environment, our ‘Little Red Dot’ offers any aspiring entrepreneur, an Asian version of its candy-tinted American variant, the “Asian-American Dream.”
Falling two notches, to settle down in the twelfth place, the Global Startup Ecosystem Report was a far cry from little rays of the sunshine and rainbows for Singapore. Despite the promising Growth Index, the report raises concern as to whether the Asia’s leading Financial Hub would manage to sustain its position amidst this turbulent atmosphere.
Irrespective of the odds stacked against it in the Startup world, Singapore still came out as the top Fintech hub in the world, tied for first place with the UK in the recent study by Deloitte. As far as Fintech is concerned, Singapore made the stacked odds resemble a pile of most delicious pancakes.
Yummy pancakes GIFs aside, will Fintech, the not-so-new sweetheart of the startup world seize the Singapore dream and thrive, or would it struggle to survive the storm and dwindle down to a thin and irregular trickle?
The strong government support makes Singapore appealing for the Fintech Startups. Does the allure match the opportunities? This article aims to look past the charm and determine the real-time opportunity available for Fintech Startups in Singapore.
The “Dumbledore approach” used by Government of Singapore & MAS (Monetary Authority of Singapore) has cemented the country’s place as top Fintech hub in the world. I guess all Potterheads would remember Dumbledore’s Grandfatherly relationship with Harry.
Remember, how he always looked out for Harry, nurtured him at every available opportunity and encouraged him to follow his heart no matter what the odds are?
The Government of Singapore & MAS is replicating that bond of mentorship by offering the aspiring entrepreneurs a startup friendly environment with optimal tax system backed by their unwavering support for Fintech initiatives. Let’s take a look at those initiatives taken by MAS and the Government to propel Singapore forward in the Fintech Arena.
- Fintech Office
A Fintech Office was set up by MAS & National Research Foundation (NRF) to provide a one-stop point-of-contact for all Fintech related issues. If a Fintech company is interested in knowing the grants available for them or get to know the schemes which offer them assistance or need help connecting with a government agency to expedite their approval, this is the place to be at. They could find a solution to all their Fintech related Dilemma’s here.
- Regulatory Sandbox
To address the regulatory challenges and find a balance between innovation and security, MAS came up with an initiative called “regulatory sandbox“, to ensure that the regulations imposed don’t out-run the innovative edge of Fintech enthusiasts.
This Regulatory Sandbox would offer Financial Institutions and Fintech Companies a fail-safe environment to conduct experiments to their heart’s content within the controlled boundaries minimising the threat of far-reaching adverse consequences.
MAS came up with the regulatory sandbox guidelines for Fintech experiments by incorporating feedback from the industry experts and road-testing against the actual sandbox applications that they received during the experimentation phase.
- Accelerating the Innovation
In its mission to accelerate innovation and place the country in a prominent position on the Global Fintech Map, MAS has committed to investing S$225 million (or US$160 million) over five years in the Financial Sector Technology and Innovation (FSTI) scheme.
FSTI scheme was launched with the intention to establish innovation centres, unleash the untapped potential by encouraging innovation, automate investment services, develop digital payments and improve the overall infrastructure.
- Celebrating Fintech
In its drive to establish Singapore as a Fintech powerhouse, MAS celebrates innovation in Fintech Sector with a week-long festival. MAS inaugurated this festival in November 2016, and the Singapore FinTech Festival is all set to return with a bang this November.
Last year’s Fintech festival drew more than 13,000 participants from across 60 countries. Built on its success, this year the festival would bring forth an extensive gathering.
The participants will span over a range of Fintech enthusiasts, Regulators, private equity/venture capitalists, Researchers, Entrepreneurs, Tech-Savvy Professionals and representatives of Financial Institutions.
Access to the ASEAN Pie
Located in the heart of Asia, Singapore acts as an economic crossroad for Startups granting them a gateway to explore the plethora of opportunities available in the ASEAN region. The Association of South East Asian Nations is a delicious pie of diverse ecosystem which comprises of developing countries in the verge of digital revolution.
The active and vibrant economy of the ASEAN region with its tech-friendly environment offers Fintech startups a chance to unleash the untapped potential of its massive unbanked population. The vigorous government run initiatives implemented with an urgency to transform the financial sector digitally comes as a boon to Fintech firms. This delightful dessert of a region provides aspiring startups possibilities for exponential growth in just a small bite.
The Talent Pool
We all know that Singapore dethroned Silicon Valley in the Talent aspect of Startup world. However, it is not yet common knowledge that the Startup founders of Singapore are the youngest in the world, with a median age of 28.
Despite bagging the first place in the talent category, Singapore still falls short when it comes to Fintech Talent as the sector demands a few niche qualifications. Be it a large financial institution or a startup, only a technology fluent person with an intensive skill set would be able to step in and fill the shoes.
The Island-Nation is taking measures to bridge this burgeoning gap by establishing several coding schools, and educational programs in leading polytechnics to produce skilled workers who could hold their stand in the future Fintech industry.
These initiatives coupled with comparatively stronger experience levels of the workers and affordable acquisition cost will help Singapore cultivate a prosperous Fintech talent pool.
Infrastructure plays a vital role in the startup’s pursuit of passion. Many of us tend to take the high road, believing that physical infrastructure is just a frivolous aspect in the digital age.
Believe it or not, good infrastructure, readily available transport and reliable resources bridge the gap between investors and startups.
Gustavo Petro, a distinguished Colombian economist and politician, said, “A developed country is not a place where the poor have cars. It’s where the rich use public transportation.” This phrase suits Singapore to a tee.
Quite a few of us may have heard of Mercer’s “Quality of Living” surveys which offer insight on the quality of life in the main cities around the world. This year, they also ranked the cities based on their infrastructure.
Can you guess which city topped that category? Yes, Singapore was crowned the winner in that category, ahead of Frankfurt and Munich. As per the results of this survey, Singapore also offers the highest quality of life in the Asian sub-continent.
In addition to offering excellent infrastructure facilities, the Island City-State also extends a helping hand to startups by granting them physical space to collaborate and experiment.
Singapore has taken measures to improve the digital infrastructure of the nation by building a national KYC utility from scratch, stimulating innovation in the blockchain sector to make electronic payments seamless and actively exploring ways to harness the potential of digital currency.
It also has incorporated Fintech Innovation Labs & Villages as an essential part of the country’s infrastructure in order to foster a favourable ecosystem that promotes economic growth.
Aren’t these just the essential components which provide a firm foundation for a startup? Are these aspects enough to give the startups that special edge they need to skyrocket?
If not, what else do we need to look for before we kick start an entrepreneurial dream? Trust me. I was getting to that :)
Before we delve deeper into that, let’s take a peek at how the Fintech landscape fared at the end of 2016. Did it manage to cross the 2015’s whopping record of $47.6 billion investment? Well… To the dismay of fellow Fintech enthusiasts, there was a steep decline (47.2%) in the overall investment as per the KPMG’s Pulse of Fintech for Q4 2016. The Pulse report of Q1 2017, however, shows promise with its modest $3.2 billion combining venture and M&A investment in the Fintech sector.
Looking at Singapore’s Fintech Ecosystem, we could observe that the quarters with massive funding activities are skewed considerably by outliers. As far as this year is concerned, we are yet to see such temporality in the investments. This is one of the reasons why the investment looks relatively small when compared to the previous year.
But, that is nothing to fret about when you consider the substantial range of advantages it could offer ranging from perfect geographic position to impeccable infrastructure. When those aspects are taken into account, it is utterly clear that Singapore’s Fintech Arena could tally the numbers with just a few temporal spikes.
As the Industry goes through the normalisation phase, a few key sectors may continue to evolve while a selective few may reaching a saturation point and stop progressing after that.
The areas which attract investor attention change constantly depending on the demand for solutions. Experts claim that Blockchain, Insurtech, Cyber Security, and Artificial Intelligence are set to flourish this year.
Now that we have a clear picture of the Fintech Landscape let’s get back to the other important factors that would help in fine-tuning our game before we launch our idea.
Being a sector that is driven by young entrepreneurs, the presence of incubators, accelerators, and sponsored innovation labs are vital, not only for the purpose of providing funds, mentorship, and networking but also to offer an in-depth insight into the banking industry and give the enthusiastic startups some industrial exposure.
Both Accelerators and Incubators help entrepreneurs in their pursuit of success. People tend to use these words synonymously when they are not just the same. So, what’s makes them different?
An accelerator program aims to speed up a startup’s journey by propelling them forward at rapid speed. Whereas, Incubators focus on turning an innovative idea into a successful business.
Let’s take a look at some notable initiatives on this front:
Incubators help startups at the early stage to develop their idea into a business model, figure out the target market, assist them in building a team and taking their product to the customer base.
If you are a backyard chicken enthusiast, you may know the importance of incubation phase in the hatching of a chicken egg. Any acts of neglects in this crucial period may result in the eggs never hatching or worse; we may end up with deformed hatchlings.
Likewise, the incubation phase is imperative to a startup as well. 9 out of 10 startups fail in their early stages due to the lack of planning, support and market research. An incubator can resolve such issues by offering the startups mentorship and solid foundation on which they can build and grow.
Incubation programs like Paypal Incubator, Joyful Frog Digital Innovation (JFDI), etc., focus more on nurturing budding Fintech Startups.
Paypal’s incubation program focuses primarily on Fintech Startup, providing them initial infrastructure, mentorship and guidance to startups nurturing and supporting them in their pursual of passion.
In addition to offering them access to an innovative environment, the incubation program provides startups almost nine months of coaching and mentorship in Singapore by industrial experts and PayPal executives with access funding through PayPal’s extensive VC connections and network.
Acting as training schools for developing startups, accelerators tend to prefer investing in innovative ventures providing them with capital and guidance for equity. The stakes may differ from each accelerator. These programs tend to be short and intense, brimming with a cutting-edge competition.
Startupbootcamp Fintech Singapore, InspirAsia Accelerator, The Open Vault at OCBC are some of the most popular Fintech focused accelerator programs in Singapore.
As one of the preeminent accelerator programs focused on innovation in the financial sector, Startupbootcamp Fintech provides funding, mentorship, office space in Singapore and access to a global network of corporate partners, mentors, investors and VCs, for up to 12 selected FinTech and InsurTech startups selected across the globe.
Selected startups get a chance to participate in an intense three-month long program where they could collaborate with the major players in the financial sector, VC & Angel investors. The expert mentors support the team to make their startup an industry leading company by building top notch Fintech products.
Innovation Labs act as an all-embracing community that fosters knowledge sharing by offering the key players in the industry a platform to connect, collaborate, and come up with unique solutions to address the ever-evolving business needs and overcome the new challenges that pop up every day in the Fintech Landscape.
MAS created Looking Glass, a Fintech Innovation Lab to encourage collaboration among the regulator, enthusiastic startups, traditional financial institutions, and technologists. MAS claims that the “Through the Looking-Glass” by Lewis Carroll inspired them to name this initiative as “Looking Glass.”
Through the Looking-Glass, the sequel to the evergreen classic “Alice in Wonderland”, offers its protagonist Alice a portal to the magical world through a looking glass/mirror. Similarly, this Looking Glass which offers the Fintech enthusiasts a glimpse into a different world where innovation is prevalent and serving a safe haven for its inhabitants to pursue their passion in a controlled environment.
Innovation villages serve as a bridge between the public and private sectors supporting regulatory bodies, traditional financial institutions, and the corporates in their endeavor to embrace innovation.
LATTICE80 is Singapore’s first FinTech innovation village. It offered the startups dedicated physical space eight in the heart of Singapore’s financial district helping them to start-ups grow and expand their businesses.
The opportunities listed out on this post are just icing on the cupcake. Of course, a Fintech Startup’s roadmap to success is full of and pitfalls and obstructions just like any other adventure. One has to overcome several challenges to survive in this competitive atmosphere.
If the foundation is laid firm, it will make us strong enough to sustain a severe storm. With its primary focus on Fintech, Singapore offers a fairyland foundation for all ambitious Fintech startups. So what are you waiting for? Take the step forward to lay down the groundwork to turn your Fintech Dream into a reality and kickstart your entrepreneurship journey. After all, you’ve got to start somewhere. What better place than Singapore? What better time than now?