Tiny Singapore has its hands full in trying to maintain its status as a financial hub of Asia. To succeed, it is stoking the fires of financial technology, or fintech.
In November, more than 13,000 people gathered in Singapore to attend the inaugural FinTech Festival. The highlight was the FinTechHackcelerator, in which 19 startups chosen from a pool of 655 international applicants demonstrated their hottest innovations, from payment systems to portfolio analysis tools.
The organizer, the Monetary Authority of Singapore -- Singapore's central bank -- is now at work planning this year's festival.
"One of the main reasons to come to Singapore is that the government is very proactive," said Gene Vayngrib, a festival participant and CEO of U.S. company Tradle, which provides blockchain-based compliance technology for banks. "It reaches out to startups. It is much easier to work with regulators that are seeking out innovations to bring to the market."
According to KPMG, the city's fintech industry generated $50.6 million in venture capital investment in 2016, nine times more than the $5.4 million raised in 2011. In 2015, a few large deals pushed the tally to a record $171.8 million.
Finance is an integral part of the Singaporean economy, contributing 13.1% of gross domestic product in 2016. The rise of fintech promises to help keep the sector humming and cement Singapore's position as Southeast Asia's financial center.
Indeed, fintech is blossoming in this corner of the continent, bringing financial services to even remote islands of Indonesia and the Philippines through mobile networks. Singapore makes a logical jumping-off point for regional expansion.
Yuen Tuck Siew, co-founder and chief executive of Jirnexu, a Malaysian company that runs financial product comparison websites, can attest to this. Early last year, Jirnexu raked in $3 million in its first major round of fundraising in Singapore. "When I started [preparing for] fundraising in 2014, there were very few venture investors in Malaysia," he said. "When you have strong investors in the [early stage], it validates your brand."
Liew Nam Soon, managing partner for Southeast Asia financial services at Ernst & Young, agrees. Because Singapore is an established financial center and its regulator is progressive in adopting fintech, "the fact that you raised money in Singapore gives a brand equity," he said.
A government that is willing to provide seed money helps Singapore's cause. The National Research Foundation in May 2016 provided venture capital funds owned by large local corporations with 40 million Singapore dollars ($28.6 million at the current rate). The money came with instructions to invest in early-stage, local technology startups, including fintech outfits. Previously, the foundation had provided a total of S$100 million to 11 projects in 2008 and 2014.
All this seed money attracts other investors. In 2015, Russian venture capital player Life.Sreda, which focuses on mobile fintech and internet startups, moved its headquarters to Singapore from Moscow. Since then, it has invested in eight fintech companies in Southeast Asia.
Igor Pesin, a partner and investment director at Life.Sreda, cited the well-developed infrastructure for funds, low taxes and the availability of capital as reasons to choose Singapore. To help keep the money flowing, in February the Monetary Authority announced a plan to relax venture capital regulations.
In on the act
Singapore's emphasis on fintech is not exclusive to the private market. The Singapore Exchange (SGX) wants to position itself as a go-to capital market for tech companies. This is partly why it is looking to introduce a dual-class share structure, which would allow certain shareholders, typically a company's founders, to have heavy voting rights despite their light shareholdings.
But interest in fintech is growing elsewhere in the neighborhood. Jirnexu's Siew has not decided whether his next fundraising round will be in Singapore. "I will look all over Southeast Asia if there are strategic investors," he said.
Chia Tek Yew, head of financial services advisory at KPMG Singapore, said that in order to stay ahead, Singapore "needs to attract fintech venture capital firms who can lead larger rounds of financing."