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Fintech in Singapore: How Powerful is Crypto Funding for Fintech 2022?

Fintech in Singapore—Despite the pandemic’s hurdles, the fintech business continues to grow globally. Fintech is becoming a significant part of the operations of organizations of all sizes, from the largest multinationals to local mom-and-pop shops.

Singapore has been generating news in the Southeast Asian fintech sector. Not only has Singapore attracted substantial investment in the industry, but several of its fintech firms have gone worldwide and established themselves as important technology partners for major global brands. Interest in areas such as “buy now, pay later,” embedded banking, and open banking aligned solutions has helped to keep the payments market in fintech highly vibrant.

Singapore’s fintech market conducted 191 deals in 2021, according to the KPMG Pulse of FinTech H2’21 report. Compared to 2020’s deal count of 139 deals, this is a 37% increase and a 91% increase over 2019’s figures (100 deals). A year-on-year increase of 59 percent in Singapore’s total transaction value in 2021 from US$2.48 billion to US$3.94 billion in venture capital (VC), private equity (PE), and merger and acquisition (M&A) deals.

Fintech funding in H2’21 accounted for US$101 billion of the overall worldwide fintech funding of US$210 billion across a record 5,684 deals in 2021, down slightly from H1’21’s US$109 billion. As a consequence of a US$ 500 million SPAC transaction, Singapore tech business Grab was valued at US$ 39.6 billion in 2021, making it one of Asia’s top four fintech investments at the time.

Fintech subsectors, such as payments, accounted for 51.7 billion dollars in investment worldwide in 2021, up from 29.1 billion dollars in 2020, according to a new analysis. For the first time ever, the blockchain and cryptocurrency industries saw record-breaking investment, with a total of $30.2 billion in funding, compared to only $5.5 billion in 2020 and a three-fold increase over the previous record of $ 8.2 billion in 2018. Security (US$4.8 billion) and wealthtech investment also hit high levels in the first quarter of 2016.

Financial technology (fintech) transactions in Singapore increased by over twofold in H2’21, from US$1.04 billion to US$2.98 billion. As a result, there were 95 deals in Singapore in the first half of this year, up from 70 deals in the same period last year. It can be ascribed to Singapore’s efforts to improve the capital market, such as the SPAC framework to position the country as a choice site for fast-growing companies and unicorns to go public..

In total, Asia-Pacific fintech funding will reach US$27.5 billion by 2021. From $11.5 billion in 2020 to $19.6 billion in 2021 VC financing has recovered as well. Investing in fintech reached new heights in India and South Korea in 2021, while it remained strong in Australia.

According to Anton Ruddenklau, KPMG International’s Global Fintech Leader, this year’s global fintech industry has been exceptional, with a record number of agreements across the board.

We’re seeing record funding in sectors like blockchain and crypto, cybersecurity, and wealth technology, and this shows that the financial industry as a whole is extremely popular.” Ruddenklau went on to say, “Payments are still a major driver of fintech activity, but the industry is expanding daily.”

The Impact of Crypto to Fintech in Singapore

Cryptocurrency and blockchain technology have become increasingly popular in Singapore’s financial sector in recent years.
In 2021, Singapore will have invested $1.48 billion in crypto and blockchain, a sign of the growing interest in the technology’s potential role in modern financial institutions. Most of Singapore’s cryptocurrency and blockchain deals in 2021 were for software and infrastructure, not services.

However, in 2022, this will be a fascinating subject to study. The Singapore Monetary Authority (SMA) has issued several crypto-related guidelines that potentially affect investments. Meanwhile, as governments around the world tighten laws on the crypto business, prices have fallen.

On the other hand, the future of blockchain technology may be bright. In the field of financial technology, more and more companies are realizing the potential of blockchain technology. Blockchain use cases are gradually becoming mainstream in various industries, from supply chain visibility to maintaining transactional transparency.

Although Ruddenklau believes that cryptocurrencies and blockchain will remain attractive areas of investment in 2022, he thinks that regulators will play an increasingly important role in helping to encourage and expand the sector. Coin and blockchain investment has surpassed that of Payments in Singapore, which had previously held the No. 1 ranking in this country.

We predict a spike in investment in banking substitutes that can help banks rethink fundamental banking services given how many are beginning to understand the major limits inherent in their legacy architecture and technologies, said Ruddenklau.

In Singapore’s payments industry, investments in 2021 have lagged behind those in cryptocurrencies and blockchains. Payouts-related trades in the local market, which had been worth US$60 million in 2020, increased by a whopping 9 times (946 percent). Payments have remained strong because of the growing popularity of “buy now, pay later,” embedded banking, and other open banking-aligned solutions.

Singapur is trying to strike a balance between the advantages of financial innovation and any inherent risks it may bring. Regulators in Singapore are expected to continue to pay close attention to cryptocurrencies in the future. As service providers want to expand and innovate to lure more customers into this market, this will include concerns on how to safeguard the infrastructure to protect a vast amount of capital invested in the crypto market.

KPMG expects that the investment in fintech will continue to expand in less developed markets, such as Africa, Southeast Asia, and Latin America, through 2022. Corporates and fintechs alike are looking to expand and scale up, which will lead to an increase in M&A activity and deal valuations.

A growing interest in fintech-focused ESG solutions and banking alternatives capable of addressing the need for modernization of fundamental banking platforms as well as an increasing number of fintech trying to identify themselves as data companies rather than simply fintech are expected.

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