Pursuing FinTech growth in Southeast Asia: 4 trends on the radar

FinTech momentum continues to grow globally despite uncertainty in the broader economy and Southeast Asia presents a land of opportunities. The region’s emerging economies, expanding population and growing middle class resulted in FinTech investments across the 10 ASEAN nations reaching US$4.3 billion (S$ 5.72b) in the first nine months of 2022 —higher than the combined sum from 2018 to 2020¹.

But there are minefields that dot the landscape, from fragmented regulatory regimes to talent uncertainty, and emerging challenges such as the rise of AI and Environmental Social Governance (ESG) pressures. How can FinTechs navigate these issues and tap on support that Singapore, a hub for business, innovation, and talent, is ready to offer?

A new report by EDB, PwC Singapore and the Singapore FinTech Association contains information on Singapore’s collaborative approach to developing the digital economy, including the schemes and initiatives offered to FinTechs.

To launch the report, a panel of FinTech business leaders came together to offer insights on scaling from Singapore. They were:

• Adrian Chng, Founder and Chairman of Fintonia Group, a licensed asset and wealth management firm in Singapore and Dubai. Chng is also an Executive Committee Member of the Singapore Fintech Association.
• Chionh Chye Kit, CEO and Co-Founder of Cynopsis Solutions, an award-winning end-to-end Regulatory Technology (RegTech) solution provider headquartered in Singapore. Chionh currently serves in the Executive Committee of Singapore FinTech Association as its Secretary.
• Liam Griffiths, Managing Director of Persefoni Singapore. Persefoni is a Climate Management and Accounting Platform (CMAP) for greenhouse gas data management, analytics, and disclosure.
• Robyn Tan, Managing Director of tech media platform KrASIA, moderated the session.

Here are the top takeaways from the discussion:

1. Establish a common language around measuring green progress

Even though FinTech innovation was firmly on the agenda at the discussion, panellists also acknowledged the importance for companies to make considerable progress in achieving their sustainability goals.

Griffiths suggested global cooperation was necessary if businesses and countries wanted to make good on their climate change plans. One way? Ensuring the use of a common language.

He mentioned: “One thing that is good that I'm seeing in Singapore and other markets like Japan, Hong Kong, Australia, New Zealand, is a convergence on a common language around sustainability.”

In Singapore, the Accounting and Corporate Regulatory Authority (ACRA) and Singapore Exchange Regulation (SGX) announced in early July this year that they would require public listed companies to start making climate-related financial disclosures from 2025 using the International Sustainability Standards Board’s (ISSB) climate reporting standards as a framework². 

Implementing such a common standard for sustainability reporting will have a multiplying effect, noted Griffiths.

“It's going to mean you're going to be able to compare between companies’ sustainability performance more easily around the world … And then that will also have a trickledown effect into the companies who are supplying goods and services to the companies who are listed because that's going to affect the emissions in the value chain that those companies will need to report.” 

2. Use blockchain as a catalyst for greener practices

While FinTech can be a powerful force for accelerating the transition to a green economy, Griffiths acknowledges that there has been mixed progress in sustainability across Southeast Asian markets. One stumbling block is companies’ ability to track their progress in a manner that is “robust, auditable, and transparent”, he said.

This is especially apparent in areas of voluntary carbon credits, where companies often grapple with the lack of standardisation, integrity, and transparency. Without clear standards in place for carbon credits, it can be challenging for corporates to meaningfully track the reduction in their emissions. 

To this end, Chng acknowledged the potential for blockchain technologies in enabling businesses to track their progress clearly.  “Using blockchain can make things more efficient,” he said, adding that creating a token as a legal representation of an interest in something, whether it was treasuries, stocks or land, that on the blockchain would allow instantaneous settlement, would take out a lot of costs.
 

3. Harness regulation as an advantage

Another common challenge faced by FinTech companies is their ability to keep pace with the frequency of regulatory updates across markets. Chionh advised companies to understand the regulations of the jurisdictions they are operating in and develop control mechanisms to comply.

FinTechs can achieve this by looking into their risk management plans and ensuring it addresses the core objective of a regulatory measure. For instance, taking steps to ensure consumer protection should be at the forefront of risk management plans with adjustments made to ensure alignment with local laws.

 “You can convert regulatory challenges into regulatory advantage by putting in place the right sets of controls into your core system and supplement it with the use of Regulatory Technology (RegTech) not just to meet the bare minimum requirements but also to consider what’s upcoming and what’s to be expected. In this way, FinTechs can truly stay ahead and be in a much better regulatory position to compete,” explained Chionh.
 

4. Address talent uncertainty with a robust ecosystem of partners

With the widespread adoption of Artificial Intelligence (AI) tools and technology in FinTech, specialised tech skills are in demand. That said, businesses in the sector are also facing added cost pressures which can affect talent acquisition.

To this end, several panellists expressed how they think a vibrant ecosystem of partners in the sector can make it easier to not just attract talent but retain them, too. Both Chionh and Chng highlighted that trade communities and associations like SFA play a valuable role. These communities enable startups and corporates within the sector to come together to have conversations about the challenges they face and engage with regulators as a community.

Griffiths noted that Singapore’s business-friendly posture has proved to be effective in helping Persefoni navigate the process of setting up its local footprint with ease. “There are lots of initiatives that Singapore has available to be able to encourage growth and expansion of foreign companies in the country and then also to hire and train local talent. So, it has been a really good experience so far”.

Footnotes:

¹ “FinTech innovation in Singapore: Sustaining growth in uncertain times” Singapore Economic Development Board, PwC Singapore, Singapore FinTech Association, 2023,
https://www.edb.gov.sg/en/market-and-industry-reports/fintech-innovation-in-singapore-sustaining-growth-in-uncertain-times, accessed 20 July 2023.

² “Singapore's Sustainability Reporting Advisory Committee Recommends Mandatory Climate Reporting for Listed and Large Non-Listed Companies” The Accounting and Corporate Regulatory Authority, 2023,
https://www.acra.gov.sg/news-events/news-details/id/736, accessed 20 July 2023.