Singapore fintech firms eye bigger share of bank-dominated payment services

SINGAPORE – Singapore’s fintech firms are expanding their services and operations even as they face competition from the banking sector and experience a decrease in funding due to macroeconomic headwinds.

They expect to be able to benefit from a bigger demand for services such as payments and remittances from individuals and smaller businesses, which may not rely on banks for their global transactions.

In July, financial technology start-up Nium, which specialises in cross-border payments, opened its new global headquarters in Singapore, and announced that it is aiming to treble its local headcount to 300, from 90 employees now.

Earlier in August, Revolut became the first fintech provider in Singapore to introduce instant card transfers, enabling users to send money to recipients in over 80 countries around the clock using just the recipient’s name and 16-digit Mastercard or Visa card number.

The growth efforts are taking place amid a fall in fintech funding in Singapore, with a report by professional services provider KPMG showing that it reached a three-year low in the first half of 2023.

Fintech firms in Singapore, particularly those that operate in the payments and remittances space, are optimistic about their potential even as they face competition from banking institutions, where most cross-border and large-scale transactions are handled.

Payments is a broad term referring to the transfer of funds for various transactions, while remittance is specifically a cross-border money transfer, either between individuals or businesses.

Nium co-founder and chief operating officer Pratik Gandhi said global business-to-business transactions are estimated to exceed US$60 trillion (S$81 trillion), and are mostly processed by the banking sector.

He also noted that larger banks like HSBC and JPMorgan account for almost half of the global cross-border payments market, which is estimated to total between US$135 trillion and US$150 trillion.

“We estimate that the total processed volume by all fintech providers would be in the region of US$200 billion. The scale is very different compared with what banks handle,” he explained, adding that the bigger transactions of over US$500,000 will still continue to flow through banks for the foreseeable future.

“Banks are not really interested in dealing with small-value flows as their cost and effort are similar for all transaction sizes, and they can roll out the red carpet for larger customers and flows.”

The remittance market in Singapore, worth US$7.52 billion in 2020, is projected to reach US$12.53 billion by 2030, which would signify an estimated compound annual growth rate of 4.7 per cent from 2021 to 2030.

While it is not known how much of the remittance market is dominated by Singapore’s banking sector, payments remain one of the most resilient and top funded spaces in Singapore, attracting US$120 million across eight deals in the first half of 2023, according to KPMG.

Ms Yu Mei Lay He, senior product manager at fintech company Wise, said traditional banks and their infrastructure are mostly built for domestic needs, which is why fintech providers in Singapore can still tap the demand for payments and remittances.

“Traditional ways of sending money abroad through a bank involves moving funds through intermediary banks across countries. This is slow and inefficient,” she said.