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Bankers in the Philippines cautiously optimistic for 2022

Originally published on Philstar, check the link here.

MANILA, Philippines — The heads of the country’s largest banks described 2021 as a better-than-expected year, but are cautiously optimistic about 2022 as the Philippines slowly emerges from the pandemic-induced recession.

Nestor Tan, president and chief executive officer at BDO Unibank Inc., told The STAR that 2021 turned out better than expected as the Philippines exited recession that stretched through five quarters, with back-to-back gross domestic product (GDP) growth of 12 percent in the second quarter and 7.1 percent in the third quarter.

Tan said the favorable outlook is seen to continue in the fourth quarter and into this year on broadening economic activity given declining COVID cases as well as rising vaccination coverage and increasing mobility.

After a stronger-than-expected GDP expansion in the third quarter, economic managers through the Development Budget Coordination Committee (DBCC) raised last year’s growth target to a range of five to 5.5 percent and seven to nine percent for this year.

“This positive backdrop is seen to benefit the banking industry, as loan demand is expected to pick up with the economic expansion,” Tan said.

After slumping for eight straight months, the loan disbursements of big banks accelerated starting August as the economy finally absorbed the 200-basis-point interest rate cuts of the Bangko Sentral ng Pilipinas (BSP) last year.

Latest data showed the increase in loans extended by universal and commercial banks accelerated to 3.5 percent to reach P9.27 trillion in October from 2.7 percent in September amid the gradual reopening of the economy.

“The economic expansion is seen driving banks’ earnings with the recovery in interest incomes coming from higher loan growth and interest rates and fee-based bank services increased volume of transactions,” Tan said.

For one, the earnings of BDO Unibank almost doubled to P32.5 billion from January to September compared to P16.6 billion in the same period last year.

“In the case of BDO, our earnings for the first nine months of 2021 were already back to pre-pandemic levels, driven by the strength in our core businesses and from the normalization of provisions we set aside last year. We are on track to meet our internal targets this year,” Tan said.

Cautiously optimistic
Fabian Dee, president of Metropolitan Bank & Trust Co. (Metrobank), said the Ty-led bank is cautiously optimistic about 2022 despite the expected one percent boost from the elections in May next year to the country’s GDP.

“So next year looks like an exciting year for all of us. I’m cautiously optimistic, hopefully in the next three weeks, we will see a continuous trend of improvement in our COVID situation,” Dee said.

Dee was referring to the declining number of COVID infections in the country that peaked to more than 20,000 cases daily in September but has gone down to below 500 per day over the past few weeks.

Hopefully, Dee said the trend would continue to improve so the Christmas season would be good for families and businesses even with the emergence of the Omicron variant.

“For our country, if these health issues continue the way they do, our economy should do well. There’s very sufficient liquidity in the banking system. Everyone is just waiting for things to quiet down and for things to lead people, consumers and businessmen alike to start going back to our normal life,” Dee said.

The earnings of Metrobank jumped by 46 percent to P16.12 billion in the first nine months from P11.05 billion in the same period last year amid the proactive management of bad debts resulting in lower provision for potential loan losses.

Full of opportunities
For his part, Bank of the Philippine Islands president and CEO Jose Teodoro “TG” Limcaoco said 2021 was full of opportunities brought about by the pandemic.

“During this ongoing pandemic, we learned to pivot, to improve, and to see things from a different perspective. There’s the opportunity to go full blast on our digital transformation journey, boost our sustainability efforts, and focus more on improving customer experience. We have to keep our customers on top of our minds and look at things from their perspective. We want to be heroes for them,” Limcaoco told The STAR.

BSP Governor Benjamin Diokno has committed to convert 50 percent of total retail transactions to electronic channels and increase the number of Filipino adults with bank accounts to 70 percent by 2023 under the central bank’s Digital Payments Transformation Roadmap, in an effort to transform the country into a cash-light from a cash-heavy economy.

The share of digital payments to total retail transactions increased to 20.1 percent in 2020 from only one percent in 2013, while the number of banked Filipino adults improved to 53 percent in the first quarter from 29 percent in 2019.

“And just as how we saw the rise of a digital economy and how it benefited the Filipino people amid this ongoing global health crisis, I see that more banks will further push for digitalization initiatives next year to capture more clients and to improve their services as well. Banking has always been a very competitive business and customers will always be on the lookout for the bank that can serve them best,” Limcaoco said.

Limcaoco said BPI aims to become the undisputed banking leader in the eyes of its clients. “We will continue to reinvent the way we serve our clients by providing easy access to smart, convenient and secure financial services via digital and physical channels.”

Edwin Bautista, president and CEO of Union Bank of the Philippines, said that 2021 was a year where the bank’s digital transformation really paid off big time.

On top of hitting its net income and return on equity (ROE) targets this year, Bautista said the Aboitiz-led bank was awarded a digital banking license by the BSP through Union Digital Bank.

Likewise, its financial technology arm UBX was able to ramp up its digital platform due to the pandemic.

To cap the year, UnionBank bagged a deal to acquire the consumer banking and retail business of global banking giant Citigroup in the Philippines for P55 billion.

“We have the deal of the year with Citi, so what more can I ask for. From our perspective, 2021 was one of the best years ever because so many transformational projects happened this year,” Bautista told The STAR.

Return to pre-pandemic levels
Security Bank president and CEO Sanjiv Vohra described 2021 as a year of calibration as the bank adjusted its strategy as the country was in and out of strict lockdown and quarantine measures due to the pandemic.

“We accomplished a lot in 2021: we built capabilities, improved processes, enhanced infrastructure, systems, and data management—all to remain focused on our goal of customer-centricity,” Vohra said.

Heading into 2022, Vohra said Security Bank is buoyed by the resurgence of economic activity brought about by the vaccine deployments and relaxation of restrictions. “We expect the banking industry to return to pre-pandemic levels,” Vohra added.

Vohra said mobility restrictions, vaccine rollouts, as well as consumer and business sentiment are the crucial triggers in a more sustainable economic recovery.

“On mobility restrictions, we expect successive loosening given the reduction in infections. On vaccine rollouts, while it was initially behind earlier expectations and despite the threat of other variants, the momentum has built up, particularly in the National Capital Region, encouraged further with the deployment of booster shots. On consumer and business sentiment, this seems to be lifting given the foregoing developments,” Vohra said

Fitch Ratings believes Philippine banks would continue to face revenue headwinds and higher non-performing loan (NPL) ratios amid the global health crisis.

After plunging by 33 percent last year due to the impact of the pandemic, latest data from the BSP showed the net income of Philippine banks jumped by 35 percent to P168.21 billion from January to September this year compared to P124.55 billion in the same period last year.

Fitch said the industry’s NPL ratio may rise to nearly six percent this year before improving next year.

“We have consistently said that forecasting a peak in terms of banking industry NPL or our bank’s NPL is tricky and difficult as this is highly dependent on the eventual reopening of the economy,” Vohra said.

Instead of forecasting a peak NPL ratio for our bank, we planned for proactive provisioning based on a rolling view of the intensity of the credit challenge in the last two years.

“There has been a significant reduction in our 2021 provisions or credit costs compared to 2020, but, ultimately, this is still going to be tied to the performance of the economy moving forward,” Vohra said.

For his part, Tan said BDO’s NPL ratio stood at 3.1 percent in end September, versus its worst-case expectation of four to five percent.

The BSP expects the NPL ratio of the industry to peak at 8.2 percent in 2022. The asset quality of Philippine banks improved for the second straight month a 4.42 percent in October from 4.44 percent in September after hitting a 13-year high of 4.51 percent in July and August.

Banking sector to support economic recovery
Diokno said Philippine banks have built resilience to shocks and the industry is seen supporting the full recovery of the economy from the pandemic-induced recession.

“While the pandemic caused a rise in soured debts, asset quality remains sound. Banks also have ample buffers against credit losses,” the BSP chief said.

Diokno said banks in the country continue to enjoy more-than-enough liquidity as the COVID response measures of the BSP unleashed P2.3 trillion into the financial system, while lending has recovered on improving demand for loans.

“Banks have ample capacity to absorb shocks, with capitalization remaining well beyond the minimum regulatory requirements. Banks have also remained profitable throughout the crisis,” Diokno said.

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FinTech Landscape in Malaysia

Originally published in legal500.com, check the link here

The convergence of financial services and technology is not new as the use of digital innovation in finance sector can be traced back to the 1990s. As advances in technology is evolving, combined with the shift in consumer behaviour and social-economic activities around the world, new business solutions and market opportunities for FinTech have emerged. Over the past decade, we saw large organisations, leading banks and financial institutions in Malaysia expanding their footprint by adopting new technology for their front and back-office systems to meet customers’ demands. Meanwhile, a range of new entrants comprising of local and foreign startups, specialised FinTech companies, consortiums of financial firms in collaboration with technology companies have sprouted rapidly to compete alongside with the traditional financial services providers. These FinTech players are the cornerstones in reshaping payments, money-exchange, lending and wealth management to be more diverse, inclusive, competitive and accessible.

In 2020 and 2021, the FinTech sector thrived significantly as the Covid-19 pandemic and implementation of the Movement Control Order in Malaysia intensified the need for digital connectivity to replace physical interactions between service providers and consumers. According to the Malaysia Fintech Report 2021 published by the Fintech News Malaysia (with reference to statistics obtained from the Central Bank of Malaysia and the Securities Commission Malaysia), the number of FinTech companies in Malaysia have reached 233 in 2020, while the spike in mobile banking usage and cashless payment options became an inevitable trend as consumers continue to adapt the ‘new normal’ to fit their lifestyle. Consequentially, mobile banking transactions grew more than double from RM200 billion in 2019 to RM460 billion in 2020 given the increase in mobile banking subscribers to 20.2 million in 2020 as compared to 17.2 million in 2019. The transaction volume for online banking, e-wallet, and merchant registration for QR code acceptance surged by 49%, 131% and 164% respectively compared to 2019.

Electronic payments and e-wallets are currently leading the FinTech space in Malaysia. Other FinTech sub-sectors are progressively gaining popularity amongst technological-savvy users and retail investors. These sub-sectors include:

Digital fundraising through the Malaysian capital markets
Equity crowdfunding (“ECF”) platforms, which broaden the ability for startups to obtain capital from a pool of individual investors in exchange for shares in startups. Since the SC’s inception and as of 30 September 2021, ECF platforms have raised a total of RM352.11 million, benefiting 222 issuers through 236 campaigns.[1]
Peer-2-peer (“P2P”) financing, where an individual could lend money to enterprises or SMEs via online platform without the use of a bank or financial institution as intermediary. As of 30 September 2021, P2P platforms have provided financing to 3,824 issuers through 25,259 campaigns and raised a total of RM1.94 billion.[2]
Property crowdfunding (“PCF”) platforms, which facilitates a homebuyer to obtain funds to pay for property purchase price through investments from multiple investors.
Digital trading and advisory (‘WealthTech’)
Digital assets (cryptocurrencies limited to BitCoin, Etherum, Ripple, Litecoin and Bitcoin Cash) are traded through digital assets exchanges (“DAX”). In 2020, there were more than 450,000 accounts opened across the registered DAX platforms, namely LUNO, Sinegy and Tokenize Xchange.
Online platforms harness the benefits of machine learning, algorithms and big data to enhance portfolio risks assessment and investment accessibility such as robo-advisors, digital investment management platforms (“DIM”) and digital broker. By end-December 2020, DIM have acquired 199,224 clients compared to 23,803 clients in 2019.[3]
InsurTech
There have been significant interests from various startups and companies offering InsurTech solutions such as end-to-end digital insurance, digital insurance broker and financial aggregation business.

Regulators’ Approach to FinTech
The key regulators are the Central Bank of Malaysia (“BNM”) and the Securities Commission Malaysia (“SC”). Both BNM and SC have been supportive of the FinTech ecosystem, working collaboratively with the Malaysia Digital Economy Corporation (“MDEC”) to facilitate digitalisation and create conducive environment for the ecosystem.

In September 2015, the Alliance of FinTech Community (aFINity) was launched by the SC to nurture FinTech development in capital markets. It aims to facilitate interactions between the SC and various FinTech players (including financial institutions, government agencies, startups and investors), where constructive discussions can take place for the FinTech community to explore new ideas and solutions, exchange insights with the SC at policy formulation stage, and obtain clarity on regulatory matters.

The SC also organizes a FinTech conference annually, commonly known as SCxSC Conference (which stands for Synergistic Collaborations by the SC), for policymakers, innovators, investors and financial service providers to come together and promote awareness on local, regional and global FinTech developments and trends.

As the BNM recognises that certain FinTech business models do not fit into any specific legislation, the Regulatory Sandbox was introduced in October 2016 to enable companies and startups to test new ideas and business models in a live environment without worrying about the regulatory impediments, within a tailored authorization process. According to the BNM’s Annual Report 2020, a takaful operator has recently received approval to live test its peer-to-peer family takaful product through the BNM’s Regulatory Sandbox, and 4 other fintech companies have advanced to the preparation stage for live testing of their solutions.

In the third quarter of 2020, MDEC in collaboration with BNM, established FinTech Booster Programme, to assist FinTech startups (both local and foreign) with insights in respect of regulatory compliance, business and technology relevant for developing new products and services.

In order to promote the P2P financing and ECF markets, the Government also plays a part by increasing its investment through the Malaysia Co-Investment Fund (MyCIF) by allocating RM50 million in matching grant for P2P financing and RM30 million matching grant for ECF respectively.

Although the regulators are aware that they need to be flexible to welcome new entrants and take a more business-friendly approach in allowing sectorial growth, both the BNM and the SC are also cautious in their licensing and approval processes, where only new operators with proper capability and resources will be selected to ensure adequate safeguards and system integrity are in place, and to prevent over-crowding in the FinTech space in Malaysia.

Malaysia’s FinTech Regulatory Framework
There is no specific legislation governing the FinTech sector. FinTech companies remain subject to the existing legislations and regulatory framework applicable to the traditional financial services companies depending on the nature of activities undertaken and types of products or services they offer.

It is pertinent to carefully assess the activities in determining which framework would apply. For example, if a FinTech company carries on any regulated activity which involve banking, investment banking, insurance or takaful, payment system and payment instruments, or related activities under the Financial Services Act 2013 (“FSA”) or the Islamic Financial Services Act 2013 (“IFSA”), and money changing and remittance businesses governed under the Money Services Business Act 2011 (“MSBA”), then such FinTech company must observe and comply with the relevant provisions under the FSA / IFSA and MSBA, which are under the BNM’s administration and supervision.

On the other hand, the SC regulates activities that fall under the Capital Markets and Services Act 2007 (“CMSA”) which include, amongst others, the provision of corporate finance, financial planning and/or investment advice, dealing with derivatives, fund/asset management and stockbroking.

It is noted that the licensing regime for FinTech activities can be broadly divided into 3 categories: ‘License’, ‘Approval’ or ‘Registration’, each represents the degree of the regulatory standards based on the risks they may pose to financial and monetary stability, consumer/investor protection and credit/market risk components that may impact the Malaysian economy. “License” being the most stringent and “Registration” are for less risky activities. Some sub-sectors are regulated by more strictly than others. For example, remittance and money exchange service provider are subjected to licensing by BNM[4] as compared to the registration requirement for the provision of merchant acquiring services.[5]

In addition to the above, there are various guidelines and policies formulated by the BNM (issued pursuant section 266 of the FSA and section 277 of the IFSA) and the SC (section 377 of the CMSA confers the power to issue guidelines as the regulator deems fit) respectively. These guidelines and policies serve as guidance for the FinTech players to address issues applicable to their activities.

Below are some of the pertinent regulatory guidelines and policies (non-exhaustive) issued by the BNM:

Guideline on Electronic Money (E-money and E-Wallets)
Operational Risk Integrated Online Network
Interoperable Credit Transfer Framework
Risk Management in Technology
Participation Rules for Payments and Securities Services
Merchant Acquiring Services
Framework on Electronic Trading Platforms
Business Continuity Management (Exposure Draft)
Payment System Operator (Exposure Draft)
Payment Cards Framework (Exposure Draft)

Anti-Money Laundering Policy
The Anti-Money Laundering, Anti-Terrorism Financing, and Proceeds of Unlawful Activities Act 2001 (the AMLA 2001), which took effect on January 2, 2018, any transaction involving the local currency or any foreign currency above the amount specified by the competent authority must be kept on file or promptly reported to the competent authority. The BNM also released the Digital Currencies (Sector 6) Anti-Money Laundering and Counter-Terrorism Financing Regulations. The Sector 6 Policy Document establishes minimal rules and standards that a reporting institution must adhere to in order to improve the transparency of digital currency transactions, including risk assessment and customer due diligence.

e-KYC Policy
The BNM issued an electronic know-your-customer (e-KYC) policy document (e-KYC Policy Document) on June 30, 2020, that is applicable to all financial institutions and sets out the minimum requirements and standards that a financial institution must follow when implementing e-KYC for the identification and verification of individuals. The e-KYC Policy Document, outlines the requirements for FinTech services providers to obtain board approval on its overall risk appetite and internal mechanism governing the implementation of e-KYC which impose accountability on the board, to use an appropriate combination of authentication factors to verify a customer’s identity through e-KYC, and to use artificial intelligence to automate the decision to verify a customer’s identity through e-KYC.

Other than the above, the SC issued comprehensive regulatory guidelines and policy documents for recognised market operators (“RMOs”), digital currencies and digital assets ecosystem players, digital investment management (“DIMs”) and the most recently, the licensing framework for digital banking.

RMOs
The SC first issued the Guidelines for Recognised Market Operators on 11 December 2015 (“RMO Guidelines”). A recognised market covers alternative trading venue, marketplace or facility that brings together purchasers and sellers of capital market products. Save for an IEO operator which is subject to registration under the DA Guidelines, all operators for ECF, P2P, DAX, PCF and E-Services platform (“ESP”) are required to register as a recognised market operator pursuant to section 34 of the CMSA, and adhere to the ongoing terms and obligations set out in the RMO Guidelines. The RMO Guidelines have been recently revised effectively on 22 November 2021 aim to:

Increase the fundraising limit on ECF platforms from RM10 million to RM20 million.
Expand the list of permitted issuers on ECF platforms to include unlisted public companies (“UPCs”).
Introduce prospectus requirements for UPCs seeking to raise funds on the ECF platform.
Expand the obligation of an ECF operator to assess and register prospectus prepared by UPCs.
Making editorial amendments and rephrasing certain provision to enhance clarity.
Digital Currencies and Digital Assets
The Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 came into force on 15 January 2019 (“Order”). Pursuant to the Order, all digital currencies and digital tokens that satisfy the requirements in the Order are prescribed as securities for purposes of securities laws. Additionally, the SC issued the Guidelines on Digital Assets (“DA Guidelines”) in October 2020. In line with digital currencies and digital tokens being prescribed as securities, these DA Guidelines set out the requirements relating to fundraising activity through digital token offering, operationalisation of IEO platform and provision of digital asset custodian (DAC) functions. Any person who intends to make available, offer for purchase, or issue an invitation to purchase digital currencies or tokens needs to seek the SC’s authorisation and obtain prior approval from an IEO operator. An IEO operator acts as an adviser, book runner and underwriter for companies that wish to raise up to RM100 million for innovative blockchain projects through digital tokens issuance. As IEO operator has similar roles as investment banks, it would require an IEO licence and compliance with the stringent requirements relevant to IEO as set out under the DA Guidelines. Since the SC’s introduction of a new framework for IEO operators in October 2020, companies that have applied for an IEO licence, amongst others include, Green Packet Bhd, Managepay Systems Bhd, MyEG Services Bhd and Wetokenize Sdn Bhd.

DIMs
The CMSA 2007 regulates a DIM, which is a type of fund management. Section 58 of the CMSA 2007 requires DIM firms who provide automated discretionary portfolio management services to apply for a Capital Market Services Licence (“CMSL”) from the SC. Chapter 13 of the Compliance Fund Management Companies Guidelines imposes additional requirements on the DIM, as well as its board of directors and compliance officer, in addition to the requirements that fund management companies are typically subject to in the Guidelines on Compliance Function for Fund Management Companies issued on 14 March 2005 (revised on 4 May 2019, and the latest revision issued on 21 December 2021 with specific amendments relating to rebates and soft commissions to streamline the Guidelines on Unit Trust Funds is scheduled to take effect by 1 March 2022) (“FMC Guidelines”). StashAway Malaysia was the first DIM to get a CMSL in order to begin operations in 2018.

Digital banking
Digital banks and Islamic digital banks must apply for a licence with the BNM pursuant to Section 10 of the FSA or Section 10 IFSA (whichever applicable). BNM issued the a more simplified Licensing Framework for Digital Banks (“DBL Framework”) in December 2020, which outlines the procedures for applications to establish a digital bank in Malaysia. The DBL Framework emphasises on financial inclusion, requiring applicants for a digital banking licence to provide quality access and responsible use of financial services, particularly to underserved or unserved markets such as retail, micro, small, and medium businesses, in a long-term manner.

Future of Malaysia’s FinTech
On July 2, 2021, the BNM announced via its press release that a total of 29 applicants have submitted proposals for digital banking licences. Barring any difficulties, the highly anticipated event for 2022 would be that, Malaysia will become the second country in ASEAN to issue digital banking licenses, after Singapore which issued 4 digital banking licences in 2020. In 2019, Hong Kong led the Asia Pacific area with 8 licences issued. The BNM intends to grant a maximum of 5 digital banking licences to qualifying candidates, each with a RM3 billion asset threshold requirement for the first 5 years of operation. This serves as a fundamental phase for licensees to establish their viability and solid operations, as well as for the Bank to monitor the licenced digital banks’ performance and associated risks.

In line with industry digitalisation efforts, the regulators have been playing pivotal roles to strengthen Malaysia’s capabilities and growth in the areas of FinTech and enforcement:

SC entered into a new Fintech Bridge agreement in 2020 to expand regional collaboration with the Indonesian financial regulator, Otoritas Jasa Keuangan (OJK). The agreement sets out a mechanism between both regulators to refer innovative businesses that wish to operate in the other’s jurisdiction and thus, it is envisage that there will be future joint-innovation projects and regular information sharing between both regulators on any emerging developments or regulatory issues in the fintech space going forward.
The BNM also laid out the major developmental and regulatory priorities for the following five years (2022-2026) in a new financial sector roadmap (Blueprint 3.0). These goals will include supporting technology and data-driven innovation, improving the financial sector’s competitiveness, extending access to and responsible use of financial solutions, and ensuring that financial intermediation stays effective to meet the economy’s future demands. The financial sector’s catalytic role in pushing the sustainability agenda, particularly climate-related risks, will be highlighted in Blueprint 3.0 to promote a smooth transition to a greener economy.
In conclusion, the competition in the banking and finance sector will undoubtedly be very steep going forward. Balancing competition, service efficiency and market stability would likely be a challenge given that FinTech in Malaysia is still in its infancy stage, while regulators will have to constantly adapt and change its regulatory perimeters to deal with emerging providers from time to time.

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Singapore fintech takes market share in 2022 global funding fall

Origionally Published on July 14th in KPMG website

After a record 2021, global fintech funding is working through a period of correction, KPMG in Singapore’s H1 2022 analysis of private market capital has found*. Yet Singapore, followed by its adjacent Southeast Asian (SEA) markets, is bucking the trend.

Globally after a banner year of US$210billion inward investing across fintech sectors in FY2021, investors are being more discerning with H1 2022 investment of US$108 billion. A combination of macro drivers are contributing to this contraction: importantly, the rise in interest rates is sharpening the investment theses of venture capitalists, as the higher cost of capital redirects their funding towards higher growth markets and the next wave of technology transformation.

In this context, Singapore, as the hub for SEA, has weathered the current market conditions well, doubling its global share. By deal value, Singapore’s global market share has doubled from 3.1 percent of global deal value for Fintech in FY2021 to 6.4 percent in Q2 2022. Share of number of deals against global deal numbers is now at 5.1 percent against a 3.4 percent average FY2021. Deal sizes have grown significantly in Q2 2022, up 10 percent to average US$43.9 million from US$39.8million across FY2021, whilst deal activity for the first half of the year is the second highest on record behind 2021.

“Whilst we are seeing the fintech investment market correcting globally, Singapore is holding its position well. As the trusted hub for high growth and rapidly digitising Asian markets, the diligence in developing an open, cross border ecosystem is paying dividends. However, we shouldn’t be complacent and we should continue to evolve the mix of services to retain relevance to investors and users of the next generation of innovative services. The recent Point Zero Forum is a good yardstick for this future investment into Digital Assets, Sustainable and Embedded Finance” said Anton Ruddenklau, Global Head of Fintech, KPMG International.

With 2021 very much acting as a high watermark for the last decade of fintech investment, private capital investors such as private equity (PE) and venture capital (VC) firms are now refocusing their 2022 investments towards technology that will fuel industry transformation over the next ten years and beyond. Fintech in the domains of climate change, supply chain, financial & crypto market infrastructure, artificial intelligence and agritech is now attracting high interest.

The Singapore Government and MAS have set a strategic path that is aligned to these future drivers of change across sustainable finance and digital assets. Recently launched initiatives demonstrate MAS’ commitment to these drivers, piloting use cases and utilities through industry collaborations across Sustainable Finance and Digital Assets with Project Greenprint and Projects Guardian and Dunbar respectively.

KPMG expects this to continue positioning SEA as one of the largest deal markets in APAC, which will potentially translate to the initial public offering (IPO) market in 2023. With SPACs listings recently introduced on the Singapore Stock Exchange in September 2021, this may further catalyse the IPO market, following the successful listings of the first 3 SPACs in H1 2022.

Environmental, social and governance (ESG) adoption is also on the rise, fuelled by cross industry demand and a desire to make an impact. As ESG momentum continues to gain steam, investors are refining and evolving their strategies. Growing ESG technology classes such as agritech, carbon markets, sustainable finance and data services are forecasted to attract investment growth of up to 150.9 percent compound annual growth rate (CAGR) between 2017 to 2021.

“MAS’s Project Greenprint demonstrates a unique and ambitious system wide approach to the innovation of Financial Services to support both Transition and Sustainable Finance. Investors recognise that this is set for incredible growth and it will likely be stimulated by a new generation of technology entrepreneurs supporting change both within real economy sectors and financial services concurrently. Critical to the project’s success is the global attraction, development and scaling of the best green fintech firms to Singapore. KPMG’s recent announcement of its Business Foundry fintech accelerator, along with other MAS initiatives, is set to deliver on this need”, said Mr Ruddenklau

As of June 2022, there were 1,007 operating fintech firms in Singapore. The number of fintech firms in Singapore remains the highest among SEA countries representing 67 percent of the total across the region which numbered 1,482.

Contributing to Singapore’s market stability has been the city-state’s ranking among the world’s most competitive economies and its recognition as a dynamic global financial hub, with estimated total assets of S$4.7 trillion under management. For the last two years running, Singapore has been nominated as the top global innovation location for technologists by its peers in KPMG’s Global Technology Innovation Hubs research.

Singapore has executed a national strategy for the further development of the fintech sector, adopting policies and incentive programs such as the Regulatory Technology Grant program and the Digital Acceleration Grant program to speed up technology adoption in the financial sector. The ambition to become a global fintech hub is accompanied by regulations that structure the development of the field.

Additionally, with Singapore now ranked second in the world on the International Property Rights Index (maintained by the Property Rights Alliance), this bolstered confidence from companies that invest heavily in research and development could undoubtedly lead to more IPOs on the SGX going forward.

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FinTech investment in Indonesia set to double in 2022

• FinTech investment in Indonesia is expected to reach $3.6bn in 2022 based on investment in the first half of the year. This is in contrast to global FinTech investment trends which point to a significant fall in funding this year, based on a 24% drop from Q1 to Q2 2022. Deal activity in the country is also expected to increase slightly by 5% reaching 102 deals in 2022. The Marketplace Lending sector was the most active in Indonesia in H1 2022 with 15 deals, a 29% share of total deals.

• Xendit, a single integration payment gateway, was the largest deal in H1 2022 raising a huge $300m in their latest Series D funding, led by Coatue and Insight Partners and intends to use the funds to expand operations and its business reach. In 2021 the company tripled annualized transactions from 65m to 200m and increased total payments value from $6.5bn to $15bn. It now serves more than 3,000 customers. Xendit is also making strategic investments that serve startups and SMEs in Southeast Asian countries.
• Indonesian FinTech regulation is regulated mainly by two authorities, Bank Indonesia and the Financial Services Authority (OJK). In 2017 Bank Indonesia announced their first regulation which included a regulatory sandbox as a limited trial place to test FinTech Providers’ technologies, services, products, and/or business models.

The data for this research was taken from the FinTech Global database. More in-depth data and analytics on investments and companies across all FinTech sectors and regions around the world are available to subscribers of FinTech Global. ©2022 FinTech Global