Singapore’s fintech funding boom in 2022 was a double-edged sword for the city-state. On the one hand, the No. 2 and No. 3 areas for investment were both bright spots.
No. 2 was payments, a segment Singapore is keen to cultivate given its importance for the city-state’s regional fintech hub aspirations. Funding for payments jumped 57% to US$984.8 million from US$628.4 million a year earlier.
No. 3 was wealthtech, which grew exponentially to US$500 million in 2022 from US$29.6 million in 2021. Wealthtech investment was especially brisk in H2 2022, with the two largest deals of the year, the US$323 million acquisition of UK-based Pollen Street Capital and the US$300 million raise by Singapore-based crypto firm Amber.
Investor interest in wealthtechs is surging given their potential to offer a larger base of investors access to asset classes that were previously out of reach. As KPMG notes, “such platforms are able to cost-effectively facilitate fractional investments which traditionally had a high minimum investment.”
While Singapore would undoubtedly like to see payment and wealthtech investment continue to climb, it feels differently about crypto – the top source of fintech funding in 2022. Though crypto funding actually slightly decreased in Singapore last year to US$1.2 billion, compared to US$1.5 billion in 2021, it still accounted for more than 25% of all fintech investment.
In November 2022, Singapore’s state-backed sovereign wealth fund Temasek wrote down its entire US$275 million investment in the collapsed crypto exchange FTX. This sobering experience, along with a deeper regulatory antipathy towards positioning the city-state as a hub for crypto retail investment, will likely cause investment in digital assets to taper off in 2023 in Singapore.
We think that Hong Kong probably makes more sense as a crypto trading hub than Singapore – now that China’s central government seems amenable to the idea. Hong Kong has a much larger traditional capital markets ecosystem and culturally more tolerance for risk in related investing. Hong Kong also needs something new and fresh to revive its fortunes, battered as they are by political turmoil and Covid restrictions, while Singapore is in a stronger overall position.
In fact, Singapore has been the beneficiary of the movement of some assets and talent away from Hong Kong. At the same time, Singapore has been ahead of the curve on many aspects of fintech. If the city-state decides to pass on the retail crypto market, it is unlikely to have many regrets.