Financial technology, or fintech, is a sector that has been boosted by changes in consumer behaviour amid the COVID-19 pandemic.
As more people stay home to reduce physical interactions and avoid the virus, demand for digital services has shot up.
This trend is likely to persist.
I have been pleasantly surprised by the convenience and benefits of some of the latest digital financial services.
For one, I no longer bring along debit or credit cards when I leave home.
Instead, I can rely on my smartphone, which houses my credit cards and e-wallets such as PayLah and GrabPay, to make payments.
I can also withdraw money from the ATM by scanning a QR code, without needing to insert an ATM card.
As financial institutions continue to advance on their digital transformation journeys, consumers like you and I can look forward to new features that bring about even greater benefits.
Here are three fintech trends that are poised to accelerate even further in Singapore in 2022.
Digital banking
Back in December 2020, the Monetary Authority of Singapore (MAS) issued four digital bank licenses, paving the way for non-bank players to challenge the incumbent banks.
Two of the four successful applicants, Sea Ltd (NYSE: SE) and a consortium owned by Grab Holdings and Singtel (SGX: Z74), were issued digital full bank (DFB) licenses.
The two DFB license winners will be able to serve retail customers, with a deposit cap of S$75,000 per customer.
Both banks are expected to launch in the first half of 2022.
Incumbent banks are not taking these developments lying down.
British lender Standard Chartered (LON: STAN) has announced a tie up with NTUC Enterprise to launch SC Bank Solutions, which already possesses a full banking license from MAS.
Local bank UOB (SGX: U11) will also be bringing its digital banking experience, TMRW, to Singapore in the last quarter of 2022.
TMRW already boasts over 300,000 customers across Indonesia and Thailand, and has ambitious plans to acquire over 3 million customers across ASEAN by 2025.
And Singapore’s largest bank, DBS Group (SGX: D05), is also no pushover.
The lender was named the “World’s Best Digital Bank” this year by Euromoney.
The fight in 2022 to attract and retain customers will undoubtedly be heated.
According to a McKinsey report, over 70% of Singaporean consumers are open to migrating to digital-only banks.
Buy now, pay later
Buy now, pay later (BNPL) is a fast-growing service that makes it easier for consumers to afford their purchases.
This service allows shoppers to pay for their purchases in instalments, while merchants receive the full payment upfront from the BNPL company.
These instalments are generally interest-free, and customers only pay additional fees for late payments.
Thus, BNPL offers an attractive proposition for gig economy and freelance workers.
This segment of customers tends to experience irregular cash flows due to the nature of their work, and BNPL helps to alleviate cash flow uncertainty by allowing them to keep more cash on hand.
BNPL adoption is projected to increase rapidly.
In Singapore, gross merchandise value for BNPL payments is expected to rise from US$370.8 million in 2020 to US$2.1 billion in 2028, a compound annual growth rate of 24.5%.
Hence, there is little wonder that numerous companies are vying for a slice of this lucrative pie.
Apart from homegrown pure play BNPL companies such as Atome and hoolah, financial institutions such as Grab, UOB, and Citibank (NYSE: C) also offer their own versions of BNPL.
Even local telco Starhub (SGX: CC3) has unveiled its own adaptation of BNPL.
The company’s new EasyGo service allows customers to pay for their new mobile phones in instalments of up to 24 months with zero interest.
Digital payments
Digital payments are another trend that has exploded recently.
E-commerce and online transactions were already growing rapidly prior to the pandemic, but the pace of adoption has accelerated as consumers enjoyed the convenience of shopping online.
According to UOB, payment companies received a massive US$494 million in funding in the first half of 2021, more than any other fintech segment.
Grab’s fintech business, Grab Financial Group (GFG), received US$300 million in funding.
Digital payments have been made simpler by government initiatives such as PayNow and SGQR, which allow merchants to accept multiple forms of payments with just a single QR code.
SGQR acts as a unified payment code that leaves room for more digital payment providers to offer their services in Singapore.
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Disclosure: Herman Ng owns shares in Sea Ltd.
