Message by by President, Singapore Fintech Association (SFA)

Welcome to 2023: The year of the rabbit! This year marks the third anniversary of the pandemic. It seems like only yesterday we were grappling with the sudden switch to lockdown mode. Work-from-home was a fresh concept for many businesses then; today, you will be hard-pressed to find a company that does not operate on a hybrid work model.

COVID’s impact on societies cannot be overstated. Future history books will chronicle how disruptions in supply chains and social distancing rules upended many walk-in businesses; how, for many months, travel came to a standstill, with airports once thronged with travellers turned into deserted buildings.

The same books will also tell how our civilisation, like in many painful periods throughout the centuries, found its way to adapt in the face of adversity. E-commerce platforms saw a surge in new users as millions who were stuck at home took to buying their essential needs online. Traditional businesses — such as luxury goods and airlines – also had to pivot to digital models to generate revenue, or sink.

Digital payments became the modus operandi. Seven in 10 Singaporeans said that they increased their use of digital payments during the pandemic, according to the UOB ASEAN Consumer Sentiment Study. Usage of physical credit and debit cards in the country also jumped by 58%.

We see this sea change happening across all generations – from baby boomers to Gen Zs. Cash payments are dwindling, and even the exchange of red packets during Chinese New Year is taking place through apps (though, of course, it doesn’t quite replicate the experience of having fresh and crisp notes in hand).

Indeed, COVID has provided the impetus to supercharge the adoption of fintech. Significant uptake in digital payment methods such as mobile wallets and Real-Time Payments have enabled merchants to receive funds fast, thus increasing liquidity and allowing them to expand their businesses further across the region. With the recent signing of the MOU between five central banks in ASEAN, we can expect cross-border transactions to be more seamless in the future.

Growing in tandem with the ballooning digital economy are the digital banks. These fully-digital banks come packed with low fees and fast processing times – a strong pull factor for the increasing number of Gen Z digital natives who are entering the workforce. Forget plastic cards even, the future of banking might take place entirely on an app.

Central Bank Digital Currencies (CBDC) would be another interesting fintech innovation to keep watch this year. The collapse of the FTX exchange and the LUNA coin sent huge ripples across the cryptocurrency space in 2022 and cast doubt on the concept of decentralised money, but it’s important to keep an objective perspective and separate the wheat from the chaff. Bad actors should not dictate the future. With the assiduous oversight and regulations that CBDCs bring to the table, international trade could be more efficient than ever and help boost economic growth.

As more people shop and conduct their banking online, we must also be wary of the growing sophistication of fraud and phishing scams. Last year’s slew of bank-related scams in the region have demonstrated how even young, digitally savvy consumers can fall prey to fraudulent transactions, and also demonstrated how conniving cybercriminals can exploit loopholes in the security frameworks.

In light of this, there is greater urgency for financial institutions to shore up their defences against further attacks. And educate their consumers about safe guarding themselves. We may not be able to eliminate every threat, but through a holistic approach, we can be better prepared to identify and counter them.

According to Chinese culture, the year of the rabbit signifies a year of hope. But it is difficult to square that with today’s reality: we have yet to see any signs of an end to fed interest rate hikes, an end to Russia’s invasion of Ukraine, nor an end to sluggish stock market performances. Consumers today are more conservative – they seek safer havens, such as fixed deposit accounts, to grow their wealth. For high-networth individuals, more are choosing to park their money in family offices situated in stable economies like Singapore.

But there are bright spots amid the gloom, China’s reopening to the world and the resurgence of industries affected by the pandemic, such as travel, will deliver a much-needed boost to international trade. Financial players and fintech companies should continue to find ways to innovate and expand their products to take advantage of these booming opportunities and stay ahead of the curve.

Shadab Taiyabi
Singapore Fintech Association (SFA)