The future of finance is being defined today, and Singapore's commitment to excellence is paving the way for a new era of banking. This is evident in the consistent recognition Singapore receives as a leading global financial hub.
Both the London-based Global Financial Centres Index (GFCI) and the New York-based International Financial Centres Index (IFCI) have placed Singapore amongst the top contenders for the title of world's most competitive financial centre in their 2024 and 2025 editions, respectively. Renowned for its robust infrastructure, unwavering political stability, and attractive taxation policies, Singapore remains a magnet for growth, even amidst the headwinds of global economic uncertainty.
Despite geopolitical tensions, inflationary pressures, and supply chain disruptions, the nation's financial sector demonstrated remarkable resilience. In recent years, assets under management (AUM) surged by an impressive 10% to reach $5.4 trillion, outpacing growth across the rest of Asia. This performance solidifies Singapore's position as a leading financial gateway – not just for the Asia Pacific region, but for the world.
The significance of finance to Singapore's economic prosperity cannot be overstated. According to the latest statistics, the industry contributed a substantial 13.8% to the nation's Gross Domestic Product (GDP), ranking third behind wholesale trade and manufacturing. This underscores the sector's critical role in driving Singapore's continued economic success.
Across the board, Singapore's financial institutions have navigated the past few years with agility and strength.
• Traditional banking: Commercial banks, finance companies, and merchant banks all recorded growth in total/liabilities assets, ranging from 1.4% to 5.3% - underscoring the stability of Singapore's core banking sector.
• Insurance: The insurance sector rebounded strongly. Direct life insurance recovered from a net loss in 2022 to a $2.1 billion net income, while general insurance saw gross premiums climb 5.4% to $19.3 billion.
• Alternative investments: Alternative asset classes also showed positive momentum. Private equity and venture capital funds surged by 12%, reaching $657 billion. Hedge funds and REITs also saw healthy growth of 5% and 14% respectively, while real estate experienced a slight dip.
Singapore's financial sector has long capitalised on the nation's pro-business environment, technological prowess, and highly skilled workforce to foster market transparency, facilitate trade, and drive growth. But in an era of rapid technological advancement and evolving customer expectations, one question has arisen, “How can Singapore's financial institutions continue to innovate and maintain their competitive edge?”
The Dawn of Industry 5.0: A New Paradigm for Finance
Even as many organisations across various sectors, including finance, grapple with the complexities of digital transformation and the adoption of Industry 4.0 technologies, a new wave of innovation is on the horizon. While artificial intelligence (AI), automation, big data analytics, the Internet of Things (IoT), machine learning, and robotics continue to reshape business operations, Industry 5.0 presents a paradigm shift.
This emerging concept, championed by the European Commission (EC), redefines the purpose of industry, shifting the focus from purely economic value creation to a broader emphasis on societal value. Industry 5.0 rests on three fundamental pillars – human-centricity, resilience, and sustainability.
1. Human-centricity: This principle places human needs and well-being at the centre of industrial operations. It prioritises genuine value creation for individuals, moving beyond a transactional view of customers as mere consumers.
2. Resilience: Industry 5.0 champions agility and adaptability in the face of disruption. Organisations are encouraged to build robust systems that can withstand crises, ensuring stability and continuity beyond a singular focus on profit maximisation.
3. Sustainability: This pillar underscores the importance of environmental, social, and governance (ESG) considerations. Industry 5.0 advocates for responsible practices that generate positive societal impact and contribute to a sustainable future.
Data as the Currency of Innovation: Unlocking Human-Centricity in Banking 5.0
The banking industry stands poised to embrace Industry 5.0, with discussions already underway about ushering in the era of Banking 5.0. As Mohit Sagar, CEO and Editor-in-Chief of OpenGov Asia, aptly observes, "Banks need to rethink how they interact with customers in the era of Banking 5.0. They can provide solutions by utilising AI and machine learning that not only satisfy but also anticipate the needs of their clients."
While human-centricity forms the core of Banking 5.0, technology undoubtedly serves as the enabler. And in this fifth industrial revolution, data is the undisputed currency. Banks and financial institutions possess vast repositories of personal and transactional data. However, to truly unlock the potential of this data and deliver personalised, insightful banking experiences, institutions must reimagine their data strategies, internal processes, and software architectures.
Sunit Kapoor, Business Strategy and Value Engineering Advisor at Qlik, a US-based data integration, analytics, and AI software company, emphasises this point. He explains, "Access to AI tools doesn't guarantee success; it's the quality and strategy behind the data that drive value." Even with the rapid advancements in AI, including machine learning, deep learning, and agentic AI, the tools themselves are secondary to a robust organisational strategy and framework.
Kapoor outlines "Five Key Needs for Accelerated AI Adoption," a strategic framework for organisations to effectively integrate AI and unleash its full potential. These are:
1. Transformation: Integrating and transforming data from multiple sources in real-time to optimise data handling and return on investment (ROI).
2. Trust: Building a unified data quality platform to ensure data integrity and track data quality.
3. Access: Providing access to data with appropriate tools for different insights for different user levels, from business analysts to the C-suite.
4. Analysing, Predicting, and Responding: Leveraging tools like Generative Business Intelligence (GenBI) to streamline dashboards for different user needs.
5. Action: Establishing frameworks to facilitate the implementation of AI-driven insights.
By laying this foundation for AI integration, the banking and finance industry can truly usher in the era of Banking 5.0, unlocking the promise of genuine customer insights, enhanced engagement, and the delivery of true value.
Enhancing Compliance: Building Trust and Transparency Through AI and Data Governance
The second pillar of Banking 5.0, resilience, offers significant potential to enhance how banks address a multitude of internal and external threats. White-collar crime, in particular, has evolved into a serious concern for the banking industry globally. In an age of interconnectedness, scams, cybercrime, and money laundering have proliferated – demanding heightened vigilance and sophisticated countermeasures.
In Singapore, police data reveals a concerning trend. Losses from scams and cybercrime in the first half of 2024 reached $385.6 million, a 24.6% increase compared to the same period in 2023. The number of reported cases also surged by 18%, totalling 28,751.
In response to the recent increase of digital crimes, new regulations place a greater onus on Singaporean financial institutions to proactively detect and prevent financial crime. The Monetary Authority of Singapore (MAS) and the Infocomm Media Development Authority (IMDA) introduced the Shared Responsibility Framework, mandating real-time fraud surveillance and 24-hour blocking mechanisms for suspicious transactions.
An inter-ministerial committee was formed to bolster anti-money laundering systems across various sectors, including financial institutions. While banks have implemented enhanced due diligence measures, some have expressed concerns about the increased administrative burden and the potential for these safeguards to become a "box-ticking" exercise.
However, the integration of AI and the creation of a unified data quality platform, as envisioned in Banking 5.0, offer powerful tools to address these challenges. AI and real-time analytics can automate the analysis of vast transaction volumes, flagging potential fraud by identifying anomalies in customer patterns.
Sri Teja Amam, Vice President of Data Governance at BNP Paribas, advocates for AI-powered data classification to ensure appropriate controls are applied based on data sensitivity. He notes, "We have crawlers that classify data based on trained models, and this technology is becoming more advanced.”
In the context of Banking 5.0, where data is paramount, data governance and lineage tracking are not merely compliance requirements – these are essential components of building resilience, transparency, and trust with both customers and regulators.
Investing in a Sustainable Future: How ESG is Reshaping Singapore's Financial Landscape
Today's consumers expect businesses to go beyond simply acknowledging their environmental impact. They demand active participation in corporate social responsibility (CSR) initiatives that mitigate harm and contribute to a sustainable future.
Traditional banking, however, often relies on a two-dimensional risk-return analysis. This approach can sometimes relegate CSR to a peripheral activity, a means of enhancing brand image rather than driving genuine societal impact. This can lead to accusations of ‘greenwashing’, where CSR efforts are seen as superficial rather than substantive.
Sustainable banking, in contrast, leverages a three-dimensional decision-making process that takes environmental, social, and governance (ESG) impact into consideration. This represents a shift towards a more holistic approach – where sustainability is not an afterthought, but an integral part of the business strategy.
This integration requires organisational accountability across all levels, encompassing:
• Environmental measures: Reducing waste, committing to net-zero strategies, and considering the impact on biodiversity.
• Social policies: Promoting diversity and inclusion, and upholding fair labour standards.
• Governance: Ensuring boardroom diversity, adhering to recognised accounting and corporate standards, and practising responsible capital and risk distribution.
By embedding ESG considerations into its operations, the banking industry can move beyond superficial CSR and contribute meaningfully to a more sustainable future. This approach aligns with the values of today's consumers and investors, who increasingly seek to engage with organisations that prioritise ethical and sustainable practices.
A Roadmap to Success: Embracing the Transformative Power of Banking 5.0
Singapore's banking and finance industry has consistently demonstrated its strength and resilience, navigating challenging global economic conditions with remarkable success. Both traditional institutions and alternative asset classes have recorded impressive gains, reaffirming Singapore's position as a leading global financial hub.
However, to maintain this competitive edge and thrive in an increasingly complex and dynamic world, the industry must embrace the transformative potential of Banking 5.0. By wholeheartedly adopting the principles of human-centricity, resilience, and sustainability, Singapore's financial institutions can unlock new opportunities for growth, innovation, and value creation.
The journey towards Banking 5.0 requires a commitment to:
• Data-driven decision making: Harnessing the power of data analytics and AI to gain deeper customer insights and deliver personalised experiences.
• Enhanced risk management: Leveraging technology to strengthen resilience against financial crime and operational disruptions.
• ESG integration: Embedding environmental, social, and governance considerations into core business strategies.
By embracing and working with these principles, Singapore's banking sector is solidifying its position as a global leader – excelling in financial performance, while also contributing significantly to a more sustainable and inclusive future.