News

Singapore capitalising on growing fintech remittance industry

The Straits Times by NG JUN SEN

New high-tech players with their low fees and virtually instant mobile transactions are shaping up as one of the most disruptive forces in the financial industry.

And Singapore is capitalising heavily on this trend, buoyed by its large migrant workforce and a sizeable contingent of Singaporeans working overseas and expatriates posted here, said industry observers.

People here sent around US$6.2 billion (S$8.5 billion) overseas last year, according to World Bank estimates. This does not include remittances coming into Singapore.

Singapore has become the fifth biggest remittance market in the Asia-Pacific, after Hong Kong, Australia, Japan and Malaysia, according to the International Fund for Agricultural Development in May.

Vertex Ventures, the venture capital arm of Temasek, notes that interest in fintech remittance firms has been heating up globally in the past couple of years.

The big players - TransferWise, WorldRemit, Azimo, Remitly and InstaReM - have raised nearly US$600 billion worth of funding from investors worldwide since 2016, said Vertex. Three of these firms have headquarters or offices here, and out of the five, only Remitly does not allow transfers to and from Singapore.

Vertex managing director Chua Joo Hock said Singapore is regarded as a starting point for many investors, as the fintech innovation hub of South-east Asia.

NATURAL ADVANTAGE

Remittance is a very regional and global business and thus naturally fits Singapore's profile... Singapore-based start-ups have the natural advantage.

VERTEX MANAGING DIRECTOR CHUA JOO HOCK

Other remittance firms also cited Singapore's significant Internet penetration and supportive rules-based ecosystem for fintech development.

"Remittance is a very regional and global business and thus naturally fits Singapore's profile... Singapore-based start-ups have the natural advantage," said Mr Chua.

As a result, the sector is a hotbed of activity with several trials and product and platform launches, including government-led initiatives, this year alone.

One major push by the Singapore Government is the Networked Trade Platform (NTP), which was launched this year. Among its many features, the NTP can hook up traders with third-party value-added service providers, including those that provide remittance services.

UNTAPPED MARKET

This is a continuous cycle that can boost economies by as much as 2 to 5 per cent in some markets, tripling Asean's economic contribution from US$17 billion to US$52 billion by 2030.

MATCHMOVE PAY SENIOR VICE-PRESIDENT AND GENERAL MANAGER ASHLEY KOH, on the untapped market potential for digital transactions in South-east Asia.

In essence, the government-run platform gives local remittance start-ups more exposure to international traders who rely heavily on cross-border fund transfers for their businesses.

On the consumer front, another milestone was the launch of the API Exchange (Apix) at the Singapore Fintech Festival last month.

Apix brings fintech firms and banks together to reach out to the unbanked and underbanked in South-east Asia.

Less than 28 per cent of the region's 600 million population had a bank account in 2016, according to accounting firm KPMG.

Against this backdrop is the fact that more than 50 per cent of this population have Internet access, thanks to cheap mobile phones and affordable data plans in the region, said MatchMove Pay senior vice-president and general manager Ashley Koh.

She believes that this untapped market will become open to the possibilities of digital transactions with people making purchases, paying bills and sending funds digitally when they receive money remitted to them electronically for the first time.

FAST, CHEAP AND CONVENIENT

We welcome the increased competition in remittance from banks and other players. Ultimately, the goal should be to make sending money overseas as fast, cheap and convenient as sending an e-mail.

TRANSFERWISE BANKING HEAD LUKAS MAY

"This is a continuous cycle that can boost economies by as much as 2 to 5 per cent in some markets, tripling Asean's economic contribution from US$17 billion to US$52 billion by 2030," said Ms Koh.

The proof is in the pudding - the remittance industry here has continued to attract sizeable investment from investors and firms. Some companies said they intend to expand their headquarters and offices here.

Last month, Singapore-based remittance start-up InstaReM raised more than US$20 million, supported by Vertex and other venture capital firms.

TransferWise, one of the earliest fintech remittance players, is looking to grow its Singapore team from 90 to 140 by the end of next year, said banking head Lukas May.

"Singapore is among a handful of countries in the region that are leading the way in taking a more open stance towards fintech companies," said Mr May, adding that Britain is still leading the way.

WORD OF CAUTION

Online remittances is a thin margin game, and the companies in the space have to remain alert to this.

INSTAREM CHIEF EXECUTIVE PRAJIT NANU

Major players from other industries, which have not provided remittance services in the past, have also jumped into the fray.

Ride-hailing firm Grab, for example, will launch a regional wallet-to-wallet remittance service next year, with the aim of making GrabPay a multi-currency wallet for the region.

"We welcome the increased competition in remittance from banks and other players. Ultimately, the goal should be to make sending money overseas as fast, cheap and convenient as sending an e-mail," said TransferWise's Mr May.

Despite the sector thriving, industry players say it is difficult to ascertain whether there are immediate or significant benefits to Singapore's economy and labour market in the short term.

InstaReM told The Straits Times that it estimates that start-ups spend between $2 million and $15 million when they set up a local presence.

Their lean business models do not require large offices, multiple physical retail outlets or a large labour force, since most of their functions can be done through a phone app or online.

"Online remittances is a thin margin game, and the companies in the space have to remain alert to this," said InstaReM chief executive Prajit Nanu.