Interesting guest post by John Ong, from The FinLab  a fintech accelerator by SGInnovate () and United Overseas Bank, housed at ().

See more here about how you can sign up for our programme (applications open until March 17th)

 Mankind’s first spaceport, the Baikonur Cosmodrome, was founded by the Soviets in 1955. Its location in Kazakhstan was chosen for its low latitude, sparse population density, railroad access, and proximity to water supplies, all factors needed to launch an unwieldy rocket into space. Still in use today, Baikonur is a testament to how success often hinges on starting with the right place.

In many ways, aspiring fintech startups face a similar problem. Finding the right country to launch one’s brainchild can mean the difference between it becoming a star and a firework. This article aims to narrow down the options, and discuss the merits of Singapore as a launch pad for fintech startups.

Centers of gravity

For a budding fintech, one of the first considerations should be country of launch and base, such as global financial centers. Mature financial industries normally seek out cutting edge solutions to achieve productivity growth. Also, their larger flows provide more opportunities for value creation, fostering a rich fintech space.  In contrast, developing counterparts can rely on acquiring unbanked customers and climbing the visible value chain for growth, reducing the urgency for fintech adoption. Hence, financial hubs allow fintech startups to plug into a larger network of potential partners and customers. Coupled with robust infrastructure and business environments, they are prime locations for fintechs to get started.

There are two salient exceptions to this. First, fintech innovation may happen concurrently with development. Some developing countries, notably Thailand, are relatively advanced in their adoption of fintech, and have popular startups such as Piggipo that are gaining widespread traction. However, this is normally within the confines of a localized financial industry. These solutions tend to be developed by locals, who have a better grasp of customer preferences, and hence their success cannot be easily replicated across markets. A fintech startup with international ambitions might do better launching in a cosmopolis, building an edge driven by technology, business model, or concept.

In addition, fintechs focused on financial inclusion might do better launching directly in developing markets. This would provide closer access to unbanked customers, and strengthen partnerships with local banks and regulatory bodies. This is particularly relevant for countries like Indonesia, where their large markets are able to sustain a niche, culture specific solution. Still, even amongst this category, some might prefer to roll out their solution through partnerships with international banks to borrow brand legitimacy. The natural choice would then be to seek out large players at financial hubs.

Different pads, different planets

In selecting amongst financial centers, it is beneficial to consider one’s target market. Financial centers are generally best integrated with their own regions – US, UK, Hong Kong and Singapore with North America, Europe, China and South East Asia respectively. Preferably, one’s business model and value proposition should interact well with the region’s characteristics. For example, startups dealing in cross currency exchanges should be mindful of cross-border capital flows restrictions in North Asia. These could cripple a business with bureaucracy should they be managed inappropriately.

In addition, the merits of the country itself should be assessed. Notably, market forces can only reward good ideas if two factors are in place. First, political support is vital to enable fintechs to navigate a sea of financial regulations. Without a cooperative regulatory partner, startups are likely to be mired in rules that were designed for traditional banking. Second, capital availability grants fintechs more opportunities to raise funds, which allows businesses to expand operations and build credibility. Startups may also opt to fundraise with accelerator programmes, which can provide the added benefit of business mentorship and networks.

To expand on these points, we zoom into Singapore, which has become increasingly attractive to fintech startups as a launch pad.

Space bound from Singapore

Singapore is both a sensible and easy place to set up a fintech. Ranked as Asia’s top financial center by the Global Financial Centers Index 2016, Singapore boasts a highly developed financial system that is well integrated with the ASEAN region. It was touted as the world’s easiest place to do business by the World Bank in 2016 due to a host of factors, including rapid business incorporation and low startup costs. Compounded with a world-class infrastructure and highly skilled workforce, Singapore has many qualifiers as a base of operations for fintech startups.

Moreover, Singapore stands out for several reasons. First, Singapore is well connected to the ASEAN region, being a trusted provider of financial services. ASEAN enjoys high economic growth, with its 2015 bloc GDP growth of 5.9% outpacing most developed regions. Also, ASEAN, comprising separated markets at varying stages of development, has a great diversity of problems that require solutions. The unbanked, wealth managers, and migrant workers across the region all face different pain points that can potentially be solved by fintech.

Second, the Singapore government has a clear direction to attract fintech startups in its bid to transform the nation into a smart financial centre. Statutory boards offer grants and industry support, whilst regulators work closely with fintech startups to enable their business development. The government puts its money where its mouth is; in 2015 the Monetary Authority of Singapore (MAS) committed S$225 million to growing the fintech startup ecosystem in Singapore. Known for its political stability, Singapore is a place where fintech startups are given every opportunity that is possible to succeed.

Finally, Singapore offers fintech startups diverse opportunities for funding. Numerous venture capitalists, government grants and financial institutions in the country are on the lookout for strong solutions to harness. There are also many accelerator programmes that seek to boost startups, often providing entrepreneurship workshops, business networks and all-rounded mentorship. With a range of business enablers, fintech startups in Singapore are likely to be constrained only be the size of their ideas.

Rocketeers                              

A rocket’s takeoff is an incredible feat. It must overcome the earth’s gravity, withstanding the immense heat and pressure of its liftoff. Fintech startups, in planning to do the same, should pick a place that maximizes its probability of success. And, whilst there are several strong options to consider, it is not difficult to see why fintech startups worldwide come to Singapore to shoot for the stars.


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