A new report by S&P Global Ratings has indicated that embracing financial technology (fintech) and the innovations it heralds will improve the long-term competiveness of Singapore’s banking industry.
According to the report titled “Singapore banks must adapt to fintech or lose out”, the global rating agency’s credit analyst Ivan Tan said digital transformation is imperative for Singapore’s banking industry.
“Investment in fintech is necessary for Singapore banks to defend their competitiveness not just among regional peer banks, but also against the tech giants that are penetrating financial services,” Tan said. Tan also said that benefits from fintech will likely accrue only over the medium-to-long-term.
However, failing to adopt it will cause banks to lose customers and market share, and ultimately profitability, leading to rating pressure.
According to Tan, the ratings on Singapore banks are underpinned by these banks’ strong business positions and dominant market shares. Leading Singapore domestic banks and large qualifying full banks are well positioned to thrive in the fintech era. They have the necessary resources to invest in technology and acquire start-ups, and a rich pool of customer data to harness technology to create commercially viable products or apps.
The current equilibrium of the financial industry in Singapore and globally could collapse if new service providers begin offering convenient services to customers via fintech, potentially threatening the profitability of existing financial institutions.