According to a survey by the global financial services and software solutions company Finastra, Singapore is leading banking-as-a-service (BaaS) adoption worldwide. BaaS is a system whereby banks give non-banks digital access to their financial services.

The Financial Services State of the Nation Survey 2021 brought together 785 managers from banks and other financial institutions in Europe, Asia, and the USA to discuss the economic landscape. The research shows that the Singapore fintech scene is booming because the nation is embracing technology and trying to create digital solutions for its citizens.

One such area is in open banking, whereby banks share customer data with third parties to allow customers or other financial institutions to access this information for various uses. Finastra found that 56% of respondents in Singapore believed that open banking is a “must-have” and it has already provided multiple benefits.

Some benefits include improved customer service and experience, reduced operating costs, streamlining internal systems, creating new revenues and bringing in new customers.

The Singapore BaaS approach has been to integrate Application Programming Interfaces (APIs) to support open banking. APIs are the programming tools that allow applications to communicate. In this case, third-party apps are connecting and interacting with the banking app services. Research shows that 87% of Singaporean respondents expect BaaS to impact the upcoming months significantly.

Thus far, 96% of the financial institutions surveyed in the various global markets said they had improved or developed technology over the last year. Additionally, 95% have said that they would continue on this trajectory and get better. Singapore, of course, is leading in the Asian markets, with 45% forecasting they’ll work on their tech and set up BaaS.

Challenges and successes of BaaS in Singapore

Despite their best intentions, there are still several barriers to innovation worldwide. For example, Finastra found that existing regulations in each market are hindering the growth of BaaS. The survey showed that 47% of the global respondents believe the rules are too tight, whereas that number is 53% in Singapore.

Additionally, there’s a lack of support from the industry and the government, with 38% of the respondents expressing their dissatisfaction. Many decision-makers also seem to be stuck in the past, hindering progress. 

Of course, we can’t fail to mention money as one of the challenges. Investment, cost of research and development (R&D), and the impact of COVID-19 on financial markets remain to be critical issues for institutions. Last year, concerns over the cost of R&D were at 43%, increasing by 4% in 2021.

Another significant issue is cybersecurity. When dealing with digital solutions, there’s a fear of criminals attempting to steal personal and financial information leading to an increased focus on online safety.

The Finastra survey shows that 83% of respondents have taken steps to address cyber issues, with Singapore leading the Asian markets at 85%.

As more innovation comes to the market, there’s a greater need for collaboration. Fintech is enabling these partnerships as companies seek to enhance their product offerings and solutions. Over 85% of those surveyed believed collaborating had made their businesses efficient.

Since BaaS uses third-party integration, it delivers better automation and convenient self-service options. 81% of respondents see it as a means of growing their business, as it shortens the time it takes to get products to the market, which, in turn, reduces expenses. Moreover, it ensures that companies comply with all the regulations.

Singapore leading the way

Singapore remains at the forefront of digital integration in many sectors, and that’s why banking-as-a-service will also continue improving. The Finastra survey shows that out of several top markets, the island-nation is number one in increasing budgets and technological investments despite the impact of the COVID-19 pandemic.

The government’s approach has also positioned the country as a global hub for innovation and digital solutions. Despite the regulatory challenges hurting the Singapore fintech scene, the industry is resilient and growing. It has many new options, such as mobile phone adoption, cloud technology, machine learning and artificial intelligence.

Cloud technology benefits the banking sector because it is cheaper than other platforms, flexible, simple to configure and install digital services. The cloud platform is also secure and guarantees greater innovation and easier integration to third party applications.

Another crucial element ensuring the future of Singapore BaaS is Open Finance, and 87% of respondents in the country believe it is the natural successor to open banking. It will take the financial data access model to a new level by giving institutions access to a customer’s entire monetary information, such as adding insurance and pension data.

With this information and technological advancements, service providers can better tailor solutions to meet each individual’s needs. The result, therefore, will be happier customers and increased revenues for Singaporean institutions. Looking ahead, the nation’s position in the global community is expected to be stronger than ever.