6 January 2022 Peiying Chua Heikes  - Yong En Koh Financial Regulation

Future of Financial Services

January 2022

Dr Tan See Leng, Minister for Manpower, has outlined in his speech at the Institute of Banking and Finance Distinction Evening 2021, shifting growth patterns in the financial services sector which will have profound impact on skills needs. They are (i) an increasing role for smart capital to fuel economic transformation; (ii) the continued rise of the Digital Economy, in particular, embedded finance; and (iii) the growing emphasis on sustainability. We set out below a summary of these emerging patterns and elaborate on the impact they have on the skills needs of financial institutions.

Increasing role for Smart Capital to fuel economic transformation 

  • The value of “capital” can no longer be measured solely in dollar terms. Instead, companies must now look for strategic investors – ones who can help them scale up, extract value and provide access to business connections, technology and expertise. This means that demand for private equity and venture capital will continue to grow.
  • Singapore has made significant progress in this space and is currently home to over 370 global and regional PE/VC managers today. Importantly, many of these PE/VC managers not only provide capital to help businesses grow, but also work closely with the businesses to accelerate growth. A number of them also partner local universities to offer internships, so as to groom Singaporean talent in the area.

The continued rise of the Digital Economy, in particular, embedded finance

  • Financial institutions have traditionally been approached for financial services but today, these services are also embedded on non-financial platforms. For example, in Singapore, Grab users can use the app to book rides, order food, and make micro-investments into investment funds managed by asset managers.
  • The converse is also true – just as financial services are now “embedded” in other platforms, financial institutions are also becoming digital ecosystem players, offering customers non-financial services through their platforms. Many retail banks, for instance, have platforms that offer travel related services by combining financial services like travel-themed credit cards and insurance, with air ticket and hotel bookings.
  • The number of ways in which customers can access financial services will continue to grow as more financial institutions partner with non-financial players to expand their reach.
  • The rise of the Digital Economy needs to be supported by strong data capabilities - how data is processed, used and stored. It also needs to be underpinned by strong cross-border data connectivity to enable frictionless data flows.
  • MAS’ Project Greenprint is one such example of Singapore’s drive towards a data economy. The Project will develop four digital platforms to address the financial sector’s needs for clear, reliable and trusted data to support the growth of the green finance ecosystem.
  • The rise of the Digital Economy will drive up the demand for tech jobs, and it is expected the financial sector will require more data analysts, software developers, infrastructure architects, and cyber security engineers.

The growing emphasis on sustainability

  • At the recent 26th UN Climate Change Conference of the Parties, nearly 200 countries across the world agreed to stronger climate action.
  • Financial institutions have an important role to play to finance and support businesses transiting to adopting environmentally sustainable practices.
  • As investors and corporates become more conscious of the impact of climate change, they will value financial institutions that can offer sustainable services and investments.
  • To meet these demands, financial institutions will need to ramp up capabilities to carry out different aspects of green finance – this includes building and deepening capabilities in environmental risk management, climate-related disclosures, as well as the design and customisation of green finance instruments and solutions.