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Open banking is now a “must have” in Singapore

For those in the financial services industry, open banking can either be an enabler or a disruptor. For most banks, open banking is becoming a disruptive competition that is making them reassess how they offer their services and cater to the demands of their customers.

For others, open banking enables them to have the opportunity to try out new opportunities with the hope of making the best of the situation. Either way, open banking is now universally and unequivocally regarded as a key part of a bank’s landscape.

In fact, according to the ‘Financial Services: State of the Nation Survey 2022’ by Finastra, global views on open finance are maturing. The research was conducted amongst 758 professionals at financial institutions and banks from August to September 2022 across Singapore, Hong Kong, France, Germany, the UAE, the UK, and the US. It explores the Open Banking and finance landscape, the technology and initiatives set to make an impact in financial services over the next year, and the growing importance of ESG.

In Singapore, 99% of respondents consider open banking either a ‘must have’ or ‘important’, up from 97% last year. The proportion of Singapore professionals that consider it a ‘must have’ has risen to 64%, a notable increase from 2021 (56%). In 2021, Singapore led other markets with agreement from 95% that open finance was important (91% global average), 47% of whom thought it was a ‘must have’ (38% global average).

This year, sentiment in Singapore remains the same with 44% agreeing it’s a ‘must have’, whilst the global average of 48% shows that many other markets have caught up and that the sector globally is actively investigating products and services that would benefit from an ecosystem model.

It’s not hard to see why, as 85% of professionals in Singapore agree that open finance is giving consumers access to a greater range of financial services. Additionally, three-quarters (76%) agree that open finance has the potential to bring about fairer and more equal financial services, whilst 90% agree that open finance is already having a positive impact on the industry and making it more collaborative.

Other insights from the research stated:

  • Banking as a Service (BaaS) and Embedded Finance have become an industry norm – 85% in Singapore agree that BaaS and embedded finance are already expected/demanded by customers. More than a third (38%) said their organizations have improved or deployed BaaS in the past year. Two in five (41%) said their organizations have deployed embedded finance in the last year, more than any other market.
  • Leading drivers for technological adoption reveal shift in outlook – Business growth continues to be a top three driver of technological adoption, as it was in 2021 (45% in 2022, 48% in 2021). However, the other top drivers in 2021 – cutting costs and adapting to changes brought about by the pandemic – have been replaced by more forward-looking drivers – preparing for opportunities arising from BaaS and embedded finance and meeting current and future customer expectations.
  • Current economic situation has led to further investment constraint – In 2021, 81% of respondents in Singapore said their technology and digital banking investments had been constrained by cost pressures. This year, 84% said the current economic situation has tightened spending. This is demonstrated by the fact that 44% said in 2021 that they were planning to improve or deploy BaaS in the next 12 months, whereas just 38% in this year’s survey said their organizations had done so. Despite the current economic uncertainty and wider cost pressures, more than three quarters (77%) expect their full investments to resume by the end of H1 2023.
  • Positive but cautious approach to cloud – The survey findings revealed a unique paradox in Singapore’s cloud adoption. For all other markets, where cloud adoption was higher than average (“all or most” software hosted on cloud solutions), these markets also revealed lower than average use of on-premises solutions, and vice versa. However, Singapore had a far higher than average number (43%, vs 32% global average) that said their software stack is split equally between cloud and on-premises solutions. These findings may be indicative of the banking landscape in Singapore, which is dominated by incumbent banks. Whereas digital players tend to be cloud-native, large incumbents have complex systems that are difficult to migrate fully off on-premises solutions.
  • Support for ESG is widespread – Singapore shows the largest support for ESG apart from the UAE, with 90% of professionals (96% in UAE, 86% globally) agreeing that it’s important for the financial services and banking sector to support ESG initiatives, and 88% (94% in UAE, 82% globally) recognizing green lending as an opportunity for growth and revenue generation.

“Finastra has always championed open finance as the key to unlocking the potential of people, businesses, and communities everywhere,” said Simon Paris, Chief Executive Officer at Finastra. “Over the years that we have conducted this survey, we have seen open finance grow from an emerging idea to a clear priority for institutions across the world, enabling, as it does, business model shifts such as embedded banking, as well as financial inclusion and equality.”