ANN/THE STRAITS TIMES – Investors are putting their money into financial technology (fintech) firms that incorporate artificial intelligence (AI). This is despite a decline in funding to SGD1.74 billion in 2024 – its lowest level since 2020. AI-driven fintech investments in Singapore surged to USD160 million in the second half of 2024, up from USD24 million in the first half, according to data from KPMG released on February 26. KPMG data also showed that Singapore’s fintech funding has been on a downward trend since 2023, amid a global downturn in fintech investments as investors focus on companies with a clear and achievable path to profitability. Partner and global head of fintech at KPMG International Anton Ruddenklau said investors are funding companies developing AI-powered solutions in key financial functions such as credit risk assessment, cyber-fraud prevention and asset allocation. The Singapore FinTech Association (SFA), which facilitates collaboration between market participants and stakeholders in the fintech ecosystem, said most fintech firms across various sectors integrate AI into their systems. From transaction monitoring in regulatory tech to quantitative trading, which involves the use of computer algorithms and programs, and robo-advisory, AI powers key financial functions, said SFA. “It enables algorithmic portfolio adjustments in real time and automates document processing by categorising extracted information,” said SFA, which has more than 700 members and over 60 international partners. SFA noted that while it has not observed any major, notable investments in AI-powered fintech, there has been strong demand for generative AI and agentic AI solutions, which can act autonomously without a need for constant human guidance, from banks and financial institutions across the region. Early-use cases have focused on enhancing internal productivity, reducing risks, improving insights and improving customer interaction such as generative AI chatbots, SFA said. Ruddenklau added that the Singapore Government’s commitment to AI has attracted investor interest. In February 2024, the city-state pledged more than SGD1 billion over the next five years into AI compute, talent and industry development. SFA said Singapore’s SGD1 billion commitment to AI, along with the rise of start-ups in Singapore and the presence of AI companies such as OpenAI, which has opened an office here, is set to attract greater investments in AI solutions and fintech firms developing these solutions. But Ruddenklau said that while there is a lot of interest in AI, generative AI, agentic AI and automation, there is a lot of caution, too. SFA said that as the technology is still evolving, it is important to bear in mind the challenges around data privacy, security, regulation and ethical considerations. Crypto and blockchain investments also surged 22 per cent to USD267 million in the second half of 2024 from the first half, fuelled by AI-powered digital asset solutions and blockchain based financial infrastructure, said KPMG. Notable funding rounds include Partior’s USD80 million for its blockchain-based interbank settlement network. Aptos Move chair professor and associate dean of partnerships and engagement at Singapore Management University Zhu Feida said that the funding trend reflects a strategic shift from speculative crypto to enterprise-grade blockchain infrastructure. Ruddenklau said that AI within the digital currency space could help asset allocation or portfolio optimisation. Digital currencies include crypto and stablecoins, whose value is pegged to another asset, such as a fiat currency or gold, to maintain a stable price. Associate Professor Zhu, who is also a board member of the Blockchain Association Singapore, said AI is helping a lot of aspects in the crypto world, from AI bots doing crypto trading, to using AI to manage crypto funds. AI is also being used in regulatory monitoring, fraud detection, money laundering detection, on-chain data analysis and smart contract auditing, he said. These functions are being made more efficient and effective by AI, he added, noting that AI helps to identify patterns, insights and causalities from vast amounts of data. Government-backed projects relating to blockchain have given investors assurance that blockchain infrastructure has strategic national-level support, especially in financial hubs like Singapore, said Zhu. These include Project Guardian, an initiative to improve liquidity and efficiency of financial markets by converting assets into digital tokens, and cross-border central bank digital currency initiatives.