Metaverse and environmental, social, and governance (ESG) are amongst top five innovations businesses in Singapore believe will have an impact on their business over the next 12 months. These technologies will present opportunities and challenges, including difficulty in accessing relevant ESG data.
Some 82% of businesses said metaverse would have major or moderate impact on their business over the next year, while 84% believed this impact would be felt in three years, according to a study released by financial services technology company, FIS.
It polled 160 executives in Singapore from both the financial services sector, including banks and insurers, and non-financial services industries, including retail, travel, and technology providers. The study was part of a global report that surveyed 2,000 executives across nine countries, including Australia, Germany, Hong Kong, India, and the UK.
Amongst Singapore respondents, 81% said ESG would affect their business over the next year, while 89% believed impact would be felt in three years.
Another 81% pointed to embedded finance as a major innovation that would impact their business over the next 12 months, while 76% said the same for decentralised finance (DeFi) and 69% cited cryptocurrencies. These numbers moved up to 89% for ESG, 84% for embedded finance, 83% for DeFi, and 73% for cryptocurrencies when respondents were asked about a three-year impact.
Embedded finance encompassed tailored financial services that are delivered to consumers when needed by non-financial services providers, such as payment and investment services.
The study revealed that Singapore executives saw both opportunities and challenges as these five technologies evolved.
For instance, FIS noted that some respondents already were actively researching potential opportunities in the metaverse and believed it was strategically important to have a presence in the virtual space in the next three years. However, there were concerns that content moderation and behavioural standards would be a barrier to adoption.
FIS noted that this suggested that more controls and predictability of virtual environments were necessary for metaverse to reach its full potential.
And while respondents acknowledged that DeFi, which taps blockchain and digital asset technologies to manage financial transactions, presented a major growth opportunity, some cited poor user experience as a barrier to adoption.
In addition, a lack of clarity around cryptocurrency regulations was cited as a major barrier to adoption.
Where ESG matters were concerned, Singapore respondents saw opportunities to improve their market competitiveness, with some already developing new ESG products and services. However, there were concerns over difficulties in accessing and analysing relevant ESG data as well as reporting on the data, amidst a lack of internal data or tools and external technology to support ESG.
Respondents also noted that incompatibility between their risk management frameworks and most digital assets would deter them from adopting DeFi.
"Singaporean businesses have made it clear that increasing investments into key areas such as embedded finance, Web3, and ESG are critical to capture growth opportunities," said Kanv Pandit, FIS' Asia-Pacific group managing director of banking solutions. "This responds to the government's ambition to solidify the city as an international fintech and innovation hub."