SINGAPORE – Advancements in fintech and artificial intelligence (AI) will drive greater transformations in the financial industry in 2026, according to some investment firm representatives on a panel at the Singapore Fintech Festival (SFF) on Nov 12, but they also cautioned about the risk of an AI bubble bursting soon.
Further developments in AI could also solve some problems while creating new ones for the world, including talent and energy shortages, some of the panellists said at the event at Singapore Expo.
The financial industry could find itself at a critical juncture in 2026, as fintech advancements are poised to deliver disruptions.
Mr Sandeep Naik, advisory director at New York-based private equity firm General Atlantic, said fintech built the digital infrastructure and digital payment rails for the world over the last decade, without any form of large-scale disruption to the industry.
But he foresees that programmable finance – the embedding of blockchain and smart contracts into digital money and payment systems – could cause major disruption within the next 12 months.
Other disruptions could see computing costs go down, while regulation will be more proactive and innovative to become a core component of the fintech industry, he said.
“Regulators are talking about the need to build a common infrastructure on which finance can be programmable. They are taking the first step to acknowledge that disruption is coming.”
Mr Naik added the key now is to ensure that the industry has the right regulations in place to allow fintech companies to scale up.
Mr Saemin Ahn, managing partner at Japanese venture capital firm Rakuten Capital, noted that while the surge in AI investments has advanced the infrastructure for the financial sector of the future, it has also led to a significant drop in innovation in other critical sectors.
“So much investment has focused on AI-first initiatives, which means that we are not putting enough capital towards human talent in other industries, for example pilots, nurses, and heating, ventilation and air-conditioning engineers,” he said.
“The world is running out of people who actually set up the wires for the power shell of the data centres.”
He predicts that capital flows will eventually still return to industries that are less reliant on AI.
Panellists were also concerned that the market may become too saturated with overvalued AI companies. This could lead to the bursting of a bubble similar to the dot.com bubble in 2000, they warned.
Mr Sunil Sabharwal, operating partner at Blackstone Growth Equity, said there is a possibility that 90 per cent of AI companies that receive investment today would fold in the next couple of years.
“There were a half-dozen survivors coming up despite the dot.com bubble, and a few years later some of these have returned. Now we might see the same pattern happening in the AI space – but maybe squared, because it is even bigger than the dot.com bubble.”
Many of the companies that survived the dot.com bubble had a strong go-to-market proposition and were able to raise enough capital before they were badly hit.
So, similarly, start-ups with a solid product today should focus on their fund raising so that they will be able to “cut to the bone” and survive the inevitable AI bubble burst, added Mr Sabharwal, who is also chairman of TookiTaki, an AI-native compliance firm in Singapore.
Mr Ahn was slightly more optimistic in his forecast. He noted that the stock market’s heavy reliance on the tech industry – which makes up 30 per cent of listings but accounts for around 80 per cent of growth – is an unprecedented phenomenon.
“We are just in very untried times. We’ve never had a situation where such a concentrated number of tech companies have persistently over-exceeded analyst expectations for more than half a decade.
“I think that’s why a lot of people are getting uneasy and the default is there just needs to be a recorrection of this, hence the nomenclature of bubbles.”
Amid the hype, Mr Naik cautioned start-up founders against blindly hopping on the AI bandwagon, saying that a mere pivot to AI does not make their business more impressive to investors.
“I think positioning yourself as an AI player does not necessarily increase your valuation. If you are trying to add ‘tourist capital’ in your cap table, you might get away with an investor who does not understand AI putting money in your start-up.
“But you actually need capital that believes in what you are building. What I’ve seen is that headlines do not compound, but business models do. It depends on what kind of company you are trying to build.”
“You don’t have to be an AI scientist or founder to really benefit from the AI revolution. You can be an AI enabler in the same ecosystem and still benefit widely from it.”
Companies should instead look at how they can utilise AI in their product offerings, he said. For instance, a payments firm could use AI to help it become a data provenance player, while a credit market infrastructure company could fine-tune its models on risk underwriting with the help of AI.
“You could build a phenomenal fintech company that’s an AI fintech company without necessarily being at the centre of building a large language model or trying to be an AI player.”
The panel also included Mr Ganesh Rengaswamy, managing partner of Quona Capital, and Ms Sweta Rau, founder and general partner of White Venture Capital. It was moderated by Mr Pat Patel, chief executive of the Global Finance and Technology Network, one of the organisers of SFF.
Singapore could capitalise on new opportunities presented by the advancements of AI and the ongoing global geopolitical uncertainty happening in parallel.
Mr Naik said that with the deep tech reset brought about by AI developments, gone are the days where a tech company would need to hire hundreds or thousands of employees.
And with immigration laws around the world in flux, Singapore as a geopolitically neutral country would become increasingly attractive to fintech start-up founders who want to set up base for their nimble small-sized companies.
“Singapore became the financial services hub of Asia, and I truly believe that it could be the fintech hub of the world,” he said.
Building partnerships with other countries could also be another step to raising the Republic’s profile in the fintech space.
The Monetary Authority of Singapore announced at the SFF on Nov 12 a new strategic AI-in-Finance partnership with the UK’s Financial Conduct Authority.
The new partnership will support safe and responsible AI innovation, enabling AI-in-Finance solution providers in Singapore and AI innovators in the UK to scale and operate across both markets more effectively.
Financial institutions in both key financial centres will also benefit from expanded opportunities for innovation and cross-border learning.
As a start, both regulators will explore the joint testing of AI solutions, exchange of regulatory insights, discussions on responsible AI, and collaborative events to spotlight best-in-class approaches.