Reported by: banking|Updated: November 14, 2019
The 2019 Singapore Fintech Festival, the world’s biggest annual fintech gathering got off to a memorable start with 400 speakers, over 900 exhibitors, 41 international pavilions and about 60,000 participants from 130 countries. This year, the festival has a unique aspect as it has merged with the Singapore Week of Innovation and TeCHnology (SWITCH) thus becoming SFF x SWITCH.
One of the key announcements at the event was that of Monetary Authority of Singapore, which said it has led the successful development of a blockchain-based prototype that enables payments to be carried out in different currencies on the same network. The prototype network, developed by MAS in collaboration with JP Morgan and Temasek, aims to improve cost efficiencies for businesses and is currently undergoing industry testing to determine its ability to integrate with commercial blockchain applications. The successful trial marks the latest development of Project Ubin, a collaborative project between MAS and industry partners that explores the use of Distributed Ledger Technology (DLT).
SFFxSWITCH also saw the government of Singapore announcing investment of US$2 billion in green funds that have a strong green focus. These will be part of MAS’s green action plan, aiming to make Singapore get to the forefront of creating a greener financial system. In addition to Green Investments Program, MAS will develop incentives to encourage growth in green and sustainability-linked loans, roll out grant schemes, and support the development of innovative green finance solutions, among other initiatives. Green finance involves making sure financial services such as borrowing, lending and investing, deliver both returns and environmentally positive outcomes.
Ravi Menon opened the fourth edition of the Singapore Fintech Festival (SFF), and the first combined edition of SFFxSWITCH stating that fintechs must serve a larger purpose. It is about innovation, inclusion and inspiration, he added. He also mentioned that the 2019 conference combines the theme of sustainability with fintech to focus on how technology can be harnessed to create a greener financial system.
The inaugural function saw a video presentation on the fintech ecosystem story in Singapore on the theme ‘ Re-imagining fintech.
NEW GLOBAL CONTEXT
Several discussion sessions on topics relevant to banking and financial services were the highlights of the 3-day event.
At a session on ‘Banking in a New Global Context’, deliberations centered on how the use of technology (including big data) to manage the customer experience is a key differentiator in banking today and is instrumental for banks to succeed in today’s digital age.
Participants discussed whether traditional banks ready to manage the changing dynamics of the banking industry, whether digital banks will impact the industry by offering a new way of thinking and the differentiated customer propositions and products they offer to customers through use of technology will be the key to their success over the next 3-5 years.
The participants felt while digital banks operate a more flexible business model than traditional banks, new technologies have enabled traditional banks to re-engineer themselves in areas such as trade finance – but this takes time. Even though technological capabilities for digital trade finance operations are currently available for deployment, banks are still working on proof of concept because scaling requires buy-in and participation from all stakeholders which, in some traditional banks, might take up to 10 years. However, once deployed, the potential for fraud arising from trade finance transactions is reduced. However, it would be highly dependent on the industry players to drive such an initiative.
At the discussion on the topic ‘Digital Transformation Agenda’, the focus areas were on the current state, role of regulators and its impact on the public and private sectors and future direction of financial inclusion, workforce and sustainability while effecting digital transformation. The participants felt there is no doubt that the rapid pace of transformation is impacting everything in digital. The challenges for regulators include how to balance supervision and encourage innovation yet ensuring that risk in areas such as cyber, consumer, data protection and anti-money laundering are kept in check. Africa was cited as an example of successful financial inclusion and balancing risk where its scale of microloans encourages take-up by consumers who are being treated fairly and do not feel disenfranchised.
They also felt the pace of digitization will continue to increase, giving consumers and corporate customers a wide variety of choice. Over time, the regulators will create a level playing field.
FUTURE OF FINANCE
At the session on ‘Future of Finance Stage- Powered by Prudential: Banking, Capital Markets and Insurance’ 3 examples were cited – of individuals who are living lives beyond the normal. These examples show that the definitions of age are changing. It is shifting to a paradigm where the lines separating quality of life and actual age are increasingly blurred. There are strong arguments in modern times that people are able to live to about 120 years old. As a result of increasing longevity, there is an increasing focus on the issue of quality of life.
The participants mentioned about research conducted in Singapore on the different activities that people would like to undertake post 62 years of age and it was found that most people want to be able to pursue something that they are passionate about. Specific endeavors such as starting a business, going back to school to learn a new skill are two of the many aspirations shared.
Discussion on the topic ‘The Next Generation of Insurance Leaders’ touched on what the future of insurance is, and how changing demographics is impacting businesses. The themes of aging population and the growing middle class are quite similar across Asia. However, in Singapore, the trends are more extreme as Singapore has one of the fasting aging populations in the world and a population which has one of the highest longevities. As a result, the insurance business is changing and moving away from simply being there to protect and pay out claims when something goes wrong, to helping people live longer and healthier lives. This means building protection. Insurance is now also involved in prevention and postponement and is no longer just there to pay the hospital bills.
The participants felt to that end, the impact of technology and applications that can provide more engagement with customers than traditional insurance, have been very welcomed. One such example is an application which can provide some preliminary diagnosis and monitoring of activities. Technology is also doing a great job enabling financial consultants to do a better job – they can service their customers more quickly and process applications much faster. So a lot of the administrative work disappears, and they are able to now focus on real financial consultancy.
The discussion on the topic ‘Open banking – It’s a revolution. Navigating your way to a thriving, open, digital future’ threw very interesting value points. The participants felt open banking was an evolution. The discussions were on ‘the shift from traditional banking to digital banking was the bigger revolution – Open Banking is simply a function of this’; ‘Open banking is an evolutionary approach as there was adoption, adoptability and then permeation’; ‘ Open data, rather than open banking, is the current opportunity everyone is discussing, as it will have the ability to bring tailored products and services into the digital experience seamlessly and without friction’, ‘Asia and other economies have approached open banking bottom-up, whilst Europe has been top-down, and ‘API efficiency and use will bring down the costs for all participants and open up customer segments (particularly the unbanked for financial inclusion). API efficiency means branches and other big capital outlays are not needed, and both traditional and challenger banks will have the ability to reduce capital and improve operating efficiency and increase revenue. For customers, this will simply mean more choice and an improvement in the way they can receive financial services.
‘SUSTAINING FIN SERVICES
On the final day of the event, the topics covered were:
‘Sustaining Financial Services – Why Tech Is Key’ and the deliberations focused on the definition that sustainable finance is about alignment of capital flows towards sustainable global goals, in line with the goals of the United Nations and the Paris Agreement. There is currently a growing movement within the market on green finance, but more growth is required. Another perspective on the definition of sustainable finance within the context of asset management is ultimately about capital deployment. Sustainable finance is about obtaining a sustainable net present value, while ensuring considerations on environmental, social and governance (ESG) factors are accounted for. It is important to understand the cost of an investment to society and to ensure inclusion of such costs in the deployment of capital.
FUTURE OF DIGITAL CURRENCY
‘Defining the Future of Digital Currency’ where the key discussion points were on whether the introduction of digital currencies is indeed helping to solve a problem or instead creating fresh ones. Panelists recalled JP Morgan digital coin, Facebook Libra, China’s Central Bank Digital Currency (CBDC) and National Bank of Cambodia’s Blockchain-based payment system. The panelists also discussed the huge fees incurred in remittances by customers and the issue of bringing greater financial inclusion at scale. They mentioned that players like TransferWise have tried to solve crossborder payments and players like WeChat and AliPay have attempted to foster greater financial inclusion. There also points raised on the risks posed due to the rise of a central bank currency and the status of the current digital currencies if central banks launch their own digital currency. The panelists felt that in the best case scenario for digital currency in the next 5 years, few large global platforms would have successfully solved all use cases, thereby resulting in faster and cheaper cross-border payments (pushing remittance cost to zero) and greater financial inclusion for the unbanked. In the worst case scenario, there will be too many digital currencies without proper regulatory and legal controls, leading to total chaos and turbulence in the global financial market.