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Fintech's Benefits to Business and Humanity on Show in Singapore

While many delegates at the Singapore Fintech Festival were keen to highlight the altruistic aspects of financial technological innovation for the less-developed economies, several also made clear its positive commercial contribution.

Photo: Fintech: Can digital banking transform the fortunes of the two billion adults that remain unbanked? (Shutterstock.com)
Fintech: Can digital banking transform the fortunes of the two billion adults that remain unbanked?
Photo: Fintech: Can digital banking transform the fortunes of the two billion adults that remain unbanked? (Shutterstock.com)
Fintech: Can digital banking transform the fortunes of the two billion adults that remain unbanked?

Emphasising the prestige attached to the Singapore Fintech Festival, its most recent iteration attracted such high-profile speakers as Queen Maxima of the Netherlands, the UN Secretary-General's Special Advocate for Inclusive Finance for Development. Setting the tone for the event in her keynote address, she said: "Not only does fintech represent a business opportunity, it is also something that can be of real benefit to people across the world.

"Access to basic financial services can reduce hunger, increase education and improve quality of life. At present, 40% of the world's adults – two billion people – are still effectively locked out of the financial system. By addressing this, fintech could potentially help achieve global financial inclusion.

"In total, over the last five years, across the less-developed countries, the financial-services sector has provided more than US$120 billion in non-guaranteed, unsecured loans to more than five million micro-, small- and medium-sized enterprises [MSMEs]. Despite this, though, almost 50% of the MSMEs in these countries still have no access to finance.

"In all, there are nine prerequisites if fintech is to genuinely flourish and become truly all-inclusive – data privacy; cybersecurity; digital literacy; financial literacy; digital IDs; connectivity; interoperability; fair competition; and physical infrastructure."

Echoing her sentiments, Michael Wiegand, the Bill & Melinda Gates Foundation's Director of Financial Services for the Poor, said: "According to the McKinsey Global Institute, digital financial services can help 1.6 billion people formally enter the economy, allowing them to contribute an additional US$3.7 trillion to the collective annual GDP of the emerging markets by 2025. In truth, digital financial services are not just tools in the battle to end poverty, they are also catalysts for sustainable economic development, something that can only be achieved when the right policies, participants, investment, innovation and infrastructure are all in place. In order to meet this challenge, we believe there are three priorities – developing a reliable facility for real-time e-payments, engaging as wide a range of participants as possible, and ensuring true interoperability between competing businesses.

"The importance of real-time transactions is that they are irrevocable, customer-initiated customer-push payments, a service that keeps costs to a minimum, while also reducing the risk of fraud. The introduction of a wider range of payment service providers, meanwhile, will drive greater inclusion, while true interoperability will allow customers to transact with anyone, without having any restrictions imposed by their service providers.

"To date, no one has managed to secure all three of these objectives, although a number of the Asian players have come the closest, particularly those in China, India and the Philippines. Overall, though, it is governments that need to create the required regulatory framework, as well as the policies and incentives, that will allow digital services to truly flourish."

For his part, Ken Moore, Chief Technology Officer of MasterCard Lab, also saw distinct opportunities in many of the apparently more sophisticated economies, saying: "Overall, there remains an immense need for greater financial inclusion. While many of the more developed territories, such as Singapore and Hong Kong, have very high rates of inclusion, looking across the region as a whole, we can see that only 50% of adults in Asia have an account of any kind with a financial institution. At the same time, only 30% have a debit card, and only 29% of workers have their monthly salaries paid into a bank account.

Photo: India’s demonetisation: Consumers complained, but fraud fell as high value notes were withdrawn. (Shutterstock.com/singh_lens)
India's demonetisation: Consumers complained, but fraud fell as high value notes were withdrawn.
Photo: India’s demonetisation: Consumers complained, but fraud fell as high value notes were withdrawn. (Shutterstock.com/singh_lens)
India's demonetisation: Consumers complained, but fraud fell as high value notes were withdrawn.
Photo: The Monetary Authority of Singapore: Banking on becoming the centrepiece of a smart financial sector. (Shutterstock.com/macashop)
The Monetary Authority of Singapore: Banking on becoming the centrepiece of a smart financial sector.
Photo: The Monetary Authority of Singapore: Banking on becoming the centrepiece of a smart financial sector. (Shutterstock.com/macashop)
The Monetary Authority of Singapore: Banking on becoming the centrepiece of a smart financial sector.

"It is clear that digital finance has the power to hugely boost GDP, while improving the lives of billions of people. At present, though, a number of challenges – most notably regulatory deficiencies and poorly-developed infrastructure – have yet to be overcome, with only greater co-operation between governments, non-governmental organisations, payment network providers and other stakeholders likely to resolve the situation."

Expanding upon the progress made in his own country, Arun Jaitley, India's Finance and Corporate Affairs Minister, said: "Although, not so long ago, 70% of the people in my country were outside the financial system, today every Indian has their own bank account. All social welfare benefits – including grants, scholarships and sponsorships – are channelled through these accounts, resulting in huge savings for the state, as well as the provision of better-targeted benefits.

"Back in November 2017, when we suddenly took all of the high-value notes out of circulation, we dramatically reduced the number of cash transactions, simultaneously cutting down on tax evasion, money laundering, fraud and corruption. We've now created a platform that captures biometric information, which will allow us to ensure that state subsidies genuinely go to those who most need them, while also facilitating easy digital payments."

Turning more to the benefits that fintech offers the business sector, Vikram Pandit, Chairman of the Orogen Group, a New York-headquartered private-equity group focusing on financial innovation, said: "In many ways, the financial-services industry is fertile ground for disruption. Capital and technology can be now put together in ever faster and cheaper ways, bringing down the costs of supplying financial services in the same way that automation reduced manufacturing overheads many years ago."

For Ravi Menon, the Monetary Authority of Singapore's Managing Director, the challenge is for institutions to keep up with the technological changes that are transforming the sector. Outlining his concerns, he said: "The world is becoming ever more digital, especially here in Asia. In the past year alone, the number of online consumers in Southeast Asia has surged by 50% and now stands at more than 200 million people. In truth, fintech is poised for mainstream adoption, with one in three internet users across the world already seeing themselves as regular fintech users. In China, the figure is even higher, with nearly 70% of all digitally-connected users now using fintech on an almost daily basis.

"For our own part, Singapore – already a decidedly smart nation – needs a smart financial centre. In order to deliver on this, we have to ensure seven prerequisites are in place – an ecosystem of diverse players, who actively compete and collaborate; an open architecture economy that facilitates connectivity and innovation; a web of international links that allows the exchange of ideas and scalable solutions; a strong pool of diverse talents; extensive research capabilities; a conducive regulatory system; and a safe and secure cyber environment."

As part of his presentation, Menon also outlined the thinking behind the Global Trade Connectivity Network, a recent initiative by the MAS. Explaining the proposition, he said: "Essentially it's a cross-border platform designed to make trade finance safer and more efficient via the use of distributed ledger technology. It was jointly developed with the Hong Kong Monetary Authority, with cross-border payment support from the Bank of Canada. It has now led to the establishment of the ASEAN Financial Innovation Network, with the World Bank as one of the founding partners. Overall, 16 countries have signed up to the initiative."

Photo: The Singapore Fintech Festival: A showcase for Asia’s lead role in financial innovation.
The Singapore Fintech Festival: A showcase for Asia's lead role in financial innovation.
Photo: The Singapore Fintech Festival: A showcase for Asia’s lead role in financial innovation.
The Singapore Fintech Festival: A showcase for Asia's lead role in financial innovation.

The Singapore Fintech Festival 2017 took place from 13-17 November in halls 1-3 of the Singapore Expo.

Ronald Hee, Special Correspondent, Singapore

Content provided by Picture: HKTDC Research
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