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What we heard at Singapore Fintech Festival 2019

Singapore Fintech Festival 2019 brought together leading experts from around the word to discuss the opportunities, challenges and the future for fintech.

We were proud to once again be a "Friend of Fintech" sponsor of the event.

As fintech continues to transform financial services, regulators are challenged with developing policies and regulations that maintain stability while also facilitating innovation.

The Singapore Fintech Festival returned for its fourth consecutive year to deliver the world’s largest platform for the global fintech community. This year’s festival, and the first combined edition of SFF and the Singapore Week of Innovation and Technology (SWITCH), saw a record of 60,000 participants from more than 130 countries converging to connect, collaborate and co-create on the future of Fintech.

Key themes this year included artificial intelligence and big data, digital economies (including digital banks, open banking, payments and digital currencies), financial inclusion, insurtech, sustainability and tech-driven global market opportunities.

Find out more about our solutions-driven Fintech advice or continue reading to explore the key trends we observed at this year’s festival.

This year, ‘Fintech for good’ was a key area of focus at SFFxSWITCH, with themes including sustainability in finance and technology, and the future of finance. We are delighted to continue our support of the FinTech Festival, and this year noted a trend of partnerships and collaboration and unprecedented growth in Singapore’s fintech ecosystem. Key developments included the launch of the MAS’ US$2 billion Green Investments Programme to invest in public market investment strategies with a strong green focus, and the unveiling of Veritas, a new framework co-created by MAS and a consortium of financial industry partners to promote the responsible adoption of AI in the financial sector.

Image of Peiying ChuaPeiying Chua, Fintech Partner

Seven key themes from Singapore Fintech Festival 2019

Collaboration in the new world – what will it look like

  • The future of fintech will centre around partnerships between traditional financial institutions and fintech companies
  • Collaboration between incumbent financial institutions and startups is no longer a luxury but a necessity. It is critical that they work together as a team to understand the capability that technology can bring to the table
  • Collaboration with regulators globally is going to be key to solving governance and standard issues. It will also be critical to the successful co-development of fintech policies and regulations such as Anti-Money Laundering (AML) solutions

Artificial intelligence (AI) and big data

  • As we become more digital, more data is collected. With the availability of data, technology companies are able to build platforms that can connect with multiple businesses and people, and it is now possible to predict customers’ interests – all of which result in exponential growth in the digital world 
  • AI is increasingly used to provide solutions to international issues such as healthcare, fraud prevention and money laundering
  • The consensus was that when AI goes wrong, it should be traced back to the human who implemented the specific AI function
  • On the possibility of operating AI across countries with different privacy policies, AI should go beyond national level to regulators such as the EU’s GDPR
  • The power of AI should be in the right hands and should not violate fundamental human rights. Linklaters, Microsoft, Deutsche Bank, Standard Chartered Bank and Visa recently published a report on “Principles to Practice: Use Cases for Implementing Responsible AI in Financial Services”, which reports on issues relating the operationalisation of numerous pieces of AI guidance that have been developed by regulators. The report also summarises key lessons learned from use cases. The report was developed with support of PDPC and MAS

Innovations in payments and digital currencies

  • Southeast Asia is seeing the rapid adoption of innovative payment methods such as e-wallets, mobile money and the use of brands, such as Grab, as modes of payment
  • Low barriers of entry have resulted in the rapid emergence of payment providers, due to the ease at which they can access technology. More collaboration is going to be required to open up more opportunities for faster, cheaper and more convenient payment methods
  • Collaboration and partnership based on open common platform and interoperable standards are the future of payments systems that make real-time cross-border payment experiences possible
  • Developments in payments also give rise to new risks and some challenges remain unsolved due to fragmented regulations
  • The MAS has developed a new Payment Services Act to provide a forward-looking and flexible framework for the regulation of payment systems and services providers in Singapore
  • In the UK, the Second Payment Services Directive (PSD2) was issued two years ago to regulate payment services and payment service providers throughout the EU and European Economic Area (EEA)
  • Currency will go digital, but a global currency will not be formed, as each country will still want to exercise their power in monetary currency exchange rates

Next generation of insurance

  • The insurance business is a sector that has been slow to innovate but it is now changing and moving away from simply paying out claims to help people live longer and healthier lives – this means building protection
  • The Asia region is expected to generate 40% of insurance premiums by 2029
  • Technology can provide more engagement with customers than traditional insurance methods, e.g. an application which can provide some preliminary diagnosis and monitoring of activities versus artificially intelligent chatbots that can provide instant quotes and submissions of policy, and a flying drone which can go into an area after a catastrophe to assess damage and evaluate actual loss
  • Through the use of health trackers, Manulife is identifying and rewarding healthy behaviours by offering consumers better insurance premiums
  • Insurance companies are ready to work with digital partners and will increasingly work with internet giants as data enables them to better reach and engage with their customers
  • Cybersecurity threats in customer data collection remain and the role of regulators becomes increasingly important in this

Beyond traditional banking

  • Open banking, which is based on data sharing, goes beyond traditional banking and is poised to be the new revolution in the financial sector
  • Asia and other economies have approached open banking bottom-up, whilst Europe’s approach has been top-down. In many geographies, regulators are increasingly willing to engage with open banking innovators
  • There are great opportunities for open banking in countries such as Indonesia where there is only 30% banking penetration, meaning open banking could efficiently take over the banking scene and become the standard
  • Aside from retail banking, there is some uncertainty as to how open banking will penetrate commercial banking, with the majority believing that the big opportunities lie in SME banking
  • Risk and issues around ethics, bias, systemic risk and governance surround the concept of open banking
  • Linklaters, Microsoft and Accenture co-authored a thought leadership report on “Open Banking: A Shared Opportunity” which explores the various drivers behind open banking in Asia and the issues financial institutions and regulators will have to address to ensure that all participants – financial institutions, third-party providers and consumers alike – can reap the benefits of open banking

Sustainable finance

  • Sustainability is not a “check box”. Organisations must understand the existential threat to nature – if there are no materials to use, there is no money to be made
  • Despite the challenges in aligning capital flows toward global green causes, sustainable finance will become the biggest opportunity for banks over the next decade
  • Sustainable investing is the fastest growing segment in finance right now and there is a need for innovation to offer products integrated with Environmental Social and Governance (ESG) aspects
  • Focus should be on creating new sustainable investment opportunities based on consumer behaviour. With a long-term mindset on climate change, governments and policymakers must be coordinated globally
  • In driving the agenda of sustainable finance, organisations need to be more specific about the changes required, the materiality of such changes, and the trade-offs
  • Technology, powered by data, can accelerate sustainable finance by connecting fintech disciplines with sustainability goals, providing more specificity and unit measurement to track, measure and report sustainable outcomes, e.g. measuring de-carbonisation effort against financial returns
  • Big data can create an indicator that acts as a financial instrument, providing insights to help stakeholders make better decisions. Education is the basic infrastructure in this context and partnerships are important to bridge the gaps between knowledge and financing to effectively coordinate and mobilise resources and execute sustainable activities
  • The Network for Greening the Financial System (NGFS) – a group of central banks and supervisors committed to better understand and manage the financial risks and opportunity of climate change – is an initiative established to drive sustainable finance
  • The concept of Multi-Capital Performance Reporting was introduced using an integrated profit or loss, which measures not only financial progress but also human capital, natural capital and social capital. Sweden’s largest forestry company was cited as an example that adopts this integrated profit or loss reporting towards a sustainable future
  • Microsoft’s “AI for Earth” programme places cloud and AI tools in the hands of those working to tackle global environmental challenges. It was developed to help organisations such as environmental NGOs and environmental academics, who are often underfunded, to apply for grants and access technology and resources to ‘do good’ for earth

Global markets outlook and opportunities

  • 2019 has been a busy year for venture capital (VC) with a surge of both exits and IPOs, and remains a particularly great year for investing in fintech
  • Fintech will continue to win more market share from traditional players because they are innovating around customers’ needs and experiences, fuelled by digital infrastructure which is becoming more mainstream
  • Fintech startups have been tapping into areas such as insurance and real estate, making investing in FIRE (Financial services, Insurance and Real Estate) a growing trend. However, catching FIRE is a challenge as it is quite competitive and in this early-stage, VC firms are watching the developments closely
  • Asia is the undisputed leader in the fintech space because of the support from its governments
  • There are huge opportunities for fintech in India, driven by the recent introduction of a unified payment interface which has resulted in a low-cost bilateral payment; consequentially increasing the rate of smartphone adoption in the country
  • India has a number of bilateral agreements with China and will have one with the U.S. very soon. India will continue to attract foreign investment and see continued growth
  • China has successful tech unicorns and global fintech funding continues to grow. With Southeast Asia being part of China’s growth strategy, it is forecasted that the internet economy will grow to US$300bn by 2025 with a great number of investment opportunities across the fintech space
  • The tightening of investment approvals by The Committee on Foreign Investment in the U.S. has resulted in a more cautious approach to B2C fintech investments, with investment trends shifting towards B2B in recent years
  • With more fintech players entering the market, the need for high performing risk management and cybersecurity tools has increased

Disruptive Technology Trends in Asia

1:32

We are seeing the rapid adoption of innovative technology solutions globally – a trend dubbed as the Fourth Industrial Revolution. Venture capitalists are looking to invest in the Southeast Asian consumer tech and e-commerce industries. Linklaters Global Co-Head of Technology Niranjan Arasaratnam looks ahead and elaborates on the three key macro trends in the Southeast Asian technology scene. 

Singapore Payment Services Act

1:54

The new Singapore Payment Services Act will become effective in January 2020. It will regulate retail payments activities and other key payments systems in Singapore, but how will this new Act raise standards in the payments space and provide a conducive environment for innovative payment services in Singapore? Linklaters financial regulation partner Peiying Chua addresses three key elements of the new Act. 

From Principles to Practice: Use Cases for Implementing Responsible Artificial Intelligence in Financial Services

There is great interest in financial services – as in other industries – in the promise of AI to unlock new opportunities for innovation, increased efficiency, and improved services for customers. This promise is fast becoming reality, with growing adoption of AI by financial institutions across Asia.

principles practice 

 

Beyond Traditional Banking - Open Banking: A Shared Opportunity

Digital transformation is an imperative for businesses in today’s economy and data has become one of the most valuable assets in this new era – the so-called Fourth Industrial Revolution. In our new report, co-authored with Microsoft and Accenture, we explore the various drivers behind open banking in Asia and the issues financial institutions and regulators will have to address.

open share banking 

 

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