How will the financial services sector respond in 2021? (Episode 4)
Following the content of Singapore Fintech Festival, we decided to give our scoop of what experts in the field have to say and relate it back to Instamo as an organisation. This article forms episode 4 of the series.
In Episode 4, we had 3 speakers:
Su Shan Tan, Group Head of Institutional Banking, DBS
Roman Regelman, CEO of Asset Servicing and Head of Digital, Senior Executive Vice President , BNY Mellon
David Marcus, Head of F2 (Facebook Financial), Facebook
to bring us on their key insights ahead for 2021.
In their point of view, a surprising incident that occurred in 2020 was the massive speed and adoption of digital solutions as everyone pivoted given that they had to. It was this speed of pivot across countries, platforms and corporations that surprised them. With this pivot, increased infrastructure is needed to ensure that these activities are sufficiently supported to ensure that everyone is enabled to participate in this new digital economy.
What are some key priorities of financial sectors for 2021?
Firstly, financial sectors need to invest in technology. We've all seen the rise of technology and financial sectors should leverage on this to improve the services and products they offer.
Secondly, financial sectors need to increase partnerships to integrate the entire ecosystem. By doing so, they should find the right partners who are aligned in their mission and philosophy. This way, consumers are given what they need in the most seamless, joyful and painless customer journey. At Instamo, we work with vietnamese banks, fintechs and overseas banks which allow us to create an ecosystem of seamless funds transfer.
Thirdly, embedded finance will play a pivotal role in shaping both the financial sector and the lives of consumers.
What’s the role of Facebook in financial services?
From David Marcus, the Head of Facebook Financial, Facebook hopes to increase the open system. With 3 billion people on Facebook every month and 200 million small businesses on the other side, he hopes to improve financial inclusion to help the 1.7 billion people who may not have access to a bank account or the ability to move money in a digital form around the world. Currently, there are over 1.5 billion people who are underserved. They hope that with the reach that Facebook has, they can participate in a very open and collaborative partnership with banks and the existing financial services industry to bring more people online to serve them better. A good analogy of this would be how the internet has helped people to have access to unlimited communications due to an open protocol.
Why should regulators or consumers trust FB?
From David Marcus, what Facebook is asking for is a benefit of the doubt, not immediate trust. And the reason why Facebook deserves the benefit of the doubt is due to the way they approach this mission - the ambitious mission that Facebook has.
Facebook could have built its platform in a closed way and imbedded wallets to whatsapp but instead, Facebook has built a new standard on the internet that relinquish most of their control. In this day, we are hard pressed to find any company that has done the same as what Facebook has in recent history of actually building and investing something and then relinquish their power and making it an open ecosystem. This to him, is why Facebook deserves the trust of regulators and consumers.
With all that is happening at Facebook, Instamo is naturally involved too. At Instamo, we are interoperable with Facebook's open protocol as we are with many other protocols in the fintech industry. Thus, Instamo sees the value that working together for various open banking partnerships can bring.
With our cloud based system and the immutable data received at Instamo, Instamo aims to balance worldwide regulations with regulations from that of institutions and banks.
What role does DBS have to play as a regional bank to help in the recovery in this region?
From Su Shan Tan, the Group Head of Institutional Banking of DBS -
DBS needs to reach out to micro SMEs who do not have access to banking. If the SME is already on a transaction platform, they could use alternative data to help make informed credit decisions. Moreover, they should take into account speed - speed to market, speed to opening an account and speed to a loan. These are what helps any SME and corporate.
Also, when SMEs or corporations approach any giant platform like Facebook or google to market, they too would need a financial partner who can give them:
A QR code that is linked to the local transaction system
Someone who has the knowledge as to how their ecosystem works
Help in terms of moving their goods cross countries
By digitalising all this in a time when they normally cannot get access to it, this would help a whole army of micro SMEs to get up to the curve and to bring them onto the playing field. Thus, it is the adding of value, helping them to digitise and getting them plugged into your ecosystem where you partner with others to help them improve their sales. Moreover, this also this helps give them the feedback loop and data they need (e.g. getting supplies for cheaper or connecting them with a new group of consumers).
How should we level the playing field to give all access to data?
From Su Shan Tan, financial systems should put all this data and create insights for their clients and do that in a highly secure way. For DBS, they have been spending years ingesting our data and then using this data in creating AI models that are relevant to the customer, and then experiment in creating a feedback loop. With this feedback loop, they get it to work faster and sharper and get machine learning models to pick up speed and accelerate and be as relevant as possible to help all get to a playing field.
How should regulations change to adapt if we do get the level playing field in access to data?
At the end of the day, good, clear and fair regulations is always better than no regulations. Ultimately, it will be good for all participants in the ecosystem to understand what the rules of regulations are. With very good use of data in a transparent manner, this can actually help to bring online millions of people who currently do not have access to the financial system and can help unlock capital for a number of people who do not have access to capital right now.
What do you see to be the biggest game changer for financial services in 2021?
With the increase contention between investing more in resilience and innovating - 2021 would be about combining both and it is the firms that successfully manage to do both will emerge as winners.
Moreover, 2021 would see an explosion of innovation in the space of blockchain and programmable money. We may not see the full impact in 2021 but it would be a foundational year for the space to take us to the start of things.
Bill gates once said, “We need banking but we don't need banks anymore." The unbundling of banking has started and financial services have become micro services that plug and play in the ecosystem - 2021 would see more proliferation of the use of blockchain especially in global trade, logistics and in areas of businesses where the data from 5G and blockchain can help make informed decisions.
At Instamo, with our scalable open API ecosystem that is integrated with AI worldwide, this ensures that we have worldwide credit scoring systems versatile to specialise in multiple industries such as healthcare, finance, ecommerce, agriculture and real estate.
We aim to improve cross border partnerships and bring it to the next level by streamlining the process and achieving automated operational excellence through our service to our customers.
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