Trends from SFF 2020 (Part II): Going Digital-first To Reimagine Finance
By Serene Koh, Head of Innovation Research, DBS Innovation
& Wang Xinmin, Innovation Research Lead, DBS Innovation
In the first half of our key takeaways from the Singapore Fintech Festival 2020, we highlighted trends such as the impact of Covid-19 on finance and beyond, financial inclusion for individuals and businesses, and green finance to combat climate change. In this second half of the series, we will explore new developments in payments and digital currencies, the impact of artificial intelligence (AI), data and emerging technologies in finance, and how ecosystems and partnerships are reshaping the financial landscape.
Intelligent and Intuitive Solutions with AI & Data
AI has been one of the biggest game-changers in financial services, powering solutions that provide invisible, intuitive and seamless services globally — anytime and in context. Technology companies have used data and AI at scale to provide insights and opportunities that humans have not been able to access on their own, and consumers are now expecting the same for financial services.
Two key subsets of AI include (1) Natural Language Processing (NLP) and (2) Machine Learning (ML). NLP makes it possible for machines to understand human language and is used in virtual assistants such as Google Assistant, Alexa and DBS’ digibot. ML, on the other hand, analyses data to come up with predictions. These technologies have been adopted to improve the customer experience, internal process efficiencies, and boost fraud detection and risk management.
To leverage the power of AI, DBS Startup Xchange has been fostering partnerships with fintech startups to co-create impactful solutions that redefine banking. Under the Startup Xchange programme, DataRobot worked with multiple business units in DBS to transform, simplify and improve operations and processes through AI solutions. Similarly, 6Estates partnered with DBS’ Risk Management Group to build a NLP powered automation solution to automate the analysis of financial reports.
Finbots.AI also worked with DBS’ Institutional Banking Group to develop an AI-based application that would read, extract and store data, shortening processing durations to mere seconds and eliminating errors. DBS has also taken innovative steps to enable its 33,000 workforce to gain a deeper understanding of AI. Last year, DBS and Amazon Web Services (AWS) have also jointly launched the DBS x AWS DeepRacer League to help DBS employees pick up the basics of AI and ML through a series of hands-on online tutorials before putting their new knowledge to the test by programming their own autonomous model race car.
While the use of AI can create positive outcomes, there is growing recognition of the urgent need to guard against the misuse of such technologies. As Microsoft CEO Satya Nadella notes, trust in technology is something that is “not claimed, but earned”. The AI community, firms, and governments have put in place rules and guidelines to prevent the abuse and misuse of AI and data while creating tools to detect and mitigate potential data bias.
In Singapore, the Personal Data Protection Commission (PDPC) has released the Model AI Governance Framework which provides guidelines on addressing ethical and governance issues when deploying AI solutions. Singapore’s Veritas consortium, which comprises financial institutions and global technology firms, has also developed a first-of-its-kind tool that allows financial institutions to validate the fairness of their AI-driven decisions in credit risk scoring and customer marketing.
Furthermore, DBS has also implemented its PURE (Purpose, Unsurprising, Respectful, and Explainable) framework for data which involves understanding the purpose of data use, avoiding unsurprising effects on customers, respecting social norms in the operating societies, and ensuring that outcomes are explainable.
Emerging Technologies Powering New Possibilities
Beyond AI, emerging technologies are powering the development of new ground-breaking solutions in financial services. For instance, blockchain technology has been gaining mainstream adoption, with industry players and regulators advancing the digital ledger technology and strengthening blockchain infrastructure. MAS and several Singapore government agencies have since launched the Singapore Blockchain Innovation Programme (SBIP), a S$12 million national research programme that will explore blockchain scalability and interoperability. The programme aims to conceptualise 17 blockchain-related projects within the next three years.
In March, DBS became the first Asian bank to successfully close a trade financing transaction on Ant Financial’s blockchain trade platform, Trusple, which aims to provide corporates with access to digital trade services. The transaction was closed on behalf of Singapore-based SME iQuartz and involved registering its trade order on the blockchain in real-time, thus improving supply chain transparency.
Upon fulfilment and acknowledgement of the trade commitment digitally, DBS will also facilitate payment to iQuartz’s supplier automatically via the platform. By leveraging technologies such as blockchain, DBS aims to enable SMEs to plug into global trade and supply chains.
Other technologies such as the Internet of Things (IoT), 5G, Augmented Reality and Virtual Reality (AR/VR), also impact the financial services industry. For instance, IoT could lead to new forms of payments, such as machine to machine payments. In the field of green finance, IoT devices could also be deployed on-site to directly capture and assess relevant real-time environmental data, such as energy and water consumption, by borrowers, portfolio companies, and suppliers.
Meanwhile, 5G technology enables lower latencies and higher speeds. This allows for faster and more efficient payment processing capabilities as well as algorithmic trading and transactions. Combined with high-performance computing and AR/VR, 5G technology could also change the nature of bank branches by facilitating immersive virtual interactions between customers and employees who need not be physically present. With 5G, banks would be able to provide customers with greater convenience, improving the overall customer experience.
Late last year, DBS signed an MOU with Keppel Technology and Innovation to further catalyse 5G development and adoption in Singapore and develop digital banking solutions to create new and unique experiences to enhance customer engagement. Both parties will co-develop new 5G-enabled features such as advanced facial recognition solutions, high-definition video conferencing and harness the use of augmented reality and IoT devices to deliver a more seamless experience for DBS’ customers.
The Rise of Real-time 24/7 Payments and Digital Currencies
Technological advancements have enabled the rise of real-time 24/7 payments. Regulators have also undertaken measures to enable greater domestic payment interoperability and faster cross-border transfers. In Singapore, non-bank e-wallet payment providers have been granted access to the nation’s e-payment infrastructure FAST since February 2021. This allows users to transfer funds in real-time between their e-wallets and bank accounts and across different e-wallets. Across borders, growing connections among payment systems are enabling cross-border payments that settle round-the-clock and in real-time. An example includes the linkage of Singapore’s PayNow and Thailand’s PromptPay that allows users to send money instantly and securely between the two countries with their mobile phone numbers, making it the first-of-its-kind in the world.
Regulators and industry players are also aiming to boost the speed and efficiency of cross-border payments and settlements. Singapore’s Project Ubin successfully tested a blockchain-based prototype for multi-currency settlement back in July 2020. Additionally, DBS Bank, JP Morgan, and Temasek are leading the development of a digital multi-currency payment network to enhance commercial cross-border clearing and settlements globally, with pilot trials set to commence this year.
Amid advancements in traditional payment systems, new forms of currency have emerged. Digital currencies have gained popularity throughout 2020, with private institutions and central banks rolling out or making plans to launch their digital currencies for payments and cross-border remittance. JP Morgan’s JPM Coin aims to enable instant cross border payments, while Facebook has shared its goal to launch its Diem currency this year.
Spurred by the growth of private digital currencies, central banks worldwide have been actively exploring wholesale and retail Central Bank Digital Currencies (CBDCs). This includes China’s Digital Currency Electronic Payment (DCEP), which are in advanced stages of development.
In light of the growth of digital currencies and rising interest in asset digitisation, DBS is developing a digital exchange to enable Institutional Investors and accredited investors to tap into a fully integrated tokenisation, trading and custody ecosystem for digital assets. Leveraging blockchain technology, DBS will provide an ecosystem for fundraising through asset tokenisation and the secondary trading of digital assets, including cryptocurrencies.
Ecosystem Partnerships
With rising consumer expectations for finance fading into the background of their daily activities and appearing in relevant and subtle ways, growing industry convergence has seen non-financial players across various industries increasingly integrating financial services into their primary businesses.
Financial institutions are partnering with industry platforms with large customer bases to offer plug-and-play financial solutions such as account opening, payments, lending to amalgamate into customers’ ecosystems and platforms. These developments have been made possible by the rise of open banking and APIs, which have enabled traditional banking products to be consumable across various settings.
Advances in AI, data, and IoT have further enabled the seamless embedding of finance into customer journeys. This has resulted in the creation of new markets and the reconfiguration of ecosystems, leading to the formation of new business value.
At DBS, the use of these technologies has allowed the bank to tailor solutions for its customers’ financial and non-financial during key milestones throughout their financial lives. For example, the DBS car marketplace is an online portal that enables customers who seek to buy a car to calculate their budget, find a suitable vehicle, connect them with the seller, process their car loan, and aid them in the purchase of their car insurance.
DBS also aims to foster partnerships with non-bank partners to facilitate the exchange of consented data and information. In 2017, DBS launched the world’s largest API developer platform in the industry, with 155 APIs. It has since grown to over 1,000 published APIs today. The platform aims to integrate various service providers to provide a holistic solution for customers to perform financial services.
Governments, regulators, financial institutions, and tertiary institutes have also engaged in domestic and cross-border partnerships to provide infrastructure and platforms while building knowledge and capabilities to strengthen financial ecosystems. Case in point, MAS, Singapore’s Ministry of Health, and the Integrated Health Information Systems are working with industry partners to build a technology platform to enable more efficient health insurance claims processing by securely sharing data with patients’ consent. Additionally, with the support of MAS, tertiary institutes, and government agencies, research institutes such as the Asian Institute of Digital Finance and Singapore Green Finance Centre were further launched to help build capabilities within the financial ecosystem.
Conclusion
Amid the rapid pace of technological advancements, purpose-driven organisations have to keep customers at the heart of what they do by maintaining a deep sense of curiosity and empathy to cater to unmet and unarticulated needs. They also have to recognise that the organisation’s responsibilities go beyond maximising profits and serve a larger purpose — such as building inclusive societies and protecting the planet.
With the new developments in the financial services industry, there are plenty of opportunities for organisations and societies to harness the power of fintech, as well as strong partnerships and collaborations among members of global communities, to innovate new solutions, solve key global challenges, and improve lives.
The 2020 Singapore Fintech Festival (SFF) x Singapore Week of Innovation and Technology (SWITCH) was held from 7 to 11 December 2020 as the world’s first week-long-round-the-clock hybrid digital event, in reflection of the changing nature of digital and physical interactions amid the global pandemic. The event saw participation from more than 60,000 participants from over 160 countries and drew over 3.5 million session views on the online event platform and social media. DBS Bank is proud to be a continued supporter of SFF x SWITCH among other global leaders in the financial services and technology industry.
