As published on straitstimes.com, Wednesday 22 June, 2022.
Global financial centres like Singapore and Switzerland need to work together to break new grounds in innovation and drive sustainable fintech, amid the partnering of industry players and regulators to use fintech to improve lives.
Deputy Prime Minister Heng Swee Keat on Wednesday (June 22) warned that the global fintech community faces many headwinds, including tougher access to funding, rising interest rates and falling valuation.
But he noted that the potential of fintech remains tremendous.
Growth in fintech has stayed strong despite the Covid-19 pandemic, with more than US$210 billion (S$291 billion) invested in this sector last year, Mr Heng said in a video recording that was aired at the inaugural Point Zero Forum in Zurich.
He added that there are still untapped opportunities in the current wave of technology - artificial intelligence (AI), big data and Internet of things - that has yet to run its course.
But a new wave of technology that "could potentially be game changing" - such as Web 3.0, blockchain, non-fungible tokens and decentralised autonomous organisation - has emerged.
Mr Heng, who is also Coordinating Minister for Economic Policies, said tailwinds in fintech are "propelled by three double helixes".
First, the Swiss-Singapore collaboration, which aims to promote innovation, broaden opportunities between Europe and Asia, and "advance a new wave of emerging tech for good", he said.
"Cooperation is also needed to break new grounds - by reducing barriers for cross-border transactions, and with common frameworks for the responsible use of technology," Mr Heng added, noting that the two countries hope to work with more global financial centres over time.
Second, the application of digital in sustainability will drive the future of finance, such as green fintech, which has recently gained traction but is relatively nascent.
To this end, Singapore will set up an environmental, social and corporate governance (ESG) Impact Hub to strengthen collaboration and fuel the fast-growing sustainability ecosystem.
"This is a physical space in the heart of town in Singapore to co-locate green fintech start-ups, venture capitalists, financial institutions, non-profit organisations and family offices.
"Through this hub, we hope to also anchor key industry-driven sustainability initiatives, which include Google's 'Project Point Zero', their climate finance accelerator, and KPMG's ESG Business Foundry," said Mr Heng.
With greenwashing on the rise, confidence in ESG products could be eroded and affect financial stability. Greenwashing is an unsubstantiated claim to deceive consumers into believing that a company's products are environmentally friendly.
To counter this, Singapore came up with an industry-wide AI platform NovA! in November last year to provide banks with ESG risk assessment when originating, underwriting and servicing sustainability-linked loans relating to real estate.
"NovA! can identify areas for sustainability improvement during loan origination and the setting of sufficiently ambitious targets during underwriting. During servicing, NovA! compares third-party verified data with borrowers' self-declarations to detect signs of greenwashing," Mr Heng said.
Third, fintech players and regulators do not have to take an adversarial approach, he said.
Citing the examples of the rise of Internet banking in the late 1990s and the taking off of AI and machine learning in the early 2010s, he added that the tech community and regulators actively shaped technology to bring out its best potential, while mitigating the risks.
He added that cryptocurrencies' underlying blockchain technology has potential to improve wholesale cross-border transactions to make settlement more efficient, accessible and affordable.
For instance, Singapore, together with some countries and the Bank of International Settlements Innovation Hub, embarked on Project Dunbar, which explores how a common platform for multiple central bank digital currencies could enable cheaper, faster and safer cross-border payments.
The forum, mooted last year, is hosted by The Swiss Secretariat for International Finance and Elevandi, a company set up by the Monetary Authority of Singapore to advance fintech in the digital economy.
It spans three days from Tuesday (June 21), and brings together founders, bankers and policymakers, including crypto exchange network Ripple's chief executive Brad Garlinghouse, UBS CEO Ralph Hamers and chief of the Swiss Financial Market Supervisory Authority Urban Angehrn, to discuss the future of financial services.