November has been an incredibly busy and inspiring month for the Know Your Customer team.
At the beginning of the month, we presented, exhibited and participated in a series of events in collaboration with Enterprise Ireland during Hong Kong FinTech Week. Then, after just a couple of days of rest, we flew to Singapore for Singapore FinTech Festival. This was our third time at what is considered the largest FinTech event in the world, and once again we were not disappointed.
During the week, we announced the signing of global private markets platform CapBridge and connected with hundreds of financial services experts from the region. Two weeks after that, we were back in Hong Kong to take part in the inaugural AML/CFT RegTech Forum organised by the HKMA on November 22nd, an important gathering aimed at fostering wider RegTech adoption across financial services.
After such intense weeks, taking a step back to identify key trends currently shaping the industry and guiding its evolution can be a rewarding exercise.
So, here are our key take-aways…
1. The lines between FinTech and traditional Financial Services are getting more and more blurred, as are their challenges.
The rise of digital banking across the APAC region is a phenomenon that has been gaining momentum in 2019. While in Hong Kong the HKMA has issued 8 virtual banking licences since March, in Singapore the MAS opened its application process in August.
At both Singapore FinTech Festival and Hong Kong Fintech Week, these new digital players were positioned alongside more traditional banks in a way that would have been unthinkable just a few years ago. At the same time, the lines between the two groups are getting harder to spot for the untrained eye. We were impressed by the sheer number of traditional banks’ digital divisions showcased with their own brand identity, embodying a larger “contamination” trend currently taking place.
As the two verticals come closer together, so do their challenges.
Being a RegTech company focused on delivering exceptional client onboarding experiences, we are particularly interested in analysing the KYC & AML compliance challenges connected with the rise of digital banking. Incidentally, this was also the focus of our presentation during Singapore FinTech Festival (if you missed it, you can read about this topic here).
2. Fast growth, localised synergies and new regulations characterise digital payments in APAC.
Euromonitor estimates that consumer transactions generated from card and electronic payments in APAC will double by 2024, growing from US$18.7 trillion in 2018 to US$39.4 trillion in 2024.
The opportunities for growth are incredibly vast, if one considers that in a country like Indonesia 97.7% of the market is still cash. The result is an extremely vibrant competitive landscape, as remarked by Andrea Donkor, global head of regulatory relations at PayPal, during Singapore FinTech Festival. However, Donkor also mentioned that PayPal was “partnering with many of the new players, rather than trying to compete with them”.
As the sector keeps expanding, regulators are paying more attention to the risks related to unsupervised payment transactions. Singapore’s Payment Services Act, passed by the Parliament earlier in the year, is the ultimate example of the trend. In this new environment, we anticipate new requirements for strong customer authentication (similar to the ones introduced by PSD2 in Europe) and remote client onboarding to be introduced across the region.
3. Interesting Institutional FinTech initiatives are on the horizon.
November saw a number of important institutional FinTech initiatives being introduced across the region.
In Hong Kong, the Bank of International Settlements (BIS) announced a new Innovation Hub Hong Kong Centre. According to the HKMA, the Centre “will serve as a focal point for regional fintech collaboration and bring the application of innovative technologies among central banks to a new level”.
In Singapore, it was announced that MAS, Deloitte and S&P Global Market Intelligence are working together on the Fintech Research Platform, “an industry-wide platform where investors and financial institutions can connect with fintech startups they can to partner with or invest in”.
Finally, Australia is another good example of what the future of FinTech institutions may look like. During Singapore FinTech Festival we had the pleasure to cross paths with Senator Jane Hume, Australia’s first assistant minister for financial technology. Navigating regulations is probably one of the biggest challengesfor FinTechs. As such, having a dedicated minister to educate and drive best practices for all stakeholders involved – including customers, regulators and financial institutions – can be an important step for the industry.
4. Last but not least, RegTech is now a force to be reckoned with across the whole APAC region.
In both Hong Kong and Singapore, we had the pleasure to present Know Your Customer at special events highlighting the unstoppable growth of RegTech ecosystems in the APAC region.
At the World RegTech Summit in Hong Kong, Brian Tang, co-chair of the RegTech Committee of the FinTech Association of Hong Kong, organised a series of insightful panel discussions to explore the future of RegTech in the era of AI (this is also the topic of the recently published RegTech Book, edited by Janos Barberis, Douglas W. Arner and Ross P. Buckley). At the RegTech Showcase event organised at 80RR in Singapore, the “Regtech around the world” panel highlighted how RegTech associations are emerging all over the world, with a particularly strong regional system being built in Asia Pacific through the APAC RegTech Network.
While the world of RegTech is evolving at a fast pace, RegTech adoption within established financial institutions is still very low. From reviewing procurement processes to making paid PoCs the industry standard, there is a lot that financial institutions and RegTech providers can do on their own to drive change. However, regulators also have an incredibly important role to play.
During the inaugural AML/CFT RegTech Forum on November 22nd, the Hong Kong Monetary Authority encouraged Hong Kong’s banks to “consider, test and implement” RegTech solutions to drive innovation and stronger compliance across the sector. As one of the fast-growing players in the region, we look with extreme interest at any initiatives introduced by regulators to facilitate RegTech implementations on a larger scale.