What The FinTech #59: 18 Jul 2021
Medhy Souidi
Transformation Lead - Head of Innovation & Experiences at DBS HK | Host of What the FinTech | Senior Editor at Money20/20
Happy Sunday and Welcome back to What The FinTech, your regular FinTech & Innovation Newsletter focusing on Hong Kong & Asia ! Here are the selection and the top headlines for this week.
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BLOCKCHAIN - CRYPTO - DIGITAL ASSETS - DE FI
According to a joint report released by the BIS Committee on Payments and Market Infrastructures, the BIS Innovation Hub, the International Monetary Fund (IMF) and the World Bank, central bank digital currencies (CBDCs) have the potential to enhance the efficiency of cross-border payments, as long as countries work together. The report analyses how CBDCs could facilitate enhanced cross-border payments, and how practical efforts are taking these considerations forward. Facilitating international payments with CBDCs can be achieved through different degrees of integration and cooperation, ranging from basic compatibility with common standards to the establishment of international payment infrastructures. The analysis highlights both the need for multilateral collaboration on macro-financial consequences as well as the importance of interoperability between CBDCs.
American Express is making its debut into NFTs, starting with NFTs for images of “Good Days” singer SZA, who was recently featured in a virtual concert hosted by the credit card company. Amex is selling 14 NFTs featuring the singer’s performance. It released 10 of the tokens, sold by NFT developer Fanaply, to concert attendees for $100 a piece. The other four were put on sale on July 12 to anyone with an Amex card for the same price. Credit card companies including Amex, MasterCard and Visa have been exploring ways to harness blockchain technology. MasterCard recently said its customers could get crypto rewards on purchases, and it plans to start supporting certain coins on its network. Visa’s customers can pay via digital currency, and it works with 35 platforms or wallets to enable its cardholders to convert digital currency to fiat for spending at merchants.
The European Central Bank is set to approve a multi-year project to create a digital version of the euro. An electronic equivalent of banknotes and coins, the digital euro will likely be a digital wallet that eurozone citizens can keep at the ECB. It will be a means of payment that gives holders a claim against the ECB - like banknotes and coins, but in digital format. The ECB has expressed concerns that the biggest providers of payment services in the eurozone, such as Visa and Mastercard, come from outside the bloc, and about the use private companies make of transactions data. Work on a digital euro accelerated after Facebook unveiled plans to create its own currency in 2019, a potential threat to central banks' core business. The ECB has given itself two years to finalise the digital euro's design. If approved, the ECB will work on implementation for another three years before launch.
Regulators are getting anxious about how "stablecoins" - mostly dollar-pegged crypto tokens - could sow instability in wider financial markets more directly than already volatile crypto currencies like Bitcoin. The stablecoin universe is so far dominated by two main tokens, Tether and USD Coin. Facebook-backed Diem, formerly known as Libra, is another in the works. Late last month, Boston Fed chief Eric Rosengren spotlighted the "exponential" growth in stablecoins and the potential problems surrounding the reserve mix behind Tether, calling it “a very risky prime fund”. Focusing more on any widening of the use of stablecoins as payments, as in the case of Diem, the Bank of England insists they should be regulated the same as commercial bank money and have equivalent capital and liquidity rules and offer deposit insurance.
Swiss digital asset bank Sygnum has partnered with art investment firm Artemundi to tokenise a Picasso painting, giving investors the chance to purchase and trade shares in the work. Sygnum is broadcasting the ownership rights to the painting, Fillette au béretn, onto the public blockchain, enabling investors to buy and trade Art Security Tokens (ASTs) in the work. The painting is priced at CHF 4 million. The 4,000 tokens can be subscribed directly through Sygnum’s e-banking platform, with a minimum subscription of CHF 5,000. Token holders will have their ownership share in the painting fully recognised under Swiss law. Transactions will be settled in Swiss Francs, using Sygnum’s digital CHF stablecoin. All tokens are tradeable on SygnEx, Sygnum’s digital asset trading platform.
Gotrade’s mission is to make investing accessible to literally anyone. Fractional shares is the game changer that powers this mission and will unlock the next 100 million brokerage accounts globally. Combined with commission free trading, Gotrade levels the playing field between the haves and the have-nots. A farmer in Southeast Asia or a student in South America can own a fraction of the same portfolio as Warren Buffett. With Gotrade, anyone in the world can invest as little as $1 into some of the largest companies globally including Tesla, Apple & Amazon.
HONG KONG
Lufax Holding’s subsidiary LU Hong Kong has partnered with BNY Mellon Investment Management to launch an open robo-advisory platform, offering tailor-made asset allocation solutions through its professional AI investment consultant “Lucy”. The Hong Kong Securities and Futures Commission (SFC) granted LU Hong Kong regulatory approval in June 2020 to provide investment and wealth management services for its Hong Kong customers. Under the agreement, BNY Mellon will provide investment advice to LU Hong Kong. It will be the first Asia Pacific ex-Japan collaboration for both LU Hong Kong and BNY Mellon Investment Management. LU Hong Kong’s professional AI investment consultant Lucy will offer portfolio options taking into consideration the investor’s financial profile including their income, financial objectives, risk appetites, and investment objectives.
SINGAPORE
Singapore banks have launched digital platforms to capture a slice of the emerging affluent market in Singapore and elsewhere across the region. UOB recently launched SimpleInvest on its UOB Mighty mobile phone app to help customers kickstart their investment journey with as little as $100. UOB said it is expanding its range of digital wealth management solutions as it sets out to serve more of Asean’s growing population of the underserved, increasingly affluent consumers. It plans to invest more than $200 million in digital innovation over the next three years and in the process double its wealth fee income by 2026. This translates to a compound annual growth rate of more than 15% over the next five years. OCBC Bank’s annual Financial Wellness Index Singapore showed millennials (21 – 39 years old) are the most worried about their finances. Their top priority is to grow their wealth, yet 42 per cent of them do not know the best way to do so.
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The Monetary Authority of Singapore (MAS) has launched the Global Veritas Challenge to promote the adoption of artificial intelligence (AI) solutions in the financial sector. The challenge aims to accelerate the development of AI and data analytics solutions which match the fairness, ethics, accountability and transparency (Feat) principles, under the Veritas framework. The Feat principles were created by MAS and the financial industry in 2018 to strengthen internal governance around the application of AI and the management and use of data. The challenge, supported by Accenture, invites fintech companies, solution providers and financial institutions worldwide to submit solutions for problem statements focused on validating the fairness of AI solutions. These statements, identified by banks, include cases in product marketing, risk, compliance and fraud monitoring, loan origination and know-your-customer, and credit scoring and profiling.
The Singapore entity of global payments platform Nium has been issued licences by the Monetary Authority of Singapore, under the Payments Services Act 2019 (PSA), to conduct account issuance, domestic money transfers, merchant acquisition, and E-money issuance services. The new licences extend Nium’s ability to offer these payment services, in addition to its previously licenced activity of cross-border money transfer. Nium is currently licenced in more than 40 countries across 11 jurisdictions worldwide. It is a global B2B payments platform that provides a modular platform that allows banks, payment providers, travel companies, and other businesses to collect and disburse funds in local currencies to over 100 countries, as well as issue physical and virtual cards globally.
According to UOB Asset Management (UOBAM), more corporates are going online to invest. The number of users in Singapore, Malaysia and Thailand on UOBAM Invest - its digital investment portal for corporate investors - has more than quadrupled over the last 18 months. Their total assets under management (AUM) on the online portal also surpassed S$1 billion. About 60% of UOBAM Invest users were new customers to the banking group, and many are small- and medium-sized enterprises. UOBAM noted that the growth may reflect the increasing demand from corporate investors for round-the-clock access to digital solutions, which allow corporate clients to make real-time changes to their investments. UOBAM Invest's Digital Adviser, which the bank says is the first robo-advisory service dedicated to corporate investors in Singapore and Malaysia, features an algorithm-based portfolio planner. With it, users can invest in customised portfolios of UOBAM's funds and global exchange-traded funds.
Singapore has launched the Singapore Trade Data Exchange (SGTraDex), a common data infrastructure and framework expected to unlock over S$200 million in value annually when fully developed. SGTraDex will onboard stakeholders along the supply chain, especially smaller firms. It will also enable new value-added services for supply chain participants and speed up the processing of customs clearance, trade financing, insurance, and other related activities. SGTraDex will be anchored through a public-private partnership with the IMDA, PSA International and Trafigura, as well as key industry participants. These include banks DBS, OCBC, UOB and Standard Chartered, as well as Jurong Port, Ocean Network Express, Oiltanking and Pacific International Lines. The new exchange has three initial use cases - strengthen financing integrity of trade flows, enhance end-to-end visibility of container logistics flows, and digitalise the bunkering industry.
The Infocomm Media Development Authority (IMDA) and National Research Foundation Singapore will invest S$50 million over the next five years to develop Singapore’s digital trust capabilities. Research institutions, institutes of higher learning, and the industry will drive research and translation in trust technologies, which should provide businesses and consumers with greater assurance and confidence as they digitalise. Opportunities enabled by emerging digital trust technologies include privacy-preserving technologies that enable businesses to gain insights from data while preserving privacy, technologies that address emerging areas in decentralised identity and verification, and testing and assurance which can provide confidence that digital technologies are safe and trustworthy. The investment will allow Singapore to tap new possibilities and demands arising from a global digital trust market, and further extend Singapore’s strength as a trusted hub into the digital realm, IMDA added.
CHINA
Alibaba Group Holding and Tencent Holdings are considering making their services available on the other's platforms, according to the Wall Street Journal. Such a move would allow customers to pay for items on Alibaba's e-commerce marketplaces - Taobao and Tmall - with Tencent's WeChat Pay, the Journal reported, citing sources. It would also give the companies more insight into each other's business. The reported talks come amid a crackdown by the Chinese authorities that aims to loosen the control held by China's biggest Internet companies and spur more competition. Alibaba was fined a record US$2.8 billion in April for abusing its market dominance and Tencent was one of 34 of the country's largest companies that was ordered to rectify anti-competitive practices.
The PBOC working group on e-CNY research and development hereby releases this white paper to clarify the PBOC’s position, to explain the background, objectives and visions, design framework and policy considerations for the e-CNY system, to seek public comments, as well as to deepen communication with all those concerned and join hands with them in building an open, inclusive, inter-operable and innovative currency service system for the era of digital economy. Full report here.
ASIA
The Reserve Bank of India (RBI) has indefinitely barred Mastercard from issuing new debit or credit cards to domestic customers for violating data storage rules. In a notification, the RBI said Mastercard had not complied with data storage rules from 2018 that require foreign card networks to store Indian payments data "only in India" so the regulator can have "unfettered supervisory access". The move comes less than three months after India's central bank barred American Express and Diners Club International, owned by Discover Financial Services, from issuing new cards due to similar violations. The RBI directive in 2018 sparked an aggressive lobbying effort from US companies, which said the rules would increase their infrastructure costs and hit their global fraud detection platforms, but the central bank did not relent. The order comes as companies such as Mastercard and Visa also face growing competition from domestic payments network Rupay.
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Medhy
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Medhy Souidi thank you for including the APAC FinTech Bridge in your newsletter. Looking forward to your insights during the digital summit.
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