The buzzword “Web 3.0” saturates the air at this year’s Singapore FinTech Festival (SFF).
What does it really mean? It refers to the next stage of web evolution that would make the Internet smarter or process information.
How can Web 3.0 or a “smarter Internet” benefit consumers?
Well, when it comes to financial services, think of a perfect user experience when it comes to banking or buying insurance. You can also get personalized information about your banking habits.
In fact, these functions have been gradually integrated into our lives.
If you haven’t noticed, try signing in to one of our local banks and they’ll show you your spending habits. Web 3.0 has also allowed for faster credit checks to process applications.
Industry experts from Tencent, HSBC, DBS and JPMorgan Chase broke down the concept of Web 3.0 into two separate discussion boards at SFF and shared its benefits and risks.
Personalized banking needs, perfect user experience
Web 3.0 is transforming the way banks interact with customers, according to speakers.
“If we think about it, it’s really about offering the capabilities of financial institutions to the user on the site when they want it in a perfect way,” explained Forest Lin, Tencent’s corporate vice president and president of Tencent Financial Technology.
HSBC’s Nuno Matos, executive director of personal and wealth banking, provided some real-life examples to justify this. “When we combine the information data we have from clients’ portfolios (their investment behaviors, risk appetite), it allows us to offer hyper-personalized information to clients individually.”
“Last month in Hong Kong, we offered 22,000 different combinations of wealth advice, customized for each individual client, and recommended exactly what they should do to rebalance their portfolios,” Nuno shared.
Nuno said the bank immediately saw 10 times more conversations between relationship and literacy managers and clients to talk about wealth management.
Faster credit issuance thanks to data
On the side of consumer loans. Nuno said the bank can rely on machine learning to extend credit to an additional 500,000 customers without any documentation or proof of income.
“This is because we get the data and we can extend the credit through the use of technology. This allows customers a lot more options and they can have a lot more power. Customers will control their data and decide who they want to share the data with. data, ”he said.
“How do you assign a credit limit in the past? Before we waited six to 12 months until we met the customer to assign a limit. Today with machine learning. We will be able to in a very few days,” Nuno said.
The HSBC executive also shared that the bank’s ATMs have machine learning capabilities that help them predict the cash situation of each ATM, so machines never run out of money when customers need it. withdraw cash.
“These are really good examples of how we really use technology to improve the customer experience … It’s transparency and putting the customer at the center of your proposal that should really drive what we do,” he said.
How Web 3.0 solves payments for businesses
As for the industry, Panagiostis Georgakopoulos (Takis), head of wholesale payments at JPMorgan Chase, said at a roundtable on wholesale banking that there has been an emergence of global payment networks for businesses with the development of a smarter Internet.
“Whether it’s markets or whether it’s connected cars in the future or connected trade, all of these things need a more efficient way of moving value. This can happen in a blockchain or not in a blockchain, but it requires a much more efficient way to move money, ”he said.
Takis pointed out that the real-time payment networks you see around the world are now a step in that direction. But they are still only national and not yet cross-border.
“When you start thinking about the blockchain part, I think what we’re doing with DBS and Temasek in Singapore is really the world’s first blockchain-based multi-currency clearing network and therefore a great experiment when we start thinking about central bank digital currencies (CBDC) in the future “.
Build trust and important collaborations for the industry to grow
Speakers Forest and Nuno point out the importance of finding a balance in this growing landscape, which requires building confidence with consumers, as financial institutions rely on their data to deliver services.
To build trust with consumers, “the most important thing to consider is user protection,” Forest said, acknowledging that Tencent is a finned service provider that is still considered new to the industry compared to traditional banks.
Forest shared that Tencent practices some key guidelines, such as telling customers what the company is using their data for and obtaining explicit consent from users to share their data.
Decentralized legalization is not intended to replace financial institutions, Forest said. “From our perspective. I don’t think it works because financial institutions over the last hundreds and thousands of years have created that trust in the financial sector as well, regardless of whether you’re talking about payment, investment, or credit. Trust is the key. “
Nuno acknowledged that banks cannot make technological advances alone either.
“Sometimes, and to be realistic, banks and FinTechs will partner and we’re seeing a lot of it. We’re seeing banks bring FinTech to their own value propositions to improve the end-to-end experience for customers. .
“But sometimes we will be competitors. and that’s more than fine because in the end it’s for the benefit of the consumer … Technology is a facilitator in all of this. But technology needs to be with the right people and build trust, and in this world where people have more power with their data, are smarter and more committed, gaining their trust will make a difference. ”
Tan Su Shan, head of DBS’s institutional banking group, noted the growth potential of digital business documentation and its benefits.
“If governments and different legal systems can be convinced that electronic documents like commercial documents can be digitized, that is, they are put on the blockchain, they are immutable and transparent, and they can be based on permissions because certain authorities have permission to access it, then you can be trusted.Now, if you can do it for trade, it will solve a lot of fraud-related problems, around the long response time of commercial financing.I think it’s a big case of ‘use for international trade,’ ‘he said.
But both Tan and Takis acknowledged that there is still a long way to go before everyone adapts to change.
“Covid-19 has accelerated all of this probably in five or 10 years, but many of our customers still have a long way to go … But I think the technology is reaching a level of maturity,” Takis said.
The important conversations that financial institutions are currently having with regulators is to be clear about the rules of these technologies, as well as the need for simplicity and clarity around these rules.
“Rules as they exist today recover a great inefficiency from the system. And the more they are simplified, the more we can eliminate that inefficiency, and obviously new technologies can help make everything faster,” he added.
The future of banking
Bank veterans said the future will contain cross-border payments that can be made 24 hours a day, at low costs.
“So five years later, I think the blockchain will allow a lot of cross-border payments today. Right now, some parts work, some don’t. So, for example, if you have a weekend payment, it may not be settled for a couple of days. It’s not 24/7. Also different countries have different holiday schedules, so with the blockchain and smart contracts it’s 24/7, ”Tan said.
Takis agreed. “Consumer payments will be 24 hours a day, 7 days a day, will be invisible to consumers and will be made at virtually zero cost. At the same time, I believe government regulations, for better or worse, have arrived. to stay ”.
“So I hope much of the same control, especially around the largest wholesale and state interbank payments, doesn’t look too different from the current one. They may be blockchain-based, but the government will continue to put everything the control they have around them as they do today, ”he said.
“I think regulators are, I would say, a little anxious. They see a lot of innovation going on from Asia, be it Singapore, which creates a lot of conversations in Europe with the European Central Bank, and obviously in the US. But the situation is different, their use cases are different and I think there is a bit of a fear of getting lost, but there is still no clear strategy or direction. “
So he said it is about finding a middle ground in this space of growth of technological innovation.
“You’re trying to find this happy medium: how do you balance both? Okay, in the short and long term. And besides, you won’t go from web 1.5 to two or three in a hurry, you’ll have to change both, manage what “It’s here and now, and managing what’s in the future. How to find that happy balance, that’s a huge challenge for everyone.”
So he pointed out that, no matter how much the virtual world may have no boundaries, the physical world in which we live has governments and geographical boundaries.
“You have to be physically where those regulations and limits are and therefore comply with those rules.”
Featured Image Credit: Singapore FinTech Festival