Commentary

 Latest Trends in LIBOR Transitions in Japan

Agent Banking is getting more popular in the rural areas of Bangladesh. More number of agents and outlets are seen these days as their numbers have grown by 15.69% and 12.59% respectively in September 2020 compared to September 2019 even amid COVID-19, according to data from the country’s central bank, Bank Bangladesh (BB)

BY AASHISH SHARMA, risk lifecycle and decision management lead for FICO in Asia Pacific.

Much has been written about the likely death of incumbent banks in the face of coming competition from neobanks (or digital banks) soon to be launched in Singapore, that will be more nimble and agile, have more streamlined processes and lower cost overheads, be free of any legacy (in the form of infrastructure, and mindsets) and give customers exactly what they want.

With smart phone usage growing year over year, mobile banking is the preferred method of customer engagement with banks. In Singapore alone, a third of the adult population is projected to have a digital bank account by 2025. We can expect this number to grow rapidly with the recent announcement by the Monetary Authority of Singapore (MAS) on awarding digital full bank licences to non-banks. This move means the increase in personalisation and convenience for consumers, with all-in-one banking services at their fingertips 24/7.

Without a doubt, COVID-19 is rapidly changing the way business is done and this is visible across industries. For players in the financial services sector, in particular, customer interactions are swiftly switching from physical to digital.

What does replacing LIBOR mean for financial services firms?

The development and penetration of the financial sector in local Asian markets confirms that the future has arrived in the region. Taxis, groceries, and all types of other goods and services, can now be paid for from devices that fit into the palm of our hand without a physical exchange of cash. Soon, transactions will become even simpler as an open banking model takes hold and fosters more innovation through integrations with third parties.

Each of the practices in Islamic finance is anchored on a particular belief – “money is not an earning asset in and of itself”. The only way to understand the system is to consider it in view of Islamic outlook towards the state’s role, economic and social justice, distribution of wealth, and most importantly ethics. Islam unequivocally abhors materialism, greed, consumerism, exploitation, and extortion in any form or to any degree by anybody, particularly the owners of capital. Quran, the holy principal book for Muslims, contains severe warnings against greed and avarice in several places.

If the Global Financial Crisis (“GFC”) was a disaster to the financial sector, the COVID-19 pandemic is a catastrophe (if not armageddon) to the businesses and economies worldwide. The loss of lives, the shutting down of schools and businesses, the travel restrictions, the increase in unemployment rate… have all caused fears that the world economy will enter into a recession. Despite governments and central banks pumping trillions of dollars into the monetary system, the IMF said the world will face the worst economic crisis since the Great Depression of the 1930s. Can these stimuli alone save the world? How can private equity play a role in today’s predicament?

Serving unbanked or under-served populations is a challenge for many retail banks globally,  despite the fact that financial inclusion is a high priority for many governments. For most  banks, maintaining a traditional branch in a rural area is inherently cost-ineffective. In  addition to tellers, banks have to station managers or other employees who specialize in  areas such as mortgages, loans and securities – often to realize that footfall is far too low to  support the branch, given that most customers have to travel extensively to reach it.

Banking-as-a-Service, or more commonly known as BaaS, is an end-to-end process that enables third parties to directly connect with banks  systems so they can build products on top of the banks’ regulated infrastructure. The reason BaaS is a big deal today is that it makes it far easier for anyone — from start-ups to multinational enterprises — to create seamless, scalable payment experiences across and within borders.

It is fair to say that financial institutions have, with technology, largely succeeded with stopgap measures in the initial drive to adapt to the new normal of the “After COVID-19” (AC) world. Celent released the results  of its global survey at a digital event on April . Of course, financial services depend to a large extent on country-specific regulations, business practices, and consumer behavior. Likewise, the impact of the COVID pandemic and its effect on financial technology will vary by region and depending on how the pandemic plays out in different places.

There is a popular analogy comparing artificial intelligence (AI) to electricity. Just like the role of electricity during the second industrial revolution, AI has the same potential to greatly transform how industries function and benefit humankind. However, this analogy in my opinion is over-simplified. The power of AI is much harder to standardize and harness, and it requires a far more collaborative effort to bridge existing gaps between academic research and solving real-world problems.

The World Bank estimated that over 1.7 billion individuals remain unbanked today. The trend is reflected in Southeast Asia, where more than 70% of its adult population is either underbanked or unbanked, despite being one of the world’s largest and fastest growing regions, according to a study by Google, Temasek, Bain & Company on Asia's digital financial services.

The COVID-19 pandemic forced Singapore banks to change tack in order to meet social distancing and work from home requirements. However, it didn’t stop financial crime. Since the pandemic, there has been a significant increase in COVID-related fraud, with criminals engaging in telephone fraud, phishing scams, and even developing fake websites for personal protective equipment (PPE) – only recently a Singapore man was arrested for suspected involvement in money-laundering offences linked to a Covid-19-related scam.