BANGKOK FINTECH FAIR 2021 SHAPING DIGITAL FINANCE IN THE NEW DECADE - Key Summary of the Sessions

BANGKOK FINTECH FAIR 2021
           SHAPING DIGITAL FINANCE IN THE NEW DECADE
                        18th – 19th October 2021

                   Key Summary of the Sessions

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Digital Outlook and Overview
Overview
        The outbreak of COVID-19 has accelerated digital adoption and disruption in every
economic aspect, especially for the financial sector, where adjustments by stakeholders,
including banks, non-banks, FinTech firms and relevant regulators, have long been observed.
Further development of digitally-enabling financial infrastructure will be the key factor that
helps the sector achieve greater efficiency and resiliency, as well as supports players to better
serve customer demands. As a result, access to quality financial services by customers
would contribute to greater economic benefits.
Key summary
       The COVID-19 pandemic has become the catalyst for the adoption of digital financial
technology, particularly electronic payment, which has grown into one of the most effective
channels for the government to distribute financial aid to those affected by the outbreak.
To move forward with digital transformation, financial service providers need to begin by
embracing digital mindset, reshaping existing organizational culture and adopting digital
solutions to their internal operations. These would serve as a solid foundation for the next
generation of financial services that places greater importance on personalization and customer
experience.
         Further development of both digital and financial infrastructures would help leapfrog
financial services in Thailand to the next level. In terms of digital infrastructure, the country
has already prepared for the 5G communication network and has progressively leveraged on
cloud-computing technology in many business applications that help contribute to
the development of the financial ecosystem, as well as help support regional expansion of
financial services. However, there is still room for improvement in terms of financial
infrastructure. While Thailand has a world-class payment system, further improvements
could be made regarding digital ID verification system that allows stakeholders to access
at a low cost. Document digitization processes, including implementation of digital signature,
should also be improved to enable customers’ ability to conduct end-to-end digital financial
transactions.
         To cope with upcoming changes and challenges, future supervision by the BOT also
needs to be adapted and to be more agile in order to effectively strike a balance between
maintaining resiliency, enhancing cybersecurity, and nurturing financial innovations. These would
be achieved through the 3 O’s approaches i.e. open environment for various players, open
infrastructure for greater access by stakeholders, and open data for further utilization.
By doing so, customers’ financial needs would be better served and greater value-added
financial services would be introduced to the economy.

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Platform as a service in the new decade
Overview
         There are 3 key enablers for a successful platform: big user base, tools that help
facilitate transactions on the platform, and data utilization to best serve users in the ecosystem.
In addition, platforms in Thailand should be designed as open platforms with low cost
of access to encourage innovation and allow all players, including smaller ones, to compete
and grow. Also, market dominance by big players should be addressed. In addition, regulators
should play a role in shaping relevant law and regulations and oversee platform development
to encourage innovation, flexibility and fairness.
Key summary
         Platforms facilitate collaboration and business transactions among users, allowing
utilization of resources that are not owned by the platforms. A good platform needs
3 components: big user base, tools that help facilitate transactions on the platform, and data
utilization to best serve users in the ecosystem.
         Platform development can involve quite a few challenges, such as coming up with
the right design to ensure scalability, attract and support large group of users, best utilize
available data and allow 3rd parties to leverage on its open nature to develop further services.
These platforms could be developed into national digital platforms that cover services by both
the public and the private sectors, so that we can make the most of the opportunities
presented for Thailand and Thai people.
          Large-scale, high-traffic platforms can help provide users’ digital identity verification
and encourage more automated transactions, given the extent and the reliability of information
generated. Platforms in Thailand should allow low cost of entry in order for SMEs and startups
to compete and grow. Regulators should ensure that relevant law and regulations are fair and
flexible, as well as discourage market dominance by big players.

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Disruptive Technologies in Trend with Potential Financial Solutions
Overview
        The COVID-19 pandemic has accelerated the adoption of disruptive technologies and
has significantly created business opportunities. Technology adoption in the financial service
industry helps improve efficiency and reduce costs, as well as enables financial service
providers to best meet changing customer needs. Digital transactions have grown rapidly and
are widely accepted by relevant stakeholders.
Key summary
         2016 – 2017: This was when we experienced the 1st wave of technological disruptions
in the financial sector, especially with the rise of mobile banking and e-payment. FinTech
players and startups entered the market to compete with banks. CeFi (Centralized Finance)
business models for cryptocurrencies started to emerge.
         2018 – 2019: The 2nd wave of disruptions created “disruption dominos”, i.e. gradual
changes throughout every sector were observed. Banks were keen to explore partnership with
FinTech players and startups. In addition, CeFi and DeFi (Decentralized Finance) were further
developed with Ethereum and smart contracts. Binance also came into play.
         2020: COVID-19 pandemic had accelerated the adoption of disruptive technologies.
“Disruption dominos” became “continuous disruptions”, i.e. all sectors seek technology
adoption at the same time. For instance, digital transformation in education and healthcare
sectors were advancing rapidly. For the financial sector, consumer behaviors caused by “at
home economy” accelerated adoption of technology, including augmented reality, virtual
reality and AI, for financial services. Moreover, given the popularity of digital asset investments
by younger generations, there was an exponential growth of CeFi and DeFi.
         2021 and beyond: We will witness more opportunities and challenges in the financial
sector. Financial service providers and customers will take part in designing new financial
services that are more customized. Financial sector will truly evolve.

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Connecting All Innovative Finance to Transform Businesses
Overview
         Rapidly changing technologies and COVID-19 pandemic have accelerated digitalization
of business processes and created new business models. Similarly, the financial industry
has developed innovations and solutions to help support the business sector. The Bank
of Thailand has encouraged these developments and has driven key financial infrastructure
initiatives to support digital financial products and services that meet business needs and
facilitate end-to-end e-business transformation.
Key summary
Digital transformation in business and financial sectors:
          Journey towards digital transformation in the business sector: The business sector
has adopted technologies to increase operational efficiency of processes like procurement
and retail management. Moreover, the business sector has become more paperless and has
enabled better linkages of end-to-end processes. In addition, data has been utilized more
extensively for management and decision making in the rapidly changing environment.
          Development of technologies in the financial sector: Business models have changed
from centralization with banks acting as intermediaries to banks providing digital solutions that
best serve customer needs. Likewise, The Bank of Thailand’s strategic policies also emphasize
on fostering the development of infrastructure, e.g. Smart Financial and Payment Infrastructure
for Business, that will support the business sector's digital transformation, improve business
efficiency, reduce physical contact to cash, enable leverage of data for access to financing
and facilitate development of new digital products and services that meet business needs.
Key success factors for fostering digital transformation in the business sector
        Collaboration with all sectors: Private sector, banking sector, and government sector
have to work together toward digital transformation.
        Tools to facilitate digital transformation by all sectors, especially small and medium-
sized enterprises: Right incentives to encourage wider digital adoption are also necessary.
        Ecosystem development: Our ecosystem must support development of innovations
that match customers’ expectation. Issues, such as regulations, incentives, and ease of market
access by players, should be taken into consideration.
        Thai people’s digital financial literacy and ability to use digital services should be further
improved.

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How Financial Service Providers Have Transformed Themselves to Support Business with Innovations
 Overview
         Intense competition in the digital era has driven players in the financial service industry,
including banks and non-banks, to adapt and adjust their business strategies by giving priority to
investment in innovation to develop new businesses and create value to customers.
Key Summary
         Transformation by Service Providers: In today’s world, the roles of financial
intermediaries have become less important. Banks, therefore, need to differentiate
their services. For example, Siam Commercial Bank (SCB) has adopted innovation to create
various new businesses and True Corporation that was mainly an infrastructure provider
has now adapted and provide more front-end services to increase visibility to users.
True Corporation also utilizes data to develop better services for customers, creates an open
corporate culture that fosters innovation and attract young talents. In addition, True
Corporation has been actively working with customers and partners to develop its services.
         Examples of Technological Adoption:
         SCB: (1) Blockchain Solution from Procure to Pay – a platform that helps boost
productivity for trading and supports payments, which can be further leveraged on to provide
lending services. (2) PayZave – a payment platform that gives discount to buyers who do not
request for credit terms, which allows sellers to get paid faster (3) SCB Mee Tung – a platform
that is integrated with payroll systems to allow employees to withdraw their salary in advance
without having to wait until payday, thereby increasing their liquidity.
         True Corporation: (1) credit scoring - using payment behavioral data to determine
underserved customers’ ability to repay (2) digital payment, which helps increase sales for
retail businesses and allows retailers to use data to better tailor sales promotions (3) IoT
devices e.g. cameras that help detect inventory level on shelf and alert employees to refill
stocks.
         Supportive ecosystem includes (1) supportive government policies and regulations
e.g. in case of China that allows innovation to flourish before stepping in to regulate (2) reduced
barrier for small service providers to access shared infrastructure (3) reduced costs for using
digital services e.g. internet fees (4) promoting investment in innovative companies e.g.
providing tax incentives and (5) taking care of those who cannot keep up with the pace of
technology.
         Suggestions on digital transformation for businesses: Digital transformation is not
a choice, but a necessity. Businesses should (1) try doing new things (2) work with customers
and partners to develop innovation (3) increase the speed of adaptation and product / service
launch (4) think regionally and globally (5) attract young talents and (6) pay attention to data
privacy.

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The essentials of Digital ID, Digital Signature and Digital Consent for Businesses
Overview
          The first fundamental factor in digital transactions is identifying and authenticating
identities of individuals and corporations through digital channels. Digital ID, e-signature
and e-consent have evolved to enable transactions through online channels and encourage
digital transformation of end-to-end processes.
Key Summary
         The process of identification and authentication is required for digital transactions,
such as opening bank accounts and applying for loans. For example, a person must present
an ID card at a bank branch and information contained on the ID card will be compared. After
authentication is completed, the person will be able to use services provided by the bank and
can conduct further transactions using authenticators like username & password or PIN number.
         Three common factors used for authentication in the context of digital
transactions include “something you have”, “something you are” and “something you know”.
For example, customers wishing to apply for mobile banking services have to take pictures
and compare their faces (something you are) with the information contained on their ID card.
After that, they can access services with their mobile phones (something you have) and must
assign PIN numbers (something you know). If later they wish to open bank accounts, they can
apply through mobile banking instead of going to branches.
         Currently, every sector is developing a digital ID initiative. For example, Department
of Provincial Administration has created D.DOPA application that can be used in place of
physical ID cards when conducting transactions with government agencies. Telecommunication
companies are also using mobile phone numbers as reference for identity verification.
In addition, there is National Digital ID (NDID) initiative, which is an open infrastructure
for all sectors to leverage on, with secure identity cross-verification process and standards
to be abide by members on issues like IT and risk management.
         As for Corporate digital ID, we can leverage on personal digital IDs to verify and
authenticate identities of directors / authorized representatives and validate relevant
information of the companies with trusted sources like Department of Business Development.
Business sector can utilize digital IDs, along with e-signature and e-consent, for every process,
from company registration and bank account opening to taxpayer identification number request
and digital lease agreement.

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The Power of Data for Inclusive and Resilient Finance
Overview
         Various agencies and companies have developed data collection and analysis to better
serve customers and strengthen businesses, leading to the emergence of digital lending
that helps increase liquidity for the underbanked and creates new business opportunities
for the companies.
Key summary
    1. Approaches used by each organization
        National Credit Bureau (NCB): The NCB collects and processes Thailand’s credit
data. Data of individuals, juristic persons and SMEs are collected separately, so that the NCB
can clearly identify purposes of the transactions and improve relevant analyses. Based on its
extensive data, the NCB has analyzed the impact of COVID-19 pandemic and helped the
government make more effective policy decisions.
         Grab Thailand: Grab believes that a lot of people are still underserved by banks
from lack of financial records. Therefore, the company collects both users’ and vendors’
behaviors and develop credit scoring model that will improve both groups’ ability to access
appropriate financial services.
         Sea Thailand: The company has always aimed to best accommodate Shopee’s
relevant stakeholders, for instance, on vendors’ inventory management and e-commerce
knowledge. Currently, Shopee aims to help its retail vendors on business expansion by using
alternative data to create credit scoring system. Shopee also gives out short-term loans to
buyers during the COVID-19 pandemic.
         MoneyTable: As an HR and financial benefit platform, MoneyTable leverages on
extensive data of employees on the platform to provide “Daycash” service, which allows
employees to be paid in advance of payday and helps improve their liquidity during difficult
times.
    2. Enhancing Financial Inclusion with Data
        Financial inclusion in Thailand can be further improved by allowing credit scoring data
linkages between agencies like the NCB and various companies. Financial institutions will be
able to improve borrowers’ creditworthiness assessment and that, in turn, can help create
a more sustainable ecosystem. In addition, financial products offered must also be suitable
to customer needs. Many financial service providers have employed artificial intelligence (AI)
to improve analyses of borrowers in order to grant the right amount of loans.
        However, data security should be a major consideration to prevent data leakages,
both internally and externally.

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Cross-Border Payment Connectivity
Overview
        Today, the current landscape for cross-border payments still has quite a few pain
points. Speed, cost, convenience, and transparency are all important factors affecting the entire
ecosystem, including consumers, merchants, issuers, and acquirers. Under the ASEAN Payment
Connectivity initiative, the central banks have been promoting financial integration by linking
payment networks, which will ultimately benefit various stakeholders, such as tourists, migrant
workers, and SMEs.
Key summary
        Cross-border remittance linkages like “PromptPay-PayNow” greatly facilitate the transfer
of money overseas, making it simpler, cheaper, and more secure. They also serve as
an infrastructure for non-banks or FinTech firms to leverage on and further offer more efficient
services for the benefits of the customers.
        Cross-border QR payment is another service that consumers and business alike are now
familiar with. With its convenience, safety, speed, and low cost, QR payment is an important
alternative for consumers and can encourage further collaboration on payment linkages.
        A key success factor that has been identified based on the successful experience
of the cross-border connectivity projects is policy alignment among participating countries.
This includes, for instance, aligning the differences in operational procedures, infrastructure
and service designs. The difficult task is to identify a common set of rules for the countries
to work together. If done right, development and implementation processes will be extremely
efficient and time-saving. Collaborations among regulators, operators, and the industry,
including banks and non-banks, are also of imperative importance, as all aspects related to
the services, such as business, technical, and legal issues, will need to be harmonized among
all stakeholders.
        In the near future, it is expected that new technologies and innovations will come into
play for cross-border payments. One example of note is Central Bank Digital Currencies (CBDCs),
which could reduce transaction time by eliminating the need for nostro accounts, beneficiary
parties and interbank protocols. Another project, Nexus, currently being developed by the BIS
Innovation Hub, explores multilateral connections between fast payment systems across
countries and aims to overcome the complexity of having multiple bilateral linkages by
providing a more standardized way for each domestic fast payment system to communicate.

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The Rise of Central Bank Digital Currency – Progress So Far and Way Forward
Overview
           In the recent years, the financial landscape has undergone a reasonable degree
of digital transformation. The introduction of cryptocurrencies, stablecoins and other private
initiatives present remarkable opportunities, but at the same time present risks and raise
a number of questions for central banks worldwide, leading to the ultimate question:
should there be a central bank digital currency (CBDC)? If yes, how should it be designed
and implemented?
Key summary
           Growing interest in CBDC is a result of many factors, including:
            Demand side: e.g. increasingly digital consumer needs, demand for more efficient
cross-border payments and more financial inclusion
            Supply side: e.g. uptake of Blockchain technology, movement of BigTech firms into
the financial landscape, and rise of privately-issued digital currencies
            CBDC is the next step forward for the digitization of money, but it is not a one-size-
fits-all solution. There is a wide spectrum of implementation options and policy objectives
for each country, with far-reaching implications to each economy.
           Proper CBDC design can help create efficiency and stability with regard to CBDC’s
implementation. Some aspects to be consider include:
            Accessibility by all population segments, including those in rural areas and without
internet connectivity.
            Cross-border applications of CBDC, including as an instrument to facilitate cheaper
B2B cross-border funds transfers and small-value P2P remittances.
            Relevant risks, such as bank disintermediation, cybersecurity and data loss / leakage.
Consultation with stakeholders in shaping CBDC design can help mitigate many concerns.
For example, a two-tier distribution model is preferable, as financial intermediaries
have resources and expertise in conducting customer-facing activities. Maintaining an interest
rate differential between CBDC and deposits can also prevent bank disintermediation.
           CBDC can act as a bridge between financial infrastructure and future innovation,
with limitless possibilities beyond the realm of payments, allowing for the potential coexistence
between CBDC and privately-issued digital currencies. In this regard, central banks will need
to be agile, so as to not be left behind by the current rapid pace of technological development
and innovation. In addition, CBDC should be interoperable with existing payment rails. As such,
central banks should lay a clear roadmap and define standards for the participation of financial
institutions, businesses and merchants, as well as educate consumers on the usage of CBDC,
so as to prepare for a smooth transition.

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Will Cryptocurrency and DeFi Really Be Game Changers for Financial Services?
Overview
       Investments in digital assets have become popular and investors must have a good
understanding of relevant information and risks before deciding to invest. The open-sourced
nature of Decentralized Finance (DeFi) allows for rapid development of applications on top of
other applications, similar to Lego blocks (“Lego of finance”). Main DeFi services being provided
include lending-borrowing protocol, digital asset exchanges, and insurance. The embedded
smart contracts allow for decentralization and automatic executions, which improves
transparency, efficiency and reduces costs, when compared to traditional financial services.
Key summary
        DeFi consists of 4 layers. (1) the Blockchain layer, which is the fundamental layer
that stores on-chain transaction history, (2) the native asset layer, acting as operating system
of the chain, (3) the protocol layer, which is the programmed smart contract for the services,
and (4) the application layer, which serves as a user interface layer to allow users to interact
with the chain and the smart contract without having to understand the coding underneath.
        DeFi will play a significant role going forward. The pace of change will be rapid, but not
instantaneous. Individuals and businesses must familiarize themselves with the decentralized
world, improve their knowledge and be prepared to take care of themselves with respect to
security issues.
        Nevertheless, not all centralized entities will be eliminated. The collaboration between
decentralized and centralized players will generate greater values for both compared to
the status quo. DeFi protocol can increase the value offered by traditional financial services,
while incumbents can help enhance public trust and acceptance of DeFi by the public.
Moreover, incumbents can contribute to the audit of legal and coding aspects of DeFi protocol,
which will help increase consumers’ confidence in DeFi and benefit DeFi ecosystem in general.
        Transitioning into DeFi world calls for collaboration from all stakeholders, including
private and public sectors. Public sector and regulators must understand and be open for
changes and developments of DeFi and digital assets. These are inevitable developments
and the support from the public sector, such as encouraging better literacy and providing
guidance on regulatory and cybersecurity issues, will allow a healthy DeFi ecosystem to
develop.

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FinTech Talk the Finale:
    Financing in the New Decade – Possibilities, Opportunities and Challenges
Overview
        “Feel the rain, fear the storm?” - This question was initially posed five years ago by a
venture capital fund manager in the US, but it is still applicable to the current financial
landscape. However, the direction of the future financial landscape has turned from being fear
of changes to embracing “copetition” to redefine value propositions, along with having clear
and diverse strategic direction and adopting less complex and more efficient technology.
Key Summary
The Current Disruption Cycle by FinTech Players
        We are now at a pivot point in the disruption cycle, where FinTech players and
neobanks have achieved meaningful growth in a reasonably short amount of time and the
financial industry has also been experiencing a period of high volatility. Despite this changing
landscape, less than 4.5 percent of the industry revenue has been attributed to FinTech.
Moreover, FinTech players and neobanks have experienced some challenges from traditional
banks trying to deal with disruption. For example, we have seen the Australian neobank “86
400”, whose aim was to provide “smart banking”, merged with one of Australia’s big banks.
The Way Forward to the New Era of “Coopetition”
        The Banking industry is moving to a new era of “coopetition” by converging neobank
and traditional banking business models towards “digital first” model. This will enable customer
personalization and transform profitability and cost structure with more flexible operations.
Additionally, such “coopetition” will create new values for customers through rebundling of
product propositions. For example, the neobank “N26” from Europe has architected a range of
banking and insurance services by seamlessly bundling services from its partners, allowing them
to offer full range of services without incurring investment for launching a traditional bank.
The key implication for FinTech players is the need to simplify onboarding processes to allow
banks to take full advantage of opportunities FinTech players have to offer.
Key Takeaways for the Rapidly Changing Financial Industry
        (1) Winners will need to be able to manage / execute across multiple business models
at the same time.
        (2) Traditional banking will shrink overtime, with value being created by consolidation,
efficiency and purpose.
        (3) Customer experience is becoming undifferentiated and battleground is moving back
toward ‘rebundled’ products.
        (4) A key tech and operational decision is common enablement platform versus business
portfolio approach.
        (5) Technology excellence is critical, but it needs to be an enabler of strategy, not an
end in itself.

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