The buzzword “Web 3.0” is filling the air at this year’s Singapore FinTech Festival (SFF).
What does this really mean? It refers to the next step in the evolution of the web 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 about a seamless user experience when banking or buying insurance. You can also get personalized information about your banking habits.
These functions have indeed gradually integrated into our lives.
If you haven’t noticed, try logging into one of our local banks and it will show you your spending habits. Web 3.0 also enabled faster credit checks to process claims.
Industry experts from Tencent, HSBC, DBS, and JPMorgan Chase broke down the concept of Web 3.0 in two separate panel discussions at the SFF, and shared its benefits and risks.
Personalized banking needs, seamless user experience
Web 3.0 is transforming the way banks interact with customers, according to stakeholders.
“If we think about it, it really brings the capabilities of financial institutions to the user where they want it seamlessly,” said Forest Lin, vice president of Tencent and president of Tencent Financial Technology.
HSBC’s Nuno Matos, Managing Director of Wealth Management and Personal Banking, provided some concrete examples to justify this. “When we combine the information we have taken from clients’ portfolios – their investing behaviors, their risk appetite – it allows us to deliver hyper-personalized information to clients on an individual basis. “
“Last month in Hong Kong, we offered 22,000 different combinations of wealth advice, personalized for each client and recommended exactly what they should do to rebalance their portfolios,” Nuno explained.
Nuno said the bank immediately saw 10 times as many conversations between relationship and literacy managers and clients discussing wealth management.
Faster credit issuance thanks to data insight
On the consumer loan side. Nuno said the bank is able to rely on machine learning to extend credit to an additional 500,000 customers without any documentation or proof of income.
“It’s because we get the data and we’re able to extend credit through the use of technology. This gives customers a lot more options and they can be a lot more self-sufficient. Customers will control their data and decide who they want to share the data with, ”he said.
“How to assign a credit limit in the past? Before, we would wait six to 12 months before knowing the customer to give them a limit. Today with machine learning. we are able to do it in a very few days, ”said Nuno.
The HSBC executive also reported that the bank’s ATMs have machine learning capabilities that help them forecast each ATM’s cash position, so ATMs never run out of cash when customers have to withdraw money.
“These are great examples of how we’re really leveraging technology to improve the customer experience… It’s transparency and putting the customer at the center of your proposition that should really drive what we do.” , did he declare.
How Web 3.0 Solves Payments for Businesses
On the industry side, Panagiostis Georgakopoulos (Takis), head of wholesale payments at JPMorgan Chase, told a separate wholesale banking roundtable that there has been an emergence of global payment networks. for businesses with the development of a smarter Internet.
“Whether it’s connected markets or cars or the connected commerce of the future, all of these things need a more efficient means for value movement. It can happen on a blockchain or not on a blockchain, but it requires a much more efficient way to move money, ”he said.
Takis noted that the real-time payment networks you now see around the world are a step in that direction. But they are still only national and not yet cross-border.
“When you start to think about the blockchain side of things, 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 experience as we let’s start thinking about central bank digital currencies (CBDCs) in the future.
Build trust and collaborations important to industry growth
Speakers Forest and Nuno stress the importance of finding a balance in this growing landscape, which requires building trust with consumers, as financial institutions rely on their data to deliver services.
To build consumer confidence, “the most important thing to keep in mind is user protection,” Forest said, acknowledging that Tencent is a financial services provider that is still considered new to the industry. compared to historical banking operators.
Forest said Tencent is following some key guidelines, including telling customers what their data is used for and getting users’ explicit consent to share their data.
Decentralized legalization is not meant to replace financial institutions, Forest said. ” From our point of view. I don’t think it works because financial institutions over the last, you know, hundreds and thousands of years have built that trust, and in the financial industry whether you’re talking about paying, investing, or credit. Confidence is the key.
Nuno recognized that banks cannot make technological advancements on their own either.
“Sometimes, and just to be realistic, banks and FinTechs team up and we see it often. We see banks bringing FinTechs 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 good because at the end of the day it’s in the best interests of the consumer… Technology is a catalyst in all of this. But technology has to be with the right people and build trust, and in this world where people are more empowered with their data, are more savvy and more engaged, earning their trust will make all the difference. “
Tan Su Shan, Group Head of Institutional Banking Services at DBS, highlighted the growth potential of digital business documentation and its benefits.
“If governments and different legal systems can be convinced that electronic documents such as business documents can be digitized – that is, they are placed on the blockchain, immutable and transparent, and that they can be permission-based so that some authorities get permission to access it – then it can be trusted. Now, if you can do this for trade, it will solve a lot of fraud, trade finance long lead time. I think it’s a great use case for international business, ”she said.
But Tan and Takis both recognized that there was still some way to go before everyone adjusted to the change.
“Covid-19 has accelerated all of this by probably five or 10 years, but a lot 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 having with regulators now are about the clarity of the rules around these technologies, as well as the need for simplicity and clarity around those rules.
“The rules as they exist today recover enormous inefficiency in the system. And the more they are simplified, the more we can eliminate this inefficiency and, of course, new technologies can help speed everything up, ”he added.
The future of banking
The future should contain low-cost, 24-hour cross-border payments, the bank’s veterans said.
“So five years from now, I think blockchain will allow a lot of cross-border payments today. Right now, some parts are working, some are not. So if you have a payment on the weekend, for example, it may not be cleared for a few days. It’s not 24/7. Plus, different countries have different holiday periods, so with blockchain and smart contracts, it’s 24/7, ”Tan said.
Takis agreed. “Payments to consumers will be made 24/7, will be invisible to consumers and will be done at virtually zero costs. At the same time, I believe government regulations, for better or for worse, are here to stay. “
“So I expect that the same control, especially with regard to wholesale interbank payments and larger government payments, will not be too different from today. They may be blockchain-based, but the government will continue to exercise all the control it has around them as it does today, ”he said.
“I think the regulators are, I would say, a little anxious. They see a lot of innovation happening in Asia, whether it’s Singapore, which creates a lot of conversations in Europe with the European Central Bank, and obviously in the United States. But the situation is different, their use cases are different and I think there is a bit of fear of missing out, but there is no clear strategy and direction yet. “
Tan said it was about finding common ground in this space for growing technological innovation.
“It’s trying to find that happy medium – how do you balance the two? Correct, for the short term and the long term. Also, you’re not going to jump from Web 1.5 to two to three in a hurry, you’re going to have to switch the two, manage what’s here and now, and manage what’s in the future. How do you find that happy balance is a huge challenge for everyone.
Tan pointed out that while the virtual world cannot have borders, the physical world we live in has governments and geographic borders.
“You have to, you know, be physically where these regulations and limits are and therefore abide by those rules.”
Featured Image Credit: Singapore FinTech Festival