Global financial centres like Singapore and Switzerland need to work together to break new ground in innovation and drive sustainable financial technology, amid the partnering of industry players and regulators to use fintech to improve lives.
Deputy Prime Minister Heng Swee Keat yesterday warned that the global fintech community faces many headwinds, including tougher access to funding, rising interest rates and falling valuation.
But he noted that the potential of fintech remains tremendous.
Growth in the sector has stayed strong despite the Covid-19 pandemic, with more than US$210 billion (S$291 billion) invested in it last year, Mr Heng said in a video recording aired at the inaugural Point Zero Forum in Zurich.
He said there are still untapped opportunities in the current wave of technology - artificial intelligence (AI), big data and the Internet of Things.
But a new wave of tech that "could potentially be game changing", including Web 3.0, blockchain, non-fungible tokens and decentralised autonomous organisation, has emerged.
Mr Heng, who is also Coordinating Minister for Economic Policies, said tailwinds in fintech are propelled by three points.
First is the collaboration between Switzerland and Singapore on fintech that aims to promote innovation, broaden opportunities between Europe and Asia, and "advance a new wave of emerging tech for good", he said.
"Cooperation is also needed to break new ground - by reducing barriers for cross-border transactions, and with common frameworks for the responsible use of technology," Mr Heng said, noting that the two countries hope to work with more global financial centres over time.
Second, the application of digital tech in sustainability will drive the future of finance, such as green fintech, which has recently gained traction but is relatively nascent.
To this end, Singapore will set up an environmental, social and corporate governance (ESG) Impact Hub to fuel and strengthen collaboration in the fast-growing sustainability ecosystem.
The hub will be "a physical space in the heart of town in Singapore to co-locate green fintech start-ups, venture capitalists, financial institutions, non-profit organisations and family offices", said Mr Heng.
"Through this hub, we hope to also anchor key industry-driven sustainability initiatives, which include Google's Project Point Zero, its climate finance accelerator, and KPMG's ESG Business Foundry."
With greenwashing on the rise, confidence in ESG products could be eroded and affect financial stability. Greenwashing refers to making unsubstantiated claims to deceive consumers into believing that a company's products are environmentally friendly.
To counter this, Singapore came up with an industry-wide AI platform called NovA! last November to provide banks with ESG risk assessment when originating, underwriting and servicing sustainability-linked loans relating to real estate.
"NovA! can identify areas for sustainability improvement during loan origination and the setting of sufficiently ambitious targets during underwriting. During servicing, NovA! compares third-party verified data with borrowers' self-declarations to detect signs of greenwashing," Mr Heng said.
Third, fintech players and regulators do not have to take an adversarial approach, he said.
Citing the rise of Internet banking in the late 1990s and the taking off of AI and machine learning in the early 2010s, he said the tech community and regulators actively shaped tech to bring out its best potential while mitigating the risks.
He added that cryptocurrencies' underlying blockchain tech has the potential to improve wholesale cross-border transactions to make settlement more efficient, accessible and affordable.
For instance, Singapore, with other countries and the Bank for International Settlements Innovation Hub, embarked on Project Dunbar, which explores how a common platform for multiple central bank digital currencies could enable cheaper, faster and safer cross-border payments.
The Point Zero Forum began on Tuesday and ends today.
