Banking needs its back to the future moment when it comes to technology

At the event, 2,000 central bankers, regulators, policymakers and industry leaders convened to address the latest developments in financial technology and its implications on the future of finance.

What I found most striking from the conference, however, was what I didn’t hear enough of.

Conversations were centred around the re-architecture of finance, particularly in how asset tokenisation, artificial intelligence (AI) and Quantum can help banking do things more safely, responsibly and efficiently.

However, it dawned on me that this is the current challenge for banking: We’re thinking about the technology, but are we truly delivering on the promise of better products, services and design based on rapidly evolving customer needs, especially with the entry of Gen Z as consumers?

More specifically, I would argue that we’re applying new technology to make incremental (or exponential) changes to banking architecture that’s no longer – or perhaps never was – fit for purpose.

This was something that Ravi Menon, former managing director of the Monetary Authority of Singapore (MAS) and Singapore’s first ambassador for climate action, understood, when in 2018 he said: “Singapore’s fintech journey is about innovation, inclusion and inspiration. Everything we do in fintech must always have a larger purpose – to improve the lives of individuals, to build a more dynamic economy, to promote a more inclusive society.”

There are examples of other sectors using new technology to truly deliver or reset customer expectations (think: Spotify helping users build their own playlists). Taking this analogy one step further, if banking was the music industry, it’s currently using new technology to make vinyl sound better – but customers still can’t select their own music!

So why can’t the banking sector apply technology to develop products that are more suited and customised to individual needs, instead of making customers fit around banks’ current product wrappers?

Taking a “first-principles” mindset of delivering to customers’ evolving needs enables us to work back to the technology required to truly shift into radical and disruptive financial products.

Challenging this underlying thinking around what tech is trying to solve in banking really sets the scene (and the focus) for the Singapore Fintech Festival in November.

As Singapore continues to grow as the epicentre for Asian fintech innovation, I think there is a tremendous opportunity to double the number of fintech firms in Singapore over the next few years.

It’s important that we achieve this, because banks will always be society’s trusted and primary financial institutions. However, fintechs can really help challenge and achieve the first principles of delivering fit-for-the-future products and services that are sustainable, safe, and push financial inclusion deeper and wider than previously thought possible.

So, how to drive stronger (and the right) adoption of fintechs and digital innovation across banks in Singapore?

For the industry to thrive in future, words such as platform banking, ecosystems, embedded and decentralised finance are the primary orchestrators of the new financial economy, and often it will require banks adopting fintechs’ disruptive potential to deliver them.

This is a process of learning by doing – and Singapore has begun to apply this mindset.

MAS has orchestrated industry-wide collaboration with banks, tech companies and fintechs to build more efficient and responsible technology infrastructures for the future of finance.

Two examples are Project MindForge, which aims to create a responsible generative AI usage framework in the financial industry, and Project Guardian, a collaborative initiative to explore the feasibility of asset tokenisation and decentralised finance within Singapore’s financial ecosystem.

HSBC led the Series A investment in the Singaporean digital market infrastructure fintech, Marketnode, which was derived from the work underway on Project Guardian. Collaborating on innovation therefore breeds investment opportunities.

Moving beyond the philosophy of using fintechs to challenge pre-existing assumptions around how we do things, banks are going to need to challenge themselves to culturally change, so that they can rapidly adapt to market changes and implement new ideas; be unwavering in customer centricity; embrace new ideas quickly; and drive data-led decision-making.

Making these cultural adjustments is easier said than done, and will require change agents within these firms to push hard against the inevitable internal cultural inertia.

From my experience of helping large institutions adopt a startup mentality, I have landed on some values that are crucial in driving innovation and change within banking. I call them the 4Cs: creativity, compassion, collaboration and consistency.

Singapore has done its early-stage buildout of the fintech space, to the point where it is now the fastest-growing ecosystem in the world.

But we need to ask ourselves: What are we building this ecosystem for? My response: So that we can all be Marty McFly, and challenge past assumptions to build a stronger and more inclusive banking future.

For me, its importance comes in the banking industry being able to further embrace and adopt fintechs’ potential.

At heart, this should be on helping banks better achieve its purpose of delivering true customer needs and expectations, and doing it in way that fintechs would: with creativity, collaboration, compassion and consistency.

Doing so will deliver on purpose and at pace.

A contribution piece by Shayan Hazir, Chief Digital Officer, Asean, HSBC. This piece was first published in The Business Times on 20 July 2024.