MAS’ Menon details use cases of advanced tech and ASEAN network developments

Excerpts from speech by Ravi Menon, managing director of the Monetary Authority of Singapore, at the Bank of France Lecture, Paris, 14 May 2019.

Banks are using technology to resolve bottlenecks. For example, banks such as BBVA, Mitsubishi UFJ, and BNP Paribas are using blockchain technology for syndicated loans. Each step of the loan process, from credit underwriting to credit administration, is documented in the distributed ledger, thereby eliminating the need for duplicative back office processing. The loan process is shortened from about two weeks to two days.

Technology can improve the efficiency of risk management. J.P. Morgan is using machine learning to review loan contracts. This reduces the review time from 360,000 man-hours to seconds, and also minimizes human errors. OCBC Bank in Singapore is using machine learning to monitor customer transactions real-time and across multiple channels. This allows the bank to identify fraudulent fund transfers and take more timely actions to recover the funds.

Technology can make risk management less passive and more predictive by harnessing the informational value of data. Ping An Insurance has developed a system that detects whether a banking customer is lying about the reason for borrowing money. It is based on subtle changes in customers’ facial expressions, with the analytical algorithm based on 30,000 videos of real lending cases. According to Ping An, this has helped to reduce credit losses by 60%. Blackrock and Rhodium are using data analytics to assess the risks of climate change to assets such as mortgage backed securities under different scenarios.

We have not tapped on the full potential of new technologies. Research by IBM has found that quantum computing algorithms can compute the risk of an investment portfolio near real-time. This is a significant reduction from the present Monte Carlo simulation approach which can take days.

A powerful way in which technology is helping to drive down the cost of financial intermediation is through partnerships between financial institutions and fintech firms. SocGen is working with TagPay to provide mobile banking in Africa through a cloud-based platform that is compatible with any mobile phone. AXA is working with MicroEnsure to offer simple and affordable insurance products to customers across Asia and Africa.

We need to take collaboration between financial institutions and fintech firms to a much broader level – through platforms for innovation and inclusion. This is why the MAS, the ASEAN Bankers Association, and the World Bank’s International Finance Corporation have teamed up to establish the ASEAN Financial Innovation Network, or AFIN in short.

AFIN aims to bring banks and fintech firms from across the world to develop innovative solutions to penetrate hard-to-reach markets in a cost efficient way. Last year, AFIN launched the API eXchange – the world’s first cross-border, open architecture platform to enhance financial inclusion. The cloud-based platform does two things: it is a marketplace, enabling financial institutions to discover and connect with FinTech partners through APIs on a globally curated platform; it also provides a sandbox environment for financial institutions and fintech firms to design and test cross-border solutions.

Read the full speech

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