• The Asian Banker was rebranded and relaunched as The Future of Finance Summit, which aims to become the forum where the conversations to shape the future of the industry will take place
• The Summit also tackled US President Donald Trump’s intention to repeal the Dodd-Frank Act and how this will impact the global banking business and influence the direction of the international regulatory regime
• David Shrier, the final opening keynote speaker, shared several major trends and technologies that are disrupting financial services today

Technological advancement and the emergence of new digital players are challenging the role of traditional financial institutions and redefining the future of finance.

As The Asian Banker tracks the evolution of the financial services industry, it has also been impacted by the very disruption that it has been observing and commenting on. In so doing, it has found that the industry is no longer the sole preserve of the banks, and The Asian Banker Summit as a forum to discuss the future of the industry is losing relevance as outside factors, players and forces are increasingly driving the agenda. So, it had to make the hard and tough decision to move with the changes and to let go of a platform that it has painstaking developed and perfected in the last 20 years.

But it is not alone, this same decision confronts many banks. It is a question of staying relevant in a changing world where business models, processes and rules are being disrupted. Where concepts and constructions such as value and price, access and ownership, on-premise versus cloud-based, distributed versus centralised are constantly and rapidly being redefined.

As the first to redefine its business and reconstitute The Asian Banker Summit as the Future of Finance Summit it aims to become the forum where the conversations to shape the future of the industry will take place.
The Asian Banker Summit was started in Singapore in 2000 as a one-format, one-track conference that eventually became the largest annual conference for commercial banking in the Asia Pacific region, incorporating all of the diverse countries, cultures, peoples, and institutions across Asia Pacific.

The Asian Banker Summit was predicated along the lines of the businesses and the operations of a traditional financial institution, so the components comprised corporate, institutional and transaction banking, risk management, banking technology and operations, and bank leadership and management. But the industry has changed dramatically, and the time has come to move ahead of the industry, and to define and shape its future.

The Future of Finance Summit is predicated on a number of new-format conferences that together cover the key topics that define the future of the industry, namely; Leadership in the Digital Economy Conference, Markets Disrupted Conference, Frictionless Conference, Cybersecurity Conference and Peer-to-Peer Conference.

Apart from these industry focussed conferences, there was also a customer oriented event called the FutureWealth Conference, meant for the men in the street to learn about the new technology, alternative asset classes as well as service and solution providers that help them better manage their finances and wealth.

When designing the Leadership in the Digital Economy Conference, The Asian Banker chairman, Emmanuel Daniel, speaking at the opening of the event shared that the brief given to the programme managers was to bring in the people who are actually transforming the industries today, and to look at the industry from the outside in.

“Bring in Uber. Bring in Google. Bring in Facebook. Bring in Grab. Bring in the people who are actually becoming a part of our everyday lives, and then, start looking at ourselves and start asking ourselves what we should be looking like,” he added.

He explained that to truly embrace change is to be willing to look at the business not from the traditional siloed or department viewpoints but from the customer viewpoint. And to seek to design and deliver a “frictionless” experience to customers, which now the internet and web-based companies seem to be very good at. But this requires bankers to see things from perspectives that they are not used to, outside the normal departments that they come from – risk management, technology, retail banking, and corporate banking.

The Frictionless Conference is designed to showcase the companies and institutions that are delivering such experiences. It allowed incumbent banks to see the world from their perspectives, their underlying vision and motivation, how they operate and how they create sustainable revenue and profits. Daniel, however, warned the audience not to be enamoured with fads, especially technology ones, and bemoaned the mindless use of words that elevate them. In particular, he called out the six-letter word that is the short form for “financial technology”, and banned its use during the event.

He reasoned that just as no one today remembers or uses the word “dot-com” so will be the fate of this word. “The problem with this word is that all of us pretend that we understand it. All of us pretend that we know what the other person is talking about. All of us pretend that it means something important. It makes us more important when we say that we are in this business. It makes it easier to raise funds. It makes it easy for us to tell our parents and our family that leaving a job in the bank is okay,” he elaborated.

The future of regulation
Regulation has arguably the most definite impact on the future of the industry. The very existence and current structure of the industry is a direct outcome of regulation. Since the global financial crises, banking regulation has been significantly enhanced to ensure stability of the industry. In the US, that has been defined by the Financial Reform Act or more commonly known by the names of its authors, the Dodd-Frank Act.

US President Donald Trump who won the presidency on an industry deregulation and pro-business ticket has articulated his intention to repeal the Act. Given that many banks operate there or do businesses with US based institutions and are subject to the Act, it has quite pervasive extraterritorial application, any change to the

Act is likely to impact the global banking business and influence the direction of the international regulatory regime. Barney Frank, former US Congressman, chairman of House Financial Services Committee and co-author of the Financial Reform Act, in his opening keynote speech argued that there will be no fundamental changes to the Act although he expected some modification to its basic structure.

“I believe, the level at which a bank becomes subject to the extra supervision of the Financial Stability Oversight Council is now $50 billion, set in 2010, is too low. Any number that we use going forward should be indexed to some appropriate growth mechanism. That number will be raised to $100 billion or maybe $125 billion. Secondly, banks under $10 billion in assets will be given relief from the Volcker Rule.

They don’t do anything that the Volcker Rule bans, but they spend a lot of money trying to comply with it,” he explained. He believes that federal regulators will also adopt a more relaxed attitude to possible systemic problems in alternative forms of lending, such as in peer-to-peer or marketplace platforms, and will let state governments play a more active role in regulating such platforms as well as state chartered banks.
“The major motivating principle of the legislation was to prevent the incurring of debt by large institutions beyond what they could pay off because the failure of the large institution to pay off a lot of debt was destabilising. There is much less fear of that, for example, in peer-to-peer and other sorts of lending,” he observed.

Future technology trends
David Shrier, managing director of the Massachusetts Institute of Technology (MIT) Connection Science and Engineering, the final opening keynote speaker shared several major trends and technologies that are disrupting financial services today.

The development of smart cities with integrated sensors that collect a variety of data; personal, transactional and behavioural, and the use of artificial intelligence to automate data measurement and analysis will create huge opportunities to predict and influence behaviour.

“This led to a new discipline called “social physics”, because once we had these devices on people, and we began to be able to measure how they were moving in a city and how they were interacting with each other, we found that there were predictive equations and math that could describe what was going, what people were going to do, and how to influence it,” he shared.

And he added: “You can also use these predictive sciences, the social physics to come up with a better credit score. The models of credit risk that we manage our institutions with are 50, 60 years old. We’re using linear progression model. That’s what a credit bureau does. They gather all your credit history.

They put it into a big database, and then you extrapolate forward and you say, “Past results are a prediction of future results.” Anyone who lived through the 2008 financial crisis knows that’s not true. So, we used mobility, communications, and other behavioural data to build a better credit score. In fact, 30% to 50% better than what banks are using today.

Indeed, the future will bring better ways of doing things and in so doing achieving significantly improved outcomes as Shrier shared. However, it will not be by incremental steps of building on existing models, but by embracing and deploying new technologies, new methods of working and new tools, that may not even exist today. For the financial services industry, it will mean less of looking at itself from within and more of looking at itself from the outside in.