Author Archives: FinLabIntern

Building an Open Architecture World

Eduard Fabian, UOB – Managing Director, Group Technology Head

"If you look at the new business models that UOB is 
working on - in every one of them we have some form of 
partnership and these partnerships, from a technical 
and architectural point of view, are enabled by APIs. 

Responsible for driving the formulation and implementation of the overall technology strategy and IT architecture design for UOB’s Wholesale and Retail Banking businesses, Eduard helps to create new business models and improve customer experience by collaborating with ecosystem partners through the deployment of banking APIs. A proponent of open architecture, he shares with us more on how APIs are going to shape the future of financial technology.

What is API?

API stands for application programming interface. It is how systems talk to each other. It is a technical term that has been around for many years. Now we have systems from FinTech, systems from banks and systems from governments all talking to each other seamlessly, and it is all done via APIs.

Why is it important for FinTech?

The real story for FinTech is the collaboration between start-ups and traditional financial service providers such as banks and insurance companies. Through collaboration, our clients get to benefit from better customer experiences that are enabled by an open architecture underlined by APIs.

What is the role of regulators in this space?

In Singapore, the regulators have been very supportive in terms of encouraging the partnership between FinTechs and banks. It has been a collaborative effort in terms of coming up with the right architecture and the right set of APIs. For me, it is a great story where the regulator brings the various ecosystem players together: the FinTech companies, the banks and even the government.

How crucial is this openness to innovation?

You are not going to get the same level of innovation when you do everything by yourself, as you get when you collaborate. If you look at the App store, Apple could have never written one billion apps, but by opening the platform to all developers, they can offer one billon solutions. It is very similar for banking as well. Banks have their core banking solutions and innovate continuously on their products and services, but with an open architecture and collaboration with FinTech companies and the government, they will be able to offer richer user experiences that will benefit their customers.

For consumers – how do they remain secure?

Every consumer wants data to be protected and banks have a fundamental duty to protect and manage the risk around collecting, storing and using data. That is why we are putting the right governance and security framework in place. For example, a “know your partner” framework, where partners will go through thorough vetting before we open APIs to them.

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FinTech in the Region

Lawrence Loh, UOB – Managing Director & Group Head of Digital Banking

"The region has huge unmet needs in financial services 
and this presents substantial opportunities for FinTech 
solutions to be used. 

As Group Head of Business Banking, he is responsible for the small business customers that bank with UOB in Singapore and the region. With his wide insights into the modus operandi of small businesses, Lawrence is familiar with what makes them tick. He shares why ASEAN is well positioned to benefit from the FinTech revolution and how UOB, as Small and Medium Enterprise Bank of the Year for 2016 & 2017 consecutively, is well positioned to support the SMEs, which are the backbone of economies in Asia.

What about this region enables it to be conducive to FinTech?

ASEAN societies have always been strongly entrepreneurial. Now private and public together more than ever to foster innovation, and to create conducive business environments to attract talent. Most of all, the region has huge unmet needs in financial services, and this presents substantial opportunities for FinTech solutions to be used.

What more can be done?

In a recent survey conducted by UOB, business customers are more likely to rely on their trusted primary banker to recommend related services such as accounting, payroll and e-invoicing to improve business productivity. This is an area where I see collaboration working well – where FinTech companies such as Xero can partner with us to reach more SMEs, and we provide added value by offering such solutions through a single, integrated platform. To further support the whole SME ecosystem, UOB recently signed a regional partnership with SAP to provide these services overseas.

With the lines between banks and other ecosystem partners blurring, governments in the region, while engaging SMEs, work alongside Financial Institutions and FinTech companies to understand the rapidly evolving business landscape, and together seek a direction that best suits the country, and help them to stay ahead. The creation of workgroups and sandboxes we see in recent times will facilitate this cross-sector and multi-party collaboration.

When will these changes happen?

It is already happening. The last two years have seen the regulators in ASEAN countries looking to leverage FinTech to improve the lives of their citizens – from financial inclusion to improving efficiency through digitisation. Regional countries each have their own sandboxes, focus areas, and FinTech associations that actively engage their local ecosystem.

Indonesia is offering government scholarships to their local start-ups to foster and incubate more ideas to fruition. The updated regulation by Otoritas Jasa Keuangan (OJK) on Peer-to-Peer financing is meant to protect consumers and enable FinTech companies to exist in the P2P space as well.

In May, the Securities Commission Malaysia introduced the Digital Investment Management framework, setting out licensing and conduct requirements for the offering of automated discretionary portfolio management services to investors. Better known as Robo-Advisory, this framework will enable access to a suite of digital wealth management products. Malaysian Digital Economy Corporation (MDEC), the lead agency in driving the digital economy in Malaysia, has identified FinTech as one of its core focus areas.

What does it take to be a unicorn?

It is definitely not easy – of the tens of thousands of FinTech companies formed in the last 10 years, there are less than 10 unicorns from China and even fewer from ASEAN.

How have they succeeded where others have failed?

To me, you must first have a strong and defensible business proposition that addresses the key pain points of your target market (which must be large for starters). Then you need to have a clear strategy on how to deliver this quickly and consistently, and a strong team to make sure this happens.

When you do these well, your business will grow. And VCs will want to fund    and help scale your business. Whether your business becomes a unicorn or not should be secondary. In my opinion, this should just be a natural progression, a by-product of all the right decisions and actions taken.


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Going Cashless

Dennis Khoo, UOB – Managing Director & Regional Head of Digital Banking

"Singapore has a highly developed financial system, 
underpinned by advance technology and is already moving 
rapidly towards a cashless nation but along a different 
path from China’s"

Dennis is responsible for the strategy, growth and delivery of UOB’s retail digital banking business, including customer experience and cashless payments. He unpacks the hype around going cashless and shares lessons from China’s success.

How far away are we from cashless kopitiams?

The precise timeframe is unclear. It has a lot to do with the actual context and situation where the cash is used. Using cashless payment to pay for your meal at a hawker centre is a challenge because the hawker is paying his suppliers using cash – so we need to solve this issue first. Good news is we are working on it. If you take another scenario, for example, management of condominium properties where conservancy fees are collected in cheques – here cashless is easier to adopt and offers an immediate benefit. For example, HiLife offers a solution for this already.

In terms of infrastructure, what more is needed for the region to go cashless?

Going cashless is ecosystem based, and across ASEAN. Currently, the infrastructure is not standardised so it is very hard to introduce something that doesn’t integrate into the entire fabric of how commerce happens across the community. This is why you can see different developments in different countries. You’ve got Singapore that has a high penetration of Near Field Communication (NFC) terminals, but if you go to Vietnam you are unlikely to find any NFC terminals. The reality is more to do with specific use cases and how you’re going to resolve the friction around each cashless use case on a granular level, taking each country’s cashless ecosystem one at a time. There are countries in the region that don’t have the terminal infrastructure and banking penetration rates are much lower: where mobile–based solutions will be used as a leapfrog strategy.

What can we learn from China?

China went down the path of using QR codes to push payments between buyers and sellers – this worked well given the size and scale of China and that there is no physical infrastructure involved. China also didn’t have the market proliferation of cards, contactless and online banking systems that we see in Singapore enabling Alipay and WeChat to sweep through many parts of the ecosystem in one go. This is not going to happen in Singapore. On the surface you may not see people using their phones to make payments on the street like they do in China but if you look deeper, Singapore has a highly developed financial system, underpinned by advanced technology and is already moving rapidly towards a cashless nation – but along a different path from China’s.

Why is there so much buzz around cashless payments? Is it all just hype?

There’s a large volume of data suggesting that even taking early steps towards cashless can add 0.5% to 1% of GDP to an economy. Why? There are a lot of steps and time needed to process cash-based transactions – you must count, account for, deposit and withdraw cash – all these take time and resources, not to mention the costs of printing and moving money from point A to B. Here there are real efficiencies in cashless. Of course, that doesn’t mean every cashless initiative is needed or is going to succeed – in each case you need to look at the efficiencies and the value-add of new technology.

What is the role of FinTech companies in helping to move towards the cashless revolution?

The real advantage of FinTech start-ups is their ability to specialise and to explore technologies on a granular level. A lot of FinTech and cashless advances are going to be made incrementally from a very small scale. That’s where I see the greatest value and opportunity today – not so much the everyday activities such as E-wallets and cash transfers but in specialised solutions. For example, I’ve been mentoring Paykey – a portfolio company of The FinLab that integrates a key on your mobile keyboard that allows you to make transactions with one touch. As it is integrated with the keyboard it doesn’t matter what platform you are using – Whatsapp, Facebook, WeChat – the innovation is at a deeper level. This isn’t a space many others have looked at and this is the value of FinTech start-ups.

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