DPM Heng Swee Keat at the Point Zero Forum 2023

Federal Councillor Karin Keller-Sutter,

Ladies and gentlemen, 

A very good morning, I am happy to make it to the Forum in person this year! A year ago, we were gathered here at “point zero” – to take a fresh, cross-sector perspective on the way forward for the digital financial services ecosystem. We covered two key issues – harnessing the potential of Web3 technology; and mobilising FinTech to tackle sustainability. I spoke about three double helixes for FinTech: The Swiss-Singapore synergies, to spur innovation and growth of FinTech; The digital-sustainability nexus to promote green financing while addressing greenwashing; and the indutry-regulator partnership, to pioneer new ways to grow the financial sector.  

Barely 12 months after our inaugural gathering, the world has changed even faster, with new uncertainties ahead. We may have put the pandemic behind us, but we are now facing global high inflation, slowing growth and supply chain disruptions. The global narrative has tilted towards competition rather than cooperation, with growing risks of economic fragmentation along geopolitical lines. Yet technological advancement and innovation have moved even faster, with Generative AI (or GenAI) being the latest technological wave. As a general-purpose technology, GenAI will have pervasive application, and is expected to be particularly game-changing for the services industry. 

What do these latest developments mean for the financial sector, and in particular, the FinTech sector? Let me make two related observations.   

Point Zero – One Year On

First, even as we face growing risks of geopolitical and economic fragmentation, finance must remain the backbone of innovation, growth, and development. Finance facilitates the movement of capital and assets across borders and economies. In particular, it plays an important role in deploying public and private capital at scale to address global challenges. McKinsey estimates that globally, US$9.2 trillion is needed per year over the next 30 years, to achieve net zero by 2050. The current funding gap stands at US$3.5 trillion. Finance and FinTech will play an important role in enabling this. As with other forms of technology and innovation, we must ensure that FinTech serves as a force for good. Indeed, it has enabled greater access and inclusion for emerging economies, businesses and individuals who need it the most. The first wave of digitalisation has improved access to banking services and brought greater convenience to consumers. With Web3 advancements, we have unlocked greater efficiency. For example, digital money enables peer-to-peer transfers without intermediaries; this empowers smallholders and micro businesses. We have also strengthened the financing integrity of trade flows by providing an interoperable common data infrastructure to connect supply chain ecosystems.  

Second, with the accelerated pace of innovation, we must actively manage the risks and downsides. This is a classic risk-return scenario that we are familiar with in finance. FinTech and innovation bring great promise, and we want to maximise its benefits and returns – financial, social and beyond. But rapid innovation can also result in rapid derailment if we do not manage its risks well. So I fully agree with Councillor Karin that financial stability is the foundation of financial activities, and we must balance innovation and stability carefully. 

With the FinTech landscape evolving so rapidly, how we supervise, regulate and manage risks must keep pace. For example, with banking services digitalised and accessible, we need to address threats like online scams and fraud. And while decentralised finance (DeFi) has the potential to enhance transparency and efficiency in financial services, we need to prevent it from being exploited by malicious actors to manipulate markets and launder money. The current debate on GenAI is instructive – the initial excitement has been followed by strong calls to put in place guardrails or even halt its development. 

These two observations underscore the value of a platform like the Point Zero Forum, which brings together a cross-section of stakeholders to understand and prepare for the next bound.So I am glad to see that  central banks, regulators, entrepreneurs, industry leaders and academics in the room today. By pooling our expertise and perspectives, we can better shape FinTech to be a force for good.  

So from our vantage point today, a little beyond point zero, what are the critical issues we should address? Let me highlight three: First, to foster the safe and responsible use of AI. Second, to reiterate our commitment to sustainability and the green transition. And third, to build and renew trust for cross-border digital finance. Let me speak on each.

Safe and Responsible AI

Today, the key preoccupation across many governments and industries is understanding how GenAI can be deployed in a safe and responsible way. The financial sector has had a head start, as we have been working on the responsible use of AI for a few years now. We kicked this off at last year’s Forum, adopting a collaborative, open-source approach to understanding emergent technologies.We will extend this to achieve the safe and responsible deployment of GenAI in FinTech across three prongs: 

The first prong is to mobilise collective action to build a safe and responsible AI ecosystem. Back in 2018, the Monetary Authority of Singapore (MAS) developed the Fairness, Ethics, Accountability, Transparency (or FEAT for short) principles with the financial industry, to provide guidance on the responsible use of AI by financial institutions. This work was continued through the Veritas Consortium, involving 31 industry players, to translate and operationalise these principles. With the benefit of iterations and road-testing over the past few years, the consortium will now release a Veritas Toolkit 2.0, to support financial institutions in integrating the FEAT principlesinto their internal risk governance. By making this an open-source toolkit, we hope to empower financial institutions all over the world to be better prepared for GenAI, and for the FinTech sector to lead in responsible AI adoption.

The second prong is to prepare for the next bound by examining the risks and opportunities of GenAI for the financial sector, under the new Project MindForge. This project will bring the data resources and domain expertise of the banking sector, together with the top AI companies’ state-of-the-art technologies and advanced algorithms. We will take an action-oriented approach of use case studies, prototyping and pilots to aid in the learning and translation process. This will complement the new AI in Finance Global Challenge that we have just launched under the Global FinTech Hackcelerator, to seek innovative solutions to problem statements that banks and industry players have identified. 

The third prong for enabling the safe and responsible deployment of GenAI is to uplift capabilities across the sector. To this end, MAS, with the support of Google Cloud, will pilot a one-stop AI resource platform for the financial sector. The one-stop resource platform will consolidate comprehensive resources, including datasets and use cases, to accelerate AI development for the financial industry. By adopting a spirit of open-source sharing and creation, we hope that this platform can enable: Individuals to tap on available data to demonstrate their skills and solutions, and land a role within the financial sector;  Smaller enterprises to level up their capabilities and gain confidence to explore new possibilities; and FinTechs and financial institutions to showcase their market-ready solutions to clinch business opportunities and funding.

Sustainability

I have spoken about the three prongs to promote the safe and responsible use of AI.

The second issue that we must continue to focus on is sustainability. It is an existential issue for every person and country, as we are already experiencing the impact of climate change. We must do more and do faster, together. Many of you are working on areas that could enable FinTech to catalyse and support the green transition. Let me reiterate two points: One: to galvanise more businesses to adopt the sustainability agenda, we must lower the cost of generating and reporting the climate data needed to track their net zero progress. Two, to enable the efficient deployment of capital to sustainability and transition-focused activities, we must improve access to such data across institutions and jurisdictions. 

One way of achieving these two objectives is to develop open and inter-operable platforms for the efficient flow of trusted data for green finance. MAS and industry players have been piloting this over the past few years, under Project Greenprint. A sustainability reporting platform called ESGenome went live last September. This allows Singapore-listed companies to standardise their reporting against a set of baseline metrics, and for their input to be automatically mapped to ESG standards and frameworks across major jurisdictions. We are now scaling ESGenome, into a more comprehensive platform capable of meeting the reporting needs of all companies.

For green finance to be pervasive, it needs to be adopted not just by big companies, but also micro, small and medium enterprises (MSMEs). This is something we aim to tackle. Just last week, MAS signed a Statement of Intent with the UNDP and Global Legal Entity Identifier Foundation to co-develop a global framework of digital ESG credentials for MSMEs. Entitled Project Savannah, it aims to simplify ESG data reporting for MSMEs worldwide, and seamlessly generate trusted ESG credentials via the enhanced ESGenome platform. By doing so, we can reduce the reporting burden and the cost of verification for enterprises, to catalyse greater adoption of sustainability reporting across the corporate landscape. This way, we could enhance MSMEs’ access to cross-border financing and business opportunities, and uplift these enterprises. 

Trust

Finally, let me turn to the issue of trust, which is at the core of finance. Trust underpins financial institutions and the international financial system. It is the foundation for stability, and a critical guiding principle for our supervisory and regulatory frameworks. As we seek to harness the possibilities of new technologies like GenAI, and integrate them with existing technologies like distributed ledgers, we must continually think about building and renewing trust.This needs to take place at the system, industry and financial institutions levels, by putting in place new initiatives, guidelines and standards that safeguard financial transactions. Only then can we generate trust and confidence among the public to embrace FinTech fully. Again, this is best achieved not by working in silos, but across stakeholders to design robust solutions that can be scaled. 

As digital assets and distributed ledger technology-based networks gain prominence in the financial industry, regulators and the industry need to better understand not just the opportunities, but also manage risks to financial stability and integrity. With more digital asset endeavours amongst the industry, digital asset networks could emerge as an alternative financial market infrastructure that facilitates the clearing and settlement of payments and tokenised securities. This is why MAS embarked on Project Guardian, to test the possibilities of digital asset networks and realise their potential to improve the efficiency of capital markets, while managing risks to financial stability and integrity. MAS will expand Project Guardian by widening the testing of asset tokenisation across more financial asset classes. This will be done through industry pilots led by 11 financial institutions. To promote cross-border collaboration, a joint report published by MAS, BIS and financial institutions, will set out a common framework for designing open and interoperable digital asset networks. Project Guardian will also welcome Japan’s Financial Services Agency (JFSA) as the first overseas financial regulatory. We hope to deepen international collaboration on digital asset innovation over time.

We are also seeing more pervasive use of digital currencies, so we need to develop digital money standards. One useful example is MAS’ Purpose Bound Money (PBM) initiative. Purpose Bound Money provides a common protocol to specify the contractual arrangements, such that money is transferred only when conditions are met. When a consumer pays for her purchase using Purpose Bound Money, digital money is held in escrow, and transferred to the merchant only when the consumer receives the goods purchased. Thereafter, the merchant could use the digital money for other purposes such as paying their supplier, without any constraints. Standards are required to ensure fungibility, where it is compatible with different wallets and transferrable across different platforms and stakeholders. To foster greater international collaboration on digital money standards, MAS recently published a Purpose Bound Money technical white paper in collaboration with the International Monetary Fund, Banca d’Italia, Bank of Korea, financial institutions, and FinTechs. Financial institutions and FinTech companies will be launching new trials to test the usage of Purpose Bound Money under different scenarios. For example, Amazon, FAZZ and Grab are collaborating to test out escrow arrangements for online commerce, to provide greater assurance to buyers and sellers that money is released when goods are delivered.
 
Taken together, what we seek is to build trust through the positive adoption of FinTech in daily life, and renew trust in institutions and companies to safely and responsibly steward FinTech. This way, we can collectively build confidence to progress and fully harness the potential of tech innovation in the financial sector. 

Conclusion

Let me conclude. 

At a time when the global environment is more uncertain and fractious, it is important that we strengthen our collaboration to chart the way ahead for FinTech. We must sustain finance as the backbone of innovation, growth, and prosperity. A spirit of collaboration and co-creation will best enable us to ride new waves of opportunities afforded by technology, while collectively guarding against downsides and unintended consequences. We can do so by refreshing the fundamental tenets of safety and trust, and anchoring our commitment to sustainability.In so doing, we can collectively stay ahead of the curve, facilitate risk-taking while ensuring good risk management, tap on new possibilities, and co-create solutions that will uplift lives and livelihoods. This is how the financial sector can set an example for stewardship in a fast-changing world.  

Finally, I would like to echo Councillor Karin’s message earlier and look forward to deepening the partnership between Switzerland and Singapore, to harness FinTech for the next phase of financial innovation.

Thank you all very much and I wish you all a successful conference.