Kristine at ABD-ABAC-APFF-Fintech Workshop - Blog 2

July 06, 2017

APFF Fintech Workshop
Manilla, Philippines, July 5, 2017
By Kristine Yang
Fintech in the payment area has been the key driver of this wave. Driven by e-commerce, the rapid development of e-payment and m-payment has not only changed people’s behavior but also people’s mindset. Perhaps the most interesting example is that today even beggars in China accept digital payment. This actually underpins the bigger picture of digitalization and deregulation in the financial service across the region. Despite different economic development across different countries/economies, it has become compellingly clear that market players as well as policy makers have to embrace a more integrated global payment system.
An APEC research report supported by PayPal looked into the E-payment Readiness across APEC economies, which examines four areas of development: the regulatory and policy environment, infrastructure, demand and innovation. It shows Hong Kong ranked the 7th among all 21 APEC economies with favorable policy environment and embracing innovation. But questions were also raised on whether Hong Kong is being truly innovative in financial services, or just renovating traditional financial institutions.
Perhaps the most well-known FinTech innovation is the development of block chain technology, or distributed ledger technology. Although there is still skepticism toward cryptocurrencies (such as bitcoin and Litecoin) underpinned by block chain (block chain is not equal to bitcoin), companies today are already going for “initial coin offerings”, or ICOs. Instead of offering stocks through traditional Initial Public Offerings (IPOs), ICO financing relies on virtual currency, which offers a speedy, cost-efficient, boundary-barriers free, and encrypted payment. This may become a game changer in the future.
Today cryptocurrencies still face issues, such as volatile exchange rate movements, and some illegal activities. These can technically be managed, but it essentially depends on regulators’ willingness to recognize and address the issues. This in turn touches on a fascinating and more fundamental question for policy makers – whether to focus regulation on financial institutions or on financial activities.  This question remains unanswered. So far, a large part of the emphasis for RegTech still surrounds the compliance process, i.e. Know Your Customers (KYC), anti-money laundering (AML), anti-terrorism financing, etc.
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