The Taiwan Banker

In a video available on YouTube, Albert Einstein has some words of advice for the world. “Mankind is at war with an invisible enemy, and we are all in this together. Please stay inside your houses to contain COVID-19. Keep your distance, and make sure to wash your hands. Together, we will defeat the coronavirus, so the world can be at peace once again.” Nobody knew how far ahead of his time he was. Deepfake technology, an AI application in which images or videos are processed to display scenes that didn’t occur or people that don’t exist, has continued its breakneck development in 2020. A number of new variants can turn you into a cartoon, or turn a cartoon into a person, or insert you into a TV show. Brands are ditching human social media ‘influencers’ for virtual ones. Although many of the current test cases have only been gags, related technologies have also been used for financial fraud. In September last year, an audio deepfake was used to defraud a company of US$ 243,000. Just as mobile technology has made video verification convenient, AI has made it easier than ever to impersonate people. Detecting these fakes will create a variety of business models, just as their creation has. The London-based Onfindo, one of the participants of FinTech Taipei Forum 2020, works on digital know your customer (KYC) verification for customers opening bank accounts, and is very familiar with the direction in which technology is moving. “Fraud has become a 9-5 operation,” said Urvashi Gupta, Regional Manager, SE-Asia for Onfido; the popular image of cybercrime as being perpetrated by teenage pranksters with no discernable larger motive is long outdated. The company identifies physical and digital manipulation of verification images and videos through techniques like textural analysis and 3D reconstruction. Because one remote verification can be used for multiple purposes, the stakes are high. Gupta was just one of the 39 speakers in the forum, held at the Taiwan Academy of Banking and Finance from October 28-29. With participants from tech companies, traditional banks, insurers, regulators, civil society, and media, including both Taiwanese and international perspectives, the event portrayed a financial sector changing in sometimes subtle but also profound ways. Earning the trust of the public FinTech Taipei is Taiwan’s annual flagship fintech event. This year, in response to the risk of in-person gatherings, it was held as a forum. Some of both the audience members and speakers participated via online teleconferencing. The first day featured three topics: digital transformation, information security, and regtech (which included Onfido). In the first section, Hank C.C. Huang, President of the Taiwan Academy of Banking and Finance, detailed the factors required for digital transformation. It’s “a process of fully restructuring a company’s organizational structure and business model, requiring both systems and human resource upgrade, with customer value at the core, using technology as a tool,” and can’t be simply delegated, nor put off until competitors test the waters. In the information security section, participants heard from Sheltered Harbor, a US initiative to create a backup version of critical data sets, updated daily, so that services can be restored in the event of a system-wide outage or attack. This planning recognizes that one of the most important factors in the recovery process will be the public’s confidence in the integrity of its financial data. Thus, so in contrast to traditional continuity planning, it emphasizes rapid access to basic account data, even in the absence of full functionality. This approach has attracted interest from the Taiwanese government, with its consistent focus on contingency planning. The topics on the second day included fintech integration, innovation, and applications, and new financial service models, as well as presentations by international ‘unicorn’ startups – companies with over US$ 1 billion valuation. One of the main fintech application markets is insurance, and several presenters detailed its progress in that industry. According to Chen Hsu Liao, Vice President of Shin Kong Life Insurance, technology has even more disruption potential than regulation. Key areas to watch include AI and predictive analytics, usage-based insurance/telematics, robotic process automation, virtual claims, cyber risk insurance, natural language process, and geospatial analytics. Vincent Shih, Microsoft’s General Manager of Corporate, External, and Legal Affairs, spoke in the session on new service models, building upon the theme of issues that will emerge from AI development. These issues include fairness, reliability, privacy, inclusiveness, transparency, and accountability – all of which will determine public acceptance of such technologies. Alternatives to credit cards In the final session, Michael Saadat, Director of Public Policy and Regulatory Affairs-Australia for Afterpay, detailed the rise of the buy now pay later (BNPL) model. BNPL differs from traditional credit card lending, as well as layaway purchasing, in that debt doesn’t roll over. The amounts start small, and if the borrower fails to pay, they pay only a small penalty. The main disincentive is simply the loss of the service in the future. The rise of BNPL also parallels a long-term decline in use of credit. Younger people in particular have seen how debt can balloon when buying on credit, and instead are moving towards debit cards or other alternatives for payment. BNPL is used as a short-term budgeting tool, rather than a way to take on debt; furthermore, its profit model mainly depends on merchants in search of new marketing channels, rather than uncreditworthy borrowers. Unpaid debts and associated fees make up only a small portion of related revenue. BNPL is a somewhat more conservative fintech model than AI-powered KYC, with less potential for transformative change, giving allowing it to reach markets faster. Australia is one major market, but the Swedish BNPL platform Klarna has also become Europe’s most valuable fintech company. PayPal announced a “Pay in 4” option in August, and Taiwan itself also has AFTEE, which can be used on PChome. The global spread of BNPL has been made possible by the incremental nature of its innovation. Between high-tech applications that meet a real need in the financial sector (like e-KYC), and business model improvements based on platform integration, as well as a variety of other perspectives from companies, regulators, and other stakeholders, the FinTech Taipei Forum gave a broad overview of current fintech developments and trends. On August 27, Taiwan’s Financial Supervisory Commission announced the creation of a 3-year “fintech development roadmap,” noting that fintech development has proceeded at a “fast and vigorous” pace this year. According to the plan, the government will make more efforts to create an international fintech team for Taiwan, including fintech licenses for qualified personnel. The announcement reflects a renewed focus on the emerging field, and an opportunity for new technologies to come to the forefront. For Taiwan to continue upgrading its financial system, companies, organizations, and individuals will need to learn from international practice, and anticipate long-term changes in stakeholder priorities. Next year’s event has already been set for October 29-30, 2021 – hopefully in a much larger format. Its insights from top experts in the field will help further ensure Taiwan’s place in the international fintech ecosystem.