Deposit insurers Intensify discussion on changing dynamics in the face of fintech developments

Without a doubt, fintech is rapidly changing the financial industry, with innovations in areas such as digital payments, core banking models, cryptocurrency and alternative finance, to name a few. The COVID-19 pandemic has further accelerated the digital footprint of the financial industry with more receptive consumer behaviour towards the adoption of fintech products and services.

In the face of this evolving landscape, a webinar themed “Fintech and Changing Dynamics of Deposit Insurance” was held on 2 June 2021. The webinar was organised by the Korea Deposit Insurance Corporation (KDIC) in collaboration with Perbadanan Insurans Deposit Malaysia (PIDM). 233 participants from 16 deposit insurers across the Asia Pacific region attended the session.

In his opening remarks, Seongbak Wi, Chairperson of the Asia-Pacific Regional Committee (APRC) of the International Association of Deposit Insurers (IADI) and Chairman and President of the KDIC, provided a strategic overview of fintech and emphasised the need for deposit insurers to identify new roles emerging from the growth of fintech.

The following are some of the key insights and discussion points from the webinar:
  1. With the increase in digital payments, new challenges such as cyber risk, fraud and malpractice surfaced with heightened focus on the need for enhanced financial consumer protection framework.
  2. In the advent of the introduction of Central Bank Digital Currencies (CBDCs), the role of deposit insurers and potential solutions to address the possible risks of CBDCs to financial stability were discussed. In brief, CBDC is a national-currency denominated claim against the central bank which is account-based or token–based and is electronically transferable.  
  3. New opportunities and the experiences of several deposit insurers relating to fintech, were also discussed. This includes a scheme to recover misdirected money transfers, which is an expansion of the current mandate and function of the respective deposit insurer. Additionally, the rising e-wallet and e-money usage has prompted another deposit insurer to explore the use of new platforms to facilitate the reimbursement of deposits, increase public awareness, and to share trends on deposit data with financial consumers. 
In his closing remarks, Rafiz Azuan Abdullah, Chief Executive Officer of PIDM and Chairperson of the IADI APRC Research Technical Committee, expressed his view that given the current growth of fintech, deposit insurers need both strategic and proactive responses to tackle what lies ahead.

Besides what was discussed, other areas for deposit insurers to consider include the potential to apply predictive analytics from artificial intelligence and machine learning to amplify impact and effectiveness of consumer engagement, as well as to improve resolution of banks. Finally, the emergence of digital banking across the Asia Pacific region, will not only introduce new players with novel innovations, but also new and different risks.

Rafiz observed that as deposit insurers are increasingly confronted with fintech and other strategic shifts in the financial landscape, forward looking deliberations through webinars and other platforms will be crucial to build common understanding, exchange ideas, and discern better ways to move ahead together.
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