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Central Banks, Fintech, and Crypto – The Financial System of the Future
July 2023
by Mark Johnson, an Associate Director of Sandpiper based in Singapore. Mark leads the Technology Communications practice for Sandpiper in the Asia Pacific Region. He has 15+ years’ experience advising and positioning business leaders and senior politicians in multiple regions and a proven track record of adapting campaign methodology to communications and public affairs projects.
A technology revolution in front of our eyes
There is a revolution happening. This revolution will change the way we live and work. It will shift power dynamics and transform a system that has existed for millennia. This revolution is happening to our financial system. And it is asking one simple question – what is the future of money?
Over the last few years, the crypto false starts have, in some ways, masked how far the financial system has come and hidden just how far we need to go. This illusion was front and centre at the recent Point Zero Conference in Zurich.
Ground Zero at Point Zero – fintech, banks, crypto, and more
The forum gathered 1,000 central bankers, regulators, and industry leaders to delve into many topics, not least discuss the necessary digital infrastructure for future digital currencies. One topic up for discussion was how we begin building toward establishing a truly harmonized new payments system that operates seamlessly across borders and systems while ensuring fairness and a level playing field for all participants.
Working in collaboration with the BIS Innovation Hub (Bank of International Settlements), the Monetary Authority of Singapore (MAS) spearheaded this initiative, which can be viewed as a precursor to the upcoming Singapore Fintech Festival later this year. Together, these events form a pivotal six-month period where we might see the foundation for a future financial system being laid.
Financial inclusion for all
One of the truly exciting aspects of this revolution is that any variation of a financial system of the future system is going to provide a significant number of underbanked people a means to access finance. Gone will be the days when access to the central banking system will be the determining factor in whether you can access the financial system. Digital money will be king and cash a thing of the past. New channels connecting finance and people will improve the lives of millions.
Furthermore, digital currencies, such as cryptocurrencies or central bank digital currencies (CBDCs), will be easily accessed through mobile phones or other digital devices, even by individuals who do not have access to traditional banking services. They will reduce transaction costs associated with traditional banking methods, such as fees for money transfers or currency conversions. Individuals will be able to store and manage their funds securely without the need for a traditional bank account. And, with digital currencies, people can store, transfer, and manage their funds independently, reducing their reliance on intermediaries and giving them greater autonomy in managing their finances.
Digital currencies are not the solution to solving the world’s income inequality issues, but they will remove some of the most unnecessary barriers to financial inclusion.
Building trust and encouraging fintech innovation
As mentioned earlier, the crypto industry has had, what appears to be, several false starts. Every time it appears that we might just be able to get everyone around the ‘future of money’ table, Crypto gets uninvited because of its association with some unsavory characters. In late 2022, that character was the drunk uncle – FTX exchange. The problem for crypto was that FTX was seen as one of the most secure and supportive of regulatory oversight. It is always the ones you trust that let you down.
The debate around what the financial system of the future will be can provide the space for game-changing campaigns that straddle the fine line between public policy, public affairs, and communications.
Nonetheless, crypto is not going anywhere. The market will eventually move towards decentralized projects that offer entire transparency – the exact opposite of FTX – but the only way to get there is through regulation and oversight. Ironically, FTXs failure, despite their willingness to regulatory ball, will result in greater oversight and regulations on cryptocurrencies. Every cloud…
Stronger regulations should not, however, come in the way of financial innovation. This is true of the crypto market, and the same applies to many Fintech players in the ecosystem. Fintech provides technology that can match the end user’s needs more successfully than ever before. Look no further than cross-border finance flows. These solutions are making international transactions faster, more cost-effective, and more accessible, thereby promoting global trade, economic growth, and financial inclusion. Too much regulation will starve the innovation driving these solutions. The key is to balance between regulating high-risk use cases and promoting those removing barriers for the public good.
How technology companies can thrive?
Now is a great time for companies in the financial services industry to thrive, provided they are willing to actively contribute to shaping the future of our entire financial system. A fair and equitable system that benefits everyone requires a combination of established players (banks) and disruptive technology (big tech, crypto etc.). The ultimate objective should be to achieve greater financial inclusion and empower individuals and businesses to have agency in their financial choices. By embracing this mission as a company, a significant opportunity to drive a positive narrative and achieve success is apparent. The age-old saying “doing well by doing good” holds true.
The debate around what the financial system of the future will be can provide the space for game-changing campaigns that straddle the fine line between public policy, public affairs, and communications. By combining these highly complementary disciplines, companies can build reputation, manage crises, shape government and public opinion, and ultimately help give a north star to the ‘future of money.’
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