Booming blockchain will open new doors in the Asia Pacific financial sector

18 April 2018 Consultancy.asia

The technology of blockchain has a huge potential for positive social impact in the future. From big-data sharing across medical sectors and direct access to funding for charities, blockchain has the opportunity to alter some of the fundamental processes in modern life. Whilst many people know blockchain only for bitcoin, it also has the ability to challenge traditional financial institutions and create positive social impact.

The outlook for the future of blockchain in Asia is strong with a desire for higher levels of financial inclusion and transparency driving the industry. Governments and international companies across the region have committed to exploring the potential of the technology and are beginning to realise the benefits. A recent study by IT services and consulting firm Cognizant titled ‘The Future of Blockchain in Asia-Pacific’ found that fintech financing across the region was higher in the 2015-2016 period than in both the US and Europe.

Blockchain is a digital ledger of economic transactions distributed across a community-wide network. The network is shared amongst the users and cuts out the necessity for a central authority agency. Banks are no longer necessary to carry out transactions or provide financial security, as with blockchain technology these abilities are put in the hands of the user directly. The industry is driven by the necessity to collaborate to regulate and verify the transactions data.

The Asia-Pacific region is booming with blockchain start-ups right now which are facilitated by global clients adopting the technology and a forward looking regulatory environment. It’s not surprising that as traditional financial institutions are poised for a major disruption by blockchain, they are also the biggest sector to move on the technology. In fear of being left behind, Cognizant found that 88 percent of the survey’s participants view blockchain as important or critical for the future of the financial industry.The Future of Blockchain Is Already Here

Asia’s high adoption of blockchain is also due to local governments positioning themselves at the forefront of the industry. With the rapid growth of the middle class and growing demand for banking solutions, and a relatively high access to digital infrastructure, the region may be a testing ground for the blockchain based financial model. Governments in Hong Kong and Singapore have taken a proactive approach in promoting innovation and both Japan and South Korea have regulated the industry. In order to demonstrate leadership in the field and to further take autonomy over their institutions, China’s central bank has created an independent domestic cryptocurrency to ease financial regulations.

The technology is also fostering financial inclusion in locations where the standard is low. Approximately two billion adults globally have never been involved in the banking process before; a phenomenon that blockchain start-ups are focusing on. MicroMoney, a blockchain-based financial service, aims to provide access to people across Asia who have never banked before. Access to financial capital outside of the traditional financial system sets in motion an important shift in social norms.

Executive views

The study highlights the ways which the banking and financial sector are preparing for a wave of disruption. Over 480 senior executives from the banking and finance sector, including insurance companies across China, Australia, Japan and Singapore were involved in the survey. Nearly 75 percent of respondents said they were looking into the ways in which their firms could adopt blockchain technology into their institutions. Firms are busy setting up blockchain prototypes, creating hybrid ways to include the technology in their existing framework and creating environments that facilitate blockchain development.

Over half of all respondents interviewed indicated that their organisations were busy setting up blockchain labs and 60 percent were developing blockchain task forces. By getting ahead of the game, firms ensure that they are “well equipped to move forward as it moves toward the mainstream.”Unlocking Competitive Advantage with BlockchainHowever, respondents still had their reservations about the new technology, with the report stating that, “It will take time for businesses to become comfortable with blockchain.” One of the main factors of why firms have been weary of the technology are concerns with security, with 71 percent of respondents naming it as the number one external barrier.

Issues surrounding security have always been concerning in relation to technology developments, and in the current climate it is exceedingly important. However, as Asia has been relatively delayed in its journey to digitalisation, the study suggests that the region can benefit from cybersecurity protocols in the developed world and bypass initial challenges.

Blockchain benefits 

In Indonesia for example, with a largely offline population of whom 80 percent remain outside the traditional banking system, blockchain has huge potential, as it will allow users access to a digital currency for those who may not have a bank account. Those who are unbanked may be so due to the fact that they cannot provide proper documents and have no legal basis to access the system. This may be especially true for undocumented migrants, refugees and rural workers who are separated by both legal and spatial barriers.

Providing access to functions such as payments, cross-border remittances, loans and digital wallets to people stuck outside the traditional banking services allows those citizens greater financial freedom and security. Blockchain can also facilitate remittences and international transfers, a huge source of income across Southeast Asia. The positive social impact of streamlining access to these remittences on local communities cannot be understated.Challenges to Shape the Future DirectionBeyond finance, blockchain leaders across the world believe that the technology could also be key in shifting gender bias in the workplace. Although the field itself is generally dominated by males with only an estimated 5.8 percent of back-end developers being women, the sector is growing and there is a talent gap which needs to be filled regardless of gender.

"Blockchain is tremendously community driven," says Pandu W. Sastrowardoyo from Blockchain Zoo in Indonesia. "Women excel in coalescing communities and getting multiple groups to get along, while Blockchain's main feature is to create partnerships between multiple competing interests.”

The technology is built on egalitarianism and fostering a community and if women do not participate at this early stage of the game, they may miss out on capitalising on the prospective future growth. "There is a still a dearth of women joining the tech workforce in developing countries," she says.

Blockchain disruption

Lastly, the study finds that firms are still attempting to understand the technology and how it will effect their business. Blockchain is set to disrupt multiple financial services and the way transactions are made, putting a new spin on the way that governance and regulation in turn effect transnational business. In order to better understand the new phenomenon and ensure that adoption is streamlined, firms are turning to professional services and consultancies to fill the knowledge gap, presenting a significant market opportunity. 

“Given this uncertainty, we suggest that firms identify blockchain experts, consultants and thought leaders to help find and build a business case for blockchain. Moreover, providers can help financial institutions by sharing pilot data, providing connectivity services and offering guidance on choosing the right platform,” the report concludes.

Beijing and Tokyo emerge as serious tech hub rivals to Silicon Valley

12 April 2019 Consultancy.asia

As Silicon Valley struggles with a number of institutional issues, the location of the world’s top tech-hub may ultimately change – with Beijing and Tokyo emerging as serious contenders according to a survey conducted by KPMG.

Now into its seventh edition, KPMG’s Technology Industry Innovation Survey quizzed over 700 global tech executives on their thoughts on the future industry landscape – revealing that for the first time more than half of the respondents (58 percent) believe Silicon Valley will no longer be the technology innovation center of the world in just four years from now, with Beijing and Tokyo seen as two possible usurpers.

“Many factors affect a city’s perception as an innovation hub, including favorable government policies and incentives, accelerators, tech parks, corporate investment, state-of-the-art infrastructure and, in all cases, at least a few highly successful and wildly popular success stories,” said Peter Laco, an Executive Director at KPMG in Slovakia, of the previous survey.Top contenders for the next world-leading technology innovation hubWhile New York remains the most touted hot-spot among respondents, Beijing and Tokyo landed in the second and third spots as likely contenders for the global tech-hub crown, with seven Asian cities featuring among the top dozen; Shanghai (in equal 5th, but overtaken by Beijing), Taipei (in joint-5th as a notable riser), Singapore and Seoul (at 7th and 8th) and Hong Kong, which rounded out the top dozen. Shenzhen, meanwhile, has dropped outside the top 20.

With access to talent and quality infrastructure remaining key attributes for a successful hub, the report states that, despite all the positive business factors present in Silicon Valley, “an escalating cost of living, questions about diversity and corporate cultures, high business taxes, an overmatched infrastructure, and even increasing scrutiny into data privacy and other business practices are contributing to the perception that Silicon Valley may not continue to dominate.”

Still, the US (which also featured seven cities among the top 20) as a whole is still considered the country expected to produce the most disruptive technologies in the coming years, maintaining its top spot ahead of China despite a narrowing of the gap by two percentage points on last year (to 23 percent against 17 percent). The UK meanwhile has gained some separation on Japan in fourth, while Singapore, South Korea and India appear among the top ten.Countries that show the most promise for disruptive technologyTo gain further insight into the likelihood of a burgeoning tech-hub reaching the peak of the global pecking order, KPMG analysed the results of the survey against a range of other city indices, including A.T. Kearney’s 2018 Global Cities report and Mercer’s Quality of Living rankings – identifying Singapore as the most consistent Asia Pacific performer across the board, with Tokyo, Seoul, and Hong Kong lagging in a variety of areas.

“The belief that Silicon Valley will be displaced as the leading hub underscores the continuing decentralisation of technology innovation, spurred by investment in other cities and regions globally, as well as contributing factors in Silicon Valley,” says Tim Zanni, KPMG’s global technology sector leader. “Even when faced with pressing issues that call for funding, cities and countries are carving out significant investment to become a technology innovation hub due to an expected broad economic impact.”