Disruptive digital technology to change banking landscape

MANILA, Philippines — The challenge of making economies more inclusive in today’s world of ever-changing and disruptive digital technologies has called for a serious rethinking of development banking strategies, the Department of Finance (DOF) said.

Finance Secretary Carlos Dominguez said financial technology (fintech) is one “dynamic area” that development banking policymakers should look into as new digital tools, like e-payment systems, speed up business transactions and make possible a more inclusive financial system.

According to Dominguez, new disruptive technologies would “overrun the way we govern our communities” unless harnessed to make institutions stronger.

New digital technologies, complemented by open borders, free trade, and increased connectivity would change the way wealth is produced, shared, and used, he said.

But rather than fear the emerging digital chaos, governments should aspire to make technology-driven economies more inclusive, the finance secretary said.

“We are at the dawn of a utopia driven by digital technologies. Autonomous vehicles, 3D printing, and personalized medicine demand we alter the way we do things. Obsolete businesses die like dinosaurs, except at an even faster pace. New businesses will have to be imagined by the day,” said Dominguez in his closing remarks read for him by Finance Undersecretary Antonette Tionko at the Technology for Inclusion Conference held at the Asian Development Bank (ADB) headquarters in Manila.

“Welcome to this brave new world. In it we must rethink the way we do things, including what development banking should be doing,” he added.

The forum serves as a lead-up event to the 51st Annual Meeting of the ADB Board of Governors to be hosted by the Philippines where 3,000 to 4,000 delegates are expected to attend from May 3 to 6.

Dominguez said the discussions held at the conference are only the beginning of more dialogues that should be done with the acceptance that today’s institutions must be reinvented lest they perish in this era of rapidly evolving technologies.

“The pace of technology-driven change will likely quicken. It alters the terms of our confederation. It instantly redefines the horizon. The challenge is to make this fast-paced technology-dictated change work to make human association better and our shared future brighter,” Dominguez said.

Dominguez said advances over the last 30 years in healthcare, education, communications, and productivity that were principally driven by the digital revolution helped improve the average life expectancy by 11 years and reduce infant and maternal mortality rates, along with building a large middle class and rescuing hundreds of millions across Asia from absolute poverty.

“Yet this revolution has only just begun. Cloud computing, artificial intelligence, and increasingly more powerful mobile technologies will alter the way we live and the way our economies are organized,” Dominguez said.

“Fintech is a particularly dynamic area. New digital tools such as e-payment systems enable us to speed up transactions and improve remittance processing. They make possible a more inclusive financial system,” he added.

According to studies, digitally driven financial inclusion using today’s fully developed technologies could increase gross domestic product (GDP) growth by three percent and raise income levels by 11 percent for the poorest.

Estimates likewise show that artificial intelligence could increase productivity by as much as 40 percent and increase global GDP growth by 25 percent by 2035.

Research made available earlier this year predict that in the Philippines alone, digital products and services will grow to 40 percent of total economic output by 2021 from just three percent in 2017.

“They could increase annual growth by half a percent,” Dominguez said.

ADB deputy chief economist Juzhong Zhuang opened the Technology for Inclusion Conference with a report on the highlights of the findings of the ADB’s Asian Development Outlook 2018 Report on Technology and Jobs.

ADB, which has been based in Manila since its inception in 1966, is dedicated to reducing poverty in Asia and the Pacific through inclusive, environmentally sustainable growth, and regional integration.

As ADB continues its firm commitment to making all of its annual meetings a sustainable event, this year’s Annual Meeting of the Board of Governors will be the first carbon neutral annual meeting ever held in Manila.

There have been 15 previous annual meetings held in Manila, with the most recent one in 2012 and an earlier small-scale meeting in 2003.