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'Siri, transfer $3 million from my account'
Web 3.0 will pave way for more open, smarter and autonomous financial services
Tom King 25 Oct 2021

Web 3.0 is one of the most talked-about digital developments, but how will banks and financial services institutions utilize the technology to avoid obsolescence and transform their business?

The importance of Web 3.0 and how its innovations will power the future of financial services will be a key theme at the 6th edition of the Singapore Fintech Festival next month.

If Web 1.0 refers to the first stage of development of the internet, Web 2.0 features the growth of user-generated content, including the rise of social media and online businesses. Web 3.0, on the other hand, involves decentralized data networks and the increasing use of artificial intelligence (AI).

Covid-19 accelerated the digital transformation of banking and payment services. As a result, opportunities for the financial services industry to collect and use more detailed customer data have also dramatically increased.

A number of forward-thinking institutions in Asia have already transitioned into becoming data-driven businesses. But many are still trying to understand how to accumulate and make the most use of data.

By leveraging advances in technology such as machine learning and blockchain, banks and financial services firms should be able to use the information to enhance their products and therefore provide better calibrated solutions to their clients. At the same time, clients become more engaged and aligned with the company’s products and services.

The Asset recently spoke to industry insiders in Asia-Pacific about how Web 3.0 will further enhance the current services offered by the banks and financial services firms.

Consumers win

Ben Smith, general manager for Australia and interim chief operating officer for Asia-Pacific at Railsbank, says the financial services industry is currently experiencing dramatic changes, led by the fintech industry, which has seen Banking-as-a-Service and embedded finance take hold.

“The main result is that the financial consumer now has greater control over their finances,” Smith says. “People understand that managing their money is now easier, whether that’s making payments via an app, arranging their pensions, or creating savings. This is an ongoing process and we are at the early days of these changes, and Web 3.0 is a crucial enabler for this to happen.”

Smith says Web 3.0 is all about increased functionality, and better-suited products and services, especially for financial consumers.

“Digital banking allows greater freedoms when managing money, so the more functionality you have, by definition, the easier the process of management. One of the often-quoted examples of how Web 3.0 operates is Apple’s Siri, which uses speech recognition and AI to bring results and perform actions,” he explains.

“Imagine telling Siri to make a transfer for you, check on your account balances, or add some money to your savings. It is this type of functionality that is around the corner.”

Machine learning

Because of Web 3.0’s ability to leverage machine learning and data, there should be greater functionality and better-suited products and services for consumers, says Singapore-based Michael Conn, chairman and chief executive officer of Zilliqa Capital, an investment company that invests in next-generation fintech, open finance and decentralized finance solutions.

“The autonomous integration of machine learning and data should allow for a more fluid and versatile distribution of products and services, given the creation of new functionalities,” says Conn.

He notes that proper governance and risk management will be critical in monitoring unauthorized access and manipulation of data. Proper control procedures, including encryption, data access control, etc., will also be necessary to properly manage Web 3.0 capabilities.

Conn also believes Web 3.0 will have a significant influence in the environmental, social and governance (ESG) and green finance marketplace.

“Web 3.0 should allow for greater scrutiny and filtering when it comes to green finance/ESG and the problems of greenwashing. Through the utilization of machine learning and blockchain, investment firms and the companies that hire them should have a better ability to navigate issues around greenwashing,” he says.

Tracking greenwashing

Mohammad Raafi Hossain, co-founder and CEO of digital asset gateway firm Fasset, concurs and points to a report published in February by the European Commission, which inspected a variety of business sectors and found that approximately 42% of the sustainability claims made were exaggerated, false or deceptive.

“With blockchain’s widely known characteristics of immutability and transparency, claims of sustainability efforts can easily be tracked and verified,” Hossain says. “Blockchain can also encourage greater inflows of capital into sustainable infrastructure, lowering the barriers to enter into the ESG space.”

He also points out that by using technology to tokenize and fractionalize large sustainable assets such as solar panels, such assets can be made more tradable and supported by a larger base of investors, democratizing access and thereby potentially channeling additional money to green initiatives.

Web 3.0 also brings new opportunities for forward-thinking financial institutions and fintech companies to future-proof their businesses.

“This phenomenon is already being observed in the e-commerce sector, where virtual and augmented reality have been used to add a third dimension, providing an immersive and personalized shopping experience that recognizes the individual needs, behaviours and preferences of consumers,” he says.  

With greater transparency across the distribution process, risk management models will be simplified, with fewer opportunities for errors. And while traditional risk models will remain part of the distribution of products and services, there will be less reliance on them with the advent of Web 3.0.

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