About a week ago I attended two back-to-back events: the Sim Kee Boon Institute’s conference and the DBS blockchain hackathon.
SKBI, where I am a visiting research fellow, is a seven year old institute which is part of Singapore Management University, one of the youngest universities in Singapore. This was its fifth annual event to cover digital banking and its scope has expanded to impact investing and financial inclusion.
While both events took place over the entire week, the conference was a two and a half day event that included panelists, moderators and audience members from around the globe including parts of Europe, both Americas and all across Asia.
The first full day included several keynotes from industry gurus including Piyush Gupta, the CEO of DBS bank, one of the largest banks in Southeast Asia and others such as Omidyar Network, a investment fund focused on social impact investing primarily in developing countries. The second day was entirely conducted in Chinese and among others included speakers from SF Express and VCredit.
Prior to the event a private roundtable took place over a three hour period and included members from policy making and research bodies. Both Chris Skinner and myself independently gave presentations covering the future of fintech (incidentally a few of our slides were even similar). Some of the feedback and comments discussed the sustainability, or rather the unsustainability of several P2P lending projects such as those in the UK and in China. For example, some of the problems in this segment include a lack of credit ratings, financial controls and arbitrary quotas (e.g., incentives to approve loans in order to hit specific arbitrary numbers).
The following day, on the first day of the public conference, Professor Rui Meng from CEIBS explained how there are now 1,700 P2P lending platforms in China and that there were at least 7 reasons for why this number has rapidly increased over the past five years including financial “repression” (the dearth of financial instruments by which investors can diversify into).
For some more stats related to China see: Understanding value transfers to and from China.
What was the overall takeaway of the conference?
My thoughts echo Todd McDonald’s, based on my two trips to Singapore over the past 6 months its policy makers seem to be positioning the country (via Smart Nation) as a testbed for a variety of innovations in the overall “fintech” arena. The Minister of Water Resources & Smart Nation, Vivian Balakrishnan, even gave a roughly 3 minute overview of what blockchains are to the conference dinner after the first day of the event.
Conversations on and off chain throughout the remainder of the week seemed to support the notion that key decision makers at institutions across the country were increasingly interested in potential use-cases that blockchains (or derivations thereof) could solve especially those surrounding trade finance and identity/authentication. And this makes sense. Singapore became a wealthy developed country in part because of its ports (recall that it sits the cross roads of both regional and international maritime trade prior to even the British colonial era).
Trade finance – smart contracts
One of the conversations I had with a banking administrator was that if you took a port manager or bank manager from the late 19th century and brought them to the present day they would likely not see too many differences in how the trade finance system worked in terms of letters of credit and bill of lading. It still involves a number of frictions (manual, heavily trust-based interactions) that are over a century year old, if not longer, yet are a multi-trillion dollar segment that the revolutions in digitization and automation seem to have forgotten.
It’s a chicken-and-egg problem, a little like fax machines and airports (I am trying not to use the overused cliche phrase “network effect”). A fax machine which cannot connect to other machines is about as useful as a paper weight and a solitary airport that has no connecting flights is effectively a parking lot.
Can distributed ledgers (or whatever we end up calling non-Nakamoto blockchains) reduce the costs and provide transparency to this seemingly anachronistic trade finance system? Can smart contracts be used to act as custodians of collateral or property titles in the movement of goods? Or is this all just wishful thinking? There are two startups that have a “trade piece” related to this, including Mountain View-based PurchaseChain (part of the SKUChain project). Readers: if you are working on a replicated ledger project in this area, Singapore is definitely the place to go to test its utility.
Perhaps the second most widely discussed area that came up in conversations with members of the Singapore financial industry was that of identity and authentication. Like the rest of the world, each local bank has its own KYC/AML procedures that creates frictions when transferring value and adds to the already expensive customer acquisition and on-boarding costs. For instance, one stat that stood out was that the costs for customer on-boarding at a traditional bank branch can reach upwards of $1,500 or more (once marketing is factored in).
Ideally, so the conversations went, something akin to SingPass or Estonia’s e-identity initiative is an idea that seems to be worth its weight in gold as it could not only lower the costs but also the potential fraud and identity theft that currently takes place (among other benefits).
While it is just my opinion, I found the two most interesting presentations to be from the Fidor bank team (Frank Schwab and Matthias Kröner) and Daniel Epstein from the Unreasonable Group.
I moderated a panel that included Chris Skinner, Frank Schwab, David Shin (from Paywise) and Todd McDonald (from R3). The videos are supposed to be uploaded soon.
I also enjoyed hanging out with Albert Chu, who was a moderator and also a SKBI visiting research fellow. His diverse experience in investing, advising and mentoring. His views are grounded and did not involve the evangelical hype of the typical Silicon Valley investor. Anju Patwardhan from Standard Chartered also had many interesting comments and insights throughout the event involving financial inclusion, P2P lending and trade finance. I would like to also thank professor David Lee for his time, effort and enthusiasm as well as Ernie Teo and Priscilla Cheng from the SKBI team for hosting me. More photos on Twitter #SKBI.
Some other coverage of the conference:
Between Friday and Saturday, 18 teams comprised of 3-4 people each (hailing from a variety of countries) participated in the DBS hackathon, competing for $33,000 SGD in prize money as well as a spot at the DBS / Startupbootcamp (SBC) accelerator.
I took a number of photos with commentary that were posted on Twitter #dbshackathon.
Both CoinGecko and Bitcoin Magazine posted an overview with a few of the teams from the event including the winners and David Moskowitz has a short reddit thread on it as well.
The hackathon itself was fairly straight forward. Held on the third floor of Block 79 called BASH (where the Startupbootcamp facility is), 18 teams initially worked in one large room and there are several adjoining rooms that were also used as meeting spaces. Throughout the day a group of mentors (of which I was one of) spoke with and provided assistance and consultation to the teams. Some of the mentors (and later judges) helped a few of the teams walk through the ideation phase. The self-organized teams themselves were fairly diverse, comprised of individuals whose skillset typically involved a engineering background but also business development.
In addition to creating a three-minute presentation, there were a number of criteria the projects would be judged on including a technical code review. While some participants arrived earlier in the week and had a chance to brainstorm, the teams themselves only had two days to bring it all together and pitch the product to six judges. DBS was the main sponsor of the event and more than 10 individuals from the bank were on-hand throughout the event to provide feedback as to how the ideas could be used in a fintech context. In addition to the three winners covered in the two articles above, three additional startups that participated in the event were recently accepted into SBC for their new batch.
Aside from the top 3 projects, I thought the 4th place was especially of interest. DBB is similar to Hyperledger and Stellar but is unique in that users individually run their own ledger and validating node yet there is no global consensus or state. One of its creators is Pavel Kravchenko who is currently chief cryptographer at Tembusu and previously worked at Stellar.
The atmosphere was friendly, informative and competitive. Some of the teams were laser focused at winning the competition while others were more relaxed, preferring to focus on team building and becoming more proficient with the tech. A few had not worked with a decentralized ledger before and Blockstrap was on-site to help provide support for everyone. Overall it was probably a helpful event for both startups and banks as it led to a cross pollination of ideas and professions.
It was good catching up with the active startup scene there: Anson Zeall from CoinPip; David Moskowitz from CoinRepublic (who led the tech auditing team for the hackathon); Yusho Liu from CoinHako (which got 3rd place), Antony Lewis (and his baby son) from itBit; TM Lee and Bobby Ong from CoinGecko, Pavel Kravchenko and Andras Kristoff from Tembusu (Pavel independently worked on a new project and got 4th place); Adam Giles and Mark Smalley from Blockstrap; Marcus Swanepoel from BitX; Taulant Ramabaja (founder of Pactum but who flew in and was part of the 1st place team); Ayoub Naciri from Artabit; Virgil Griffith (independent); Lilia Vershinina from Kraken; Markus Gnirck from StartupBootcamp; and Ron Hose from Coins.ph.
They all have, as my British friends say, heaps of passion and it appears as if Singapore is positioning itself to be an important integral role in the future of fintech innovation.
Special thanks to Mikkel Larsen and Cade Tan from DBS for organizing the event and taking the time to discuss their views on trends in this space.
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