The twin forces of technological innovation and sustainable financing are revolutionising financial services in Singapore, says Professor Xin (Simba), Chang, Professor of Finance at Nanyang Business School (NBS). But the industry could suffer from talent shortages if the skills sets of finance professionals do not keep up with these changes, says Professor Chang, who teaches on the NBS Executive MBA (EMBA), a programme designed to equip senior managers with cutting-edge business, technology, and leadership skills.
The Monetary Authority of Singapore’s recent groundbreaking decision to award licences to operate the country’s first digital banks will accelerate the transformation of the local finance sector. He expects these four banks, which operate online and don’t have brick-and-mortar branches, will offer retail and business customers lower fees and better access to financing. “They will have a big impact on financial inclusion. Traditional banks are conservative and prudent, so they are often reluctant to lend to smaller companies,” he adds.
Singapore’s new virtual banks, will also be “highly innovative” in the technology they use, especially in fields such as big data and artificial intelligence. “The big banks are investing in these areas too, because they’re critical for sustaining business growth, but the emergence of the digibanks will increase competition among financial institutions on the technology front. In the future, firms will rely even more on the strength of their data to gain a competitive advantage,” he explains.
The digital banks, which are expected to launch in 2022, will look to reduce intermediation in the Singapore finance sector. “We’re already seeing this happen, particularly in peer-to-peer lending, where there’s a direct connection between borrowers and lenders without the involvement of a large bank. Nimble virtual banks should be able to cut intermediation in payments and other areas through the use of their technology,”
This trend extends beyond digital banking. “Within financial services, I think the insurance industry will actually experience the most drastic changes because of emerging technologies. An AI-based insurance platform could evaluate clients’ risk more accurately and quickly based on personalised data, without the need for human intermediation. Insurance products could also be priced more precisely, which could lower premiums,” continues Professor Chang.
As technology disrupts financial services, the sector will increasingly need to employ more people who can combine financial and technology skills. “You won’t necessarily have to know how to code to work for a digital bank, but there will be a high level of tech understanding required. And even traditional commercial banks have more and more roles with digital transformation elements to them. On top of this, I don’t think the trend towards automation is destroying the need to have high emotional intelligence. The finance jobs of the future will focus on human skills that tech can’t replace, such as creativity and customer engagement,” he adds.
Professor Chang says there is a growing shortage of people in Singapore who have hybrid tech and finance skills. At a senior leadership level, the Nanyang EMBA can address this shortage by helping finance professionals make sense of technology transformation, and develop business strategies based around innovation.
NBS is part of Nanyang Technological University (NTU), a leading research-intensive public university in Singapore. “The business school provides a unique environment to learn about the technology challenges facing banking and other industries because we are closely linked to NTU, which is so strong in areas like technology, science and engineering. We have top AI scientists at the university, for example, so when you join the Nanyang EMBA you get the best of both worlds: tech and business. It’s about combining our strengths,”
The 13-month Nanyang EMBA programme is delivered through five segments of intensive learning lasting about two weeks each. Each segment contains several modules, some of which explore how technologies such as automation, AI, and robotics have disrupted businesses. NBS works with the rest of the university on an ongoing basis to develop the programme, says Simba. Faculty from the School of Computer Science and Engineering, for example, help to co-teach a module called ‘Innovation and Technology Management.'
Professor Chang has been extending the scope of NBS’s collaboration within the university. He is currently conducting research on sustainable finance alongside the Earth Observatory of Singapore, which is part of the Asian School of the Environment at NTU and focuses on the impact of climate change, earthquakes, volcanic eruptions, and tsunamis. Sustainable finance integrates environmental, social and governance (ESG) criteria into financial services to bring about sustainable development outcomes, including mitigating the adverse effects of climate change. The Monetary Authority of Singapore is promoting sustainable financing, and it’s becoming more important for finance professionals to broaden their knowledge in this field.
“If you work for a financial services company, you face increased pressure by regulators to become socially responsible. More institutional investors are now looking to make sustainable investments into companies that are socially responsible, so those that are not will be punished by the capital markets. Sustainability is also rising up the agenda for consumers, so focusing on it makes economic sense for financial institutions and their clients,”
The professor is now working to incorporate sustainable finance into Nanyang Business School’s programmes. “There’s huge demand for sustainability expertise in the finance industry. If you’re making investments, for example, you need to be able to determine which ones are actually sustainable. If you don’t know the issues in areas such as climate change, you can’t do this,” says Simba, who recently organised a research seminar with the Earth Observatory about rising sea levels.
Finance professionals should use their existing expertise as a platform to understand sustainability. “Environmental issues in finance are essentially all about pricing risk, but the good thing is that many finance professionals already have risk-pricing skills sets that they can adapt. As an academic, I think it’s important that we develop new tools and educate students around climate risk,” he adds.
Professor Chang says NBS is well positioned to stay ahead of the curve when it comes to sustainability, automation and other major trends transforming the finance sector. “Businesses don’t operate in a vacuum, so neither do we as a business school,” he adds. “We partner with faculty from across the NTU campus to provide EMBA participants with the research insights they need to understand the external forces shaping their industries and their careers. In doing so, we turn them into better, more insightful leaders.”
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