How do you use technology/policy to improve citizens’ lives? Tell us about your role or organisation.
Technology in the age of the 4th Industrial Revolution should be able to lift people out of poverty by better allocating scarce resources in order to reduce disparity amongst the rich and the poor.
While access to financial services has been proven to help people better manage their finances and lift them out of poverty, it is often challenged by the lack of affordable and adequate products for the low income segment of the population. This problem is compounded by the absence of financial institutions in villages, making financial services geographically inaccessible.
With this premise in mind, the National Bank of Cambodia (NBC) introduced a number of initiatives that aim to increase financial inclusion through the usage of technology. We introduced a regulatory framework that is conducive for microfinance institutions (MFI) and payment service providers (PSP) to thrive. While MFIs provide credit to people in the village, payment service providers use FinTech to reduce the delivery cost of those financial services and improve users’ experience by introducing new non-banking services such as bill payment.
The move to license PSP on a standalone basis from a mere third-party processor of banks has been an adequate progression that the NBC adopted. Under the TPP status, PSP were at the mercy of guaranteeing banks therefore limiting its expansion. Understanding this limitation, the NBC introduced the new regulation allowing PSP to operate as standalone and introduce more services such as cooperating with other stakeholders to reduce international remittance fees for our migrant workers.
The licensing of a private credit bureau, Credit Bureau Cambodia (CBC) has been helping the industry to better identify its customers, reduce credit underwriting risk as well as promote financial inclusion. The regulation governing CBC has been hailed by the IFC as one of the best in the world and Cambodia is often subject to regular study visits from other regulators looking to introduce a credit bureau in their country.
What has been the most exciting thing that you worked on in 2018?
In 2018, NBC introduced its online trading platform NBCP for banks and make interbank transaction easier. This was an in-house system development, so I am very proud of our IT team. Another exciting project I worked on was the inclusion of financial literacy in the general education program. Children from grade 1 to grade 12 will learn about financial matters. This is going to be an important skill for them to better manage their financial lives in the future.
If you were to share one piece of advice that you learned in 2018, what would it be?
Lately there has been a lot of hype about technology and FinTech in particular. Regulators are often blamed for being slow or rigid in allowing new FinTech to come and play in their field. But most regulators aren’t from Silicon Valley and we need time to figure out the new animal in town because when things go wrong, not only the regulators take the blame but also the financial system can be destabilised and bring adverse consequences to the economy.
But this is not an excuse for regulators to not take a more proactive stance on new technology. We can’t resist it and should embrace it. Sometimes it is okay for regulators to admit that they don’t understand it. Therefore, a continuous dialogue between the industry and regulators is very important to reach a common understanding.
“We can’t resist it and should embrace it. Sometimes it is okay for regulators to admit that they don’t understand it.”
The efforts should be mutual. FinTech players needs to also understand that as regulators we don’t necessarily appreciate innovation for the sake of innovation; we need to see that it brings added value to the financial system and to the people.
What tool or technique particularly interests you for 2019?
For the past three years, I have been so much involved in FinTech. So, for 2019 I would like to learn something more artistic such as drawing or resume my piano class. Art is important and can make technology more human. I need this balance.
What are your priorities for 2019?
Professionally, I am focusing on the launch of the Cambodia Share Switch, which requires FIs in Cambodia that issue chip cards as payment instruments to be interoperable with each other. During the year, we will also work to standardise QR codes offered in the country. In Q2, we expect to also launch cross-border retail payments using QR code between Cambodia and Thailand.
Sometime in Q3, we are also looking to launch a market testing of our Bakong Project which will use central bank digital currency for interbank settlement. This project could be the first CBDC project in the world to be tested in a real environment.
On a personal level, I am working to further raise the awareness of mental and physical disability in Cambodia as well as provide health care assistance to those in needs. In 2019, I would like to work more on education and women’s economic empowerment.
What is one skill that has helped you the most throughout the course of your career?
A skill that I have developed over time, and that has helped me along the course of my career, is perseverance. I don’t give up easily, but that doesn’t mean that I am stubborn. I also know when to give up.
“A skill that I have developed over time, and that has helped me along the course of my career, is perseverance.”
What advancements do you predict will happen in your field in the next ten years?
The rapid advancement in technology and big data will be a game changer to almost every field, from finance to trade to health care and art.
In finance in particular, the role of FinTech will change the way we do banking: brick and mortar expansion will merely be symbolic and will make way to online delivery of services. Big Data, for example, will allow credit scoring to be more accurate allowing better identification and risk assessment of potential borrowers. The benefit would be cost efficiency, convenience etc. at the expense of lesser data privacy and greater impact of cybersecurity threats. These are only a few developments already happening and will have a stronger foothold in the next 5-10 years.
But potentially, what could happen within this timeframe is the threat to banking intermediation itself with the rapid development of FinTech. One of the main roles of a bank is to intermediate liquidity from those with excesses to those in shortage. Today, the tools previously available to banks are now available to everyone. Peer to peer lending platforms can easily and cheaply fill this intermediation role.
If this is happening at a smaller scale now, it doesn’t mean that it won’t happen at a bigger one in the next five to ten years. In this case, the concept of “depositors” may make way for “investors” and prudential regulations will need to be updated.
The second main role of a bank is the issuance of means of payment and the processing of it. With the likes of Alipay and Wechat rapidly expanding and increasingly innovating, banks may find themselves less relevant. If Blockchain technology were to deliver what it promises to deliver, the transfer of assets of value may no longer need to pass by a third party like a bank. The RTGS system of a central bank could therefore be redundant.
If the use of crypto-currency were to increase, then not just the banking intermediation will be at risk, but also central banking itself. It will not only compete with central bank money, but also redefine their role as monetary policy implementer. How can the central bank manage money supply in the economy and maintain price stability when it no longer has control over the issuance of money?
Coffee, yoga, music… what powers you through your day?
In the morning, I need coffee. But later in the day, music helps.
Serey Chea is also Chairwoman of the Board, Credit Bureau Cambodia, and Board Member, South East Asia Advisory Board, Women World Banking.