As banks become tech-driven, regulation needs to keep up

A LITTLE over a year ago, JP Morgan's chairman and CEO Jamie Dimon gave a wake-up call to the banking and financial services industry (BFSI) by saying "Silicon Valley is coming".

In his report to shareholders last year, Mr Dimon noted that there were hundreds of startups "with a lot of brains and money working on various alternatives to traditional banking" and banks need to be prepared for that. Mr Dimon used the term Silicon Valley because he was addressing the largely US-based shareholders of JP Morgan. However, his words are perhaps even more true for Asia Pacific, where new innovative challengers are reaching out to the region's vast unbanked population; according to McKinsey, Asia has about 876 million unbanked people.

It is in this context that last week's Monetary Authority of Singapore's (MAS) announcement on outsourcing risk-management for financial institutions (FIs) is very important. This could provide banks in Singapore the framework to use technology tools to streamline operations without compromising on their fiduciary responsibilities.