Home Policy & Governance Trending topics: pinpointing priorities for the evolving ‘fintech for government’ agenda

Trending topics: pinpointing priorities for the evolving ‘fintech for government’ agenda

Global Government Fintech Lab 2024 panel session seven: Ian Hall (moderator), Mai Santamaria, Mari-Liis Kukk and Parma Bains | Credit: Deirdre Brennan

GLOBAL GOVERNMENT FINTECH LAB 2024: SESSION SEVEN (CLOSING PANEL)

An expert panel discussed the important fintech-related topics facing public authorities – and set them in a wider context – during the 2024 Lab’s concluding session, Nancy Johnson writes

Financial technology is creating a growing number of opportunities, and also challenges, for public sector authorities worldwide.

The final discussion of the 2024 Lab – ‘Frontiers of fintech (and beyond)’ – invited a three-strong panel to give their views on nine pre-selected topics (which flashed up one by one on the overhead screen): access to capital, artificial intelligence (AI), blockchain, crypto, digital currencies (including central bank digital currencies – CBDCs), digital ID, digital inclusion, green fintech and open data/ ‘smart data’.

The topics had been pre-chosen by Global Government Fintech as important to public authorities worldwide but which the day’s previous sessions may have had insufficient time to discuss.

The discussion featured: Mai Santamaria, principal – shareholding and financial advisory division in Ireland’s Department of Finance; Mari-Liis Kukk, head of the Estonian Financial Supervision and Resolution Authority’s innovation department; and Parma Bains, financial sector expert in the International Monetary Fund (IMF)’s monetary and capital markets department.

The trio were invited by event moderator Siobhan Benita and editor Ian Hall to choose from the menu or indeed identify further topics that merited greater prominence.

RELATED ARTICLE Fintech futurology: exploring emerging topics (and risks) for the public sector – a write-up of the concluding session at the 2023 Lab (which followed the same format and also featured Mai Santamaria)

‘Systems thinking’ important

Mai Santaramaria at Global Government Fintech Lab 2024

Santamaria opened by pointing out that some topics (for example, blockchain, CBDCs and crypto) overlap and identifying one cross-cutting theme – ‘trust’. “Trust will impact your CBDCs, digital ID, digital inclusion and open data even – on how it’s used,” she said.

Governments typically “don’t understand enough” how society values trust and how it is “anchored in society”, she said – an often-underestimated consideration as ultimately it drives the behaviour of citizens and “should definitely inform” delivery choices in respect of fintech-powered services, and more broadly.

She made a similie with the growth in use of electric cars, saying that implementation would involve public awareness and infrastructure. “We are talking here [at the Lab] about fintech and about digital and it’s a bit like talking about electric cars, and then you walk outside and there’s nowhere to plug it in to charge it,” she said. “We can’t be talking about any of that without actually knowing we have those data-centres, cloud providers and all that kind of stuff. Unless there’s a lot more ‘systems thinking’ – and we’re putting that all together – all our best intensions when it comes to fintech and actually applying those technology changes to other products as a government, where are they going to go?”.

Asked about blockchain’s potential, she described its use for public services as “tricky”. She referred to the possibility (in a select few jurisdictions globally) of paying tax using cryptocurrency, saying that the “element of openness” involved in types of blockchain can “seem counterintuitive” to public service delivery and use (for example, people’s tax affairs).

It depends, of course, on the type of blockchain: for example, whether it is public or private. She highlighted the use smart contracts (blockchain-based digital contracts that are automatically executed when pre-determined terms and conditions are met) as an attractive area. “So, there are possible elements to blockchain that I think would be used more than just saying the technology overall we should use for public services,” she said.

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Blockchain’s ‘billionaire’ potential

Parma Bains at Global Government Fintech Lab 2024

Bains was keen to jump in on blockchain’s possibilities, saying that things that can be done using blockchain can also be done on conventional platforms (so often blockchains are unnecessary).

“So, things like programmable payments – that’s just conditional programming logic that you can do that without the block: we can do that anyway. Programmable money is something different (and potentially something darker as well) but it exists.”

“Why does blockchain exist, at least in the form that it exists in now?,” he continued, rhetorically. “It exists to solve the double-spend problem, or to put in a simpler way, it just creates trust in a trustless environment – that’s what it is.”

“You’ve got to ask the question: in what use-case is having data (broadly or narrowly distributed, depending on if it’s public or private), and the ability to act on that data (whether it’s permissioned or permissionless), where would that be helpful? Where would it be helpful where data is dispersed and you need to verify and validate it, everyone needs to have access to that data [and] they can see that data in real time?”.

“It is useful somewhere – and the person who answers that question is going to become a billionaire,” he said.

GLOBAL GOVERNMENT FINTECH’S ‘BLOCKCHAIN’ SECTION

Cybersecurity and tokenisation

Mari-Liis Kukk at Global Government Fintech Lab 2024

Kukk kicked off by saying that cybersecurity “definitely” deserved a mention as a crucial topic, before highlighting a headline-grabbing initiative detailed last year by the Bank for International Settlements (BIS).  

The Switzerland-headquartered institution published a ‘blueprint’ for a new type of financial infrastructure – a ‘unified ledger’ – in a special chapter of its annual economic report for 2023.

The infrastructure would combine tokenised forms of CBDC with tokenised bank deposits and other tokenised claims on a programmable platform.

Described the global monetary system as ‘standing at the cusp of another major leap’, the BIS stated that ‘following dematerialisation and digitalisation, the key development is tokenisation – the process of representing claims digitally on a programmable platform.’

The unified ledger proposal did not refer to blockchain, Kukk pointed out. “This ‘unified ledger’ is still a concept and consists [of] a lot more than just the technology behind it,” she said.

RELATED ARTICLE BIS releases ‘game-changing’ blueprint for global financial system – our news story (20 June 2023) on a ‘blueprint’ for a new type of financial infrastructure – a unified ledger – detailed in BIS’s annual economic report for 2023

Crypto and data

Of the pre-chosen topics, Bains was keen to speak about crypto and data. But he first picked up on Kukk’s contribution. “Just because something is technically feasible, doesn’t make it commercially viable,” he pointed out, adding that “we come across that a lot, especially in the fintech space.”

In respect of crypto, he described “a lot of movement in the past 12 months” in respect of new recommendations and rules from bodies such as the Financial Stability Board, Basel Committee on Banking Supervision and International Organization of Securities Commissions (IOSCO).

On the topic of data, he emphasised the importance of good regulation to ensure trust among consumers. “We want data to flow through an economy as frictionlessly as possible, but it’s important to create some friction because regulation is a cornerstone of a well-functioning market. It’s not an inhibitor.”

Data protection frameworks, he pointed out, are “not a given in many countries” and, where they exist, are “not always that robust”. “Once you have that baseline, on top of that you can build data portability – like open banking [and] open finance,” he said (a reference to further hot topics).

But then, he said, engagement incentives need to be clear. “For me, the way that we’re interacting with the digital economy is very different to the way that we interact with each other now because in the digital world, there is no privacy. So, the question is: how do you create confidence to allow actors to share their data in a meaningful manner while ensuring that there is privacy?”. He spoke of “exciting” research in this field, saying that ‘privacy-enhancing technologies’ were promising.

RELATED ARTICLE Ireland hosts public sector fintech pioneers in Dublin for third ‘Lab’ – an on-the-day event summary of Global Government Fintech Lab 2024

‘Bloodline to fintech’

Ian Hall, Mai Santamaria, Mari-Liis Kukk, Parma Bains and Siobhan Benita

An audience member asked about digital resilience and whether systems were at risk of a ‘single point of failure’ and whether that could ‘bring down the system.’

Santamaria responded by referring back to her opening remarks about systems thinking. “It’s great to look at the technologies but we have to think from a public service and government perspective. Our citizens are not thinking about this because, instinctively, they’re relying on us [government] to be looking at this.”

Major infrastructure is the “bloodline to fintech, to all services” and typically merited greater prominence in discussions such as those at the Lab, she said.

On this note she echoed Kukk’s point about the crucial importance of cybersecurity – again, something that she felt had been under-discussed.

“Risks really go hand in hand with fintech,” she added, joking that she was aware that such a view was out of kilter with the event’s largely optimistic tone.

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Fintech’s dynamic landscape

Overall the three panellists largely opted to take an overarching perspective on the multifaceted and dynamic ‘fintech for government’ landscape.

Santamaria’s emphasis on systems thinking, Bains’ observations about data privacy in the context of trust and Kukk’s focus on possibilities for the global financial system combined to round off the 2024 Lab with ‘big picture’ considerations.

Their comments also served to highlight the importance of regulation, including global standards and recommendations, as public authorities weigh up the extent to which they could and should explore fintech’s possibilities.

Public officials have much to ponder as financial technology’s development – and its possibilities – continue to evolve.

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