FinTech and the Future of Finance- Rise of NFTs and BNPL

Prof Dr Nafis Alam, PGCHE, SFHEA

Head, School of Accounting and Finance

Asia Pacific University of Technology and Innovation (APU)

[email protected]

Financial Technology (FinTech) is changing the way people carry out their day-to-day financial services mainly through the use of apps or digital channels designed for their convenience and cost-effectiveness. Such financial apps are often based on mobile phones in the form of “digital wallets” that store credit cards, debit cards, and sometimes account information, thus eliminates the need for cash or checks.  While using the Artificial Intelligence (AI)-powered investment apps, investors have the flexibility to invest anywhere and everywhere. With the emergence of the unheard financial products and services like Non-Fungible Tokens (NFTs), Initial Coin Offerings (ICOs), Embedded Finance, Defi and more recently Buy Now Pay Later (BNPL), FinTech is revolutionising the way we engage with financial services.

Even though FinTech has wide-ranging applications and there is plenty of reading on how FinTech is shaping the financial world, this piece will be more focused on the two hot FinTech products, NFTs and BNPL, which are attracting wide-ranging discourse on their suitability as a financial product and challenges they bring along. I will also share my perspective on why FinTech knowledge and awareness is key for its sustained growth.

A couple of weeks ago, a digital billboard right in front of Lot 10, Kuala Lumpur, showed the image of a pudgy penguin, nothing unique, right? But it was part of the intriguing project which is taking the NFT world by storm. Pudgy Penguins, a collection of 8,888 randomly generated avatar NFTs that sold out in just 19 minutes and generated over 30,753 Ethereum or US$97.6 million (RM403 million) in total sales volume with rarer pieces being sold at 150 Ether (ETH), the cryptocurrency of the Ethereum network. Closer to home, Malaysia’s local graffiti artist and illustrator, Katun managed to gain a total sale of 127.60 ETH for his NFT art collection, equivalent to around RM1.63 million on the day of their release. So what is so cool about NFT and why are there so much hype in the FinTech world? An NFT is a digital asset that represents real-world objects like digital art, drawings, music, in-game items, videos and even a tweet that are bought and sold online, usually with cryptocurrency, and is generally encoded with the same underlying software as many cryptos. For instance, Jack Dorsey, Twitter’s founder and CEO, auctioned his first-ever tweet originally uploaded on 21 March 2006 that read “just setting up my twttr” as an NFT. The tweet was bought using ETH and had a final bid of US$2.9 million (RM11.97 million). Having a digital record, most NFTs are part of the Ethereum blockchain.

As the name suggests, NFTs are non-fungible, meaning they can’t be swapped for something of completely equal value. The value of the NFT lies in its uniqueness and it represents exclusive ownership of a particular digital asset. In a simple term, since NFTs are unique, they have no equivalent value other than what the market is willing to pay for them. NFT can only have one owner and by buying an NFT, the owner purchases the exclusive ownership of a particular digital asset.

The next key questions are, is it worth investing so much money in NFTs? Are they valuable? What will be the future value of those investments? Any crypto investment comes with its challenges and since NFTs are traded in crypto, it follows the same volatile and unpredictable nature of the crypto market. Going with the current hype in cryptocurrencies, NFTs are bound to follow the same interest, but it is difficult to predict the future value of NFTs. Since NFTs will be tagged to the value of ETH or related cryptocurrencies, their value will be attached to the highs and lows of the crypto and the future popularity of the digital assets. Another challenge in buying an NFT is confirming the authenticity of the underlying token itself. As NFTs are completely being sold online, it might be the case where counterfeit digital art can be sold for the price of the original item. Tax authorities are also yet to allocate preferential tax treatment to NFTs as same as some preferred stocks. The overall gains from trading in NFTs might not be that advantageous unless anyone has plenty of funds to spend on acquiring collectibles.

Overall, investing in NFTs is a fad among crypto enthusiasts and a race to hoard some priceless digital tokens but it is too early to prove if NFTs can be considered a valuable investment and we need some time to prove their worth.

Another popular FinTech segment that is becoming a big hit among millennials is the Buy Now Pay Later (BNPL), which is a short-term financing option that allows customers to make purchases without having to pay the full amount upfront. Customers might pay a small fraction of the total cost upfront (ranging between 10% and 25%) while the balance must be paid weekly, bi-weekly, monthly or any other predetermined payment schedule. BNPL has its own fan base with both millennials and Gen Z consumers are attracted to its no-frill and instalment-based payment system. With limited or poor credit history, BNPL has emerged as one of the popular financing options available especially during the COVID-19-induced eCommerce boom. With the euphoria for BNPL, the global BNPL market which was only US$4.07 billion in 2020, is expected to reach US$20.40 billion by 2028, registering a CAGR of 22.4% from 2021 to 2028.

Initially pressed as a solution to increase the financial inclusion for credit card deprived consumers, BNPL is starting to emerge as a new debt trap for young professionals who do not have or don’t want to have a traditional credit card with high-interest rates. Trendy lifestyle, social media influence, easy availability of credit and no interest rate charged by BNPL providers are fuelling the rise of its popularity among young consumers. Due to less stringent credit checks and onboarding requirements by platforms, it is easier for customers to rack up debt by spending the money which they don’t have and often leading to overspending. Not only is BNPL adding debt pressure, but the non-payment of pre-determined instalment plans is also eating up the potential credit score.

Even though in Malaysia, BNPL usage is way behind countries such as in the US, China, Australia, its attractiveness is soon going to catch up, making it a popular FinTech segment in the country. Pine Lab, one of the leading BNPL platforms, has already onboarded leading merchants as well as banks like CIMB Bank, AmBank and RHB Bank on its platform. An interesting feature of BNPL is that it is largely an unregulated business for anyone and everyone to join, both from the provider and users perspective. Regulating BNPL platforms is crucial for both business continuity and consumer protection in addition to not creating an ecosystem of easy personal financing which could lead to defaults and financial uncertainties. From a FinTech viewpoint, huge defaults from BNPL users can also adversely impact platform survival in the long run.

It is clear that while FinTech does provide new and innovative ways of investment (NFT) and financing (BNPL), the education and awareness of FinTech concepts is key for the booming financial services industry. Educating young Malaysians about FinTech should be the utmost priority of the higher education sector which should include courses on data-driven financial analysis, application of Machine Learning and AI in financial decision making, application of blockchain in financial services, usage of digital assets and alternative finance. At the same time, a fast-growing FinTech industry requires talents that are equipped with financial skills, digital skills, and data analytics skills for them to stay through new roles such as FinTech specialists and business data analysts within the industry. The Private Higher Education Institution (IPTS) has been slow to offer FinTech programmes with only a few universities offering such courses. Asia Pacific University of Technology and Innovation (APU) understood the importance of FinTech knowledge for Finance graduates and was the first university in the country to offer both undergraduate and postgraduate FinTech programmes. More recently with the likes of Taylors have also ventured into offering FinTech related programmes. Some universities both public and private are incorporating the FinTech module in their Finance programmes.

APU also became the first and only university to sign a pact with the FinTech Association of Malaysia (FAOM) in March 2020. This new partnership opened a whole window of opportunities as APU’s FinTech students are exposed to career and internship opportunities with FAOM members, which include leading banks, financial institutions and FinTech platforms. Industry experts from FAOM are also providing inputs in enhancing the programme comprising key areas of FinTech, namely digital currencies, blockchain technologies, crowdfunding, Robo-advisory and entrepreneurial finance. For a vibrant FinTech ecosystem, IPTS must work closely with the FinTech industry players and development agencies like Malaysia Digital Economy Corporation (MDEC) to create awareness and knowledge transfer among Malaysians as well as to produce the next generation of FinTech experts and founders. FinTech knowledge is becoming an important aspect of education for the digital age as the increased sophistication of FinTech products and services (like NFTs and BNPL) need more awareness among the customers. In addition to being aware of these innovative financial products, users should also be able to compare the pros and cons of each available product.

In conclusion, FinTech is not only the future of finance, it’s already here and it will transform the way we transact and interact with the financial world. Education and awareness is the key for sustained growth of the FinTech ecosystem.

Author Profile

Dr Nafis is currently working as a Professor of Finance and Head of School of Accounting and Finance at Asia Pacific University of Technology and Innovation (APU). He previously served as an Associate Professor of Finance at Henley Business School Malaysia, University of Reading Malaysia and at Nottingham University Business School (NUBS) in the University of Nottingham Malaysia Campus (UNMC). He is also a research affiliate of Cambridge Centre for Alternative Finance (CCAF) at Judge Business School, University of Cambridge and contributes to global reports on Fintech, Alternative Finance and Fintech Regulation.

He has published over 40 peer-reviewed in leading journals including The World Economy, Emerging Markets Review, Pacific-Basin Finance Journal, Journal of Asset Management, Journal of Banking Regulation, Review of Islamic Economics and Journal of Financial Services Marketing among others. He has also co-authored nine books and numerous book chapters on Fintech and Islamic Finance. As a frequent traveller, he has given lectures on finance and Islamic finance across the world, including Harvard Islamic Finance Forum at Harvard Law School; a Gulf Research Meeting at Cambridge University, UK; Durham University Summer School; Seoul International Finance Conference (SIFIC); World Islamic Economic Forum (WIEF); OIC Asia Trade and Economic Forum, Central bank of Turkey among others.

Dr Nafis has served as a visiting Professor/Associate Professor at various universities in the UK and Indonesia. He was featured as a Professor of the Month by Financial Times (FT) in 2014 and received an award for Upcoming Personality in Islamic Finance in 2016 presented by Global Islamic Finance Awards (GIFA) and hosted by the Indonesian government. He is an avid writer and contributes regularly to mainstream newspapers, economic forums and professional outlets like WEF, Huffington Post, The Edge, The Conversation among others.  He is among the world top 100 influencers in Fintech and top 5 amongst Regtech influencers. He can be followed at https://twitter.com/nafisalam 

Developing Trends in the Digital Economy

Skrol ke bawah untuk versi Bahasa Melayu / Scroll down for Malay version

Throughout the ages, major extraneous circumstances and calamities have been the key factors that catalysed rapid innovation, both in society and industry.

The situation in the world today has businesses in Malaysia, like elsewhere, feeling the impact brought about by the widening threat of Covid-19. The Movement Control Order (MCO) is now firmly in effect to counter the pandemic, and businesses are innovating to deal with the disruption to how they operate. The following trends are fast becoming mainstream.

1.Internal Teams Are Organising Around Remote Working Apps

Digital meeting apps including Zoom, BlueJeans, Slack, Microsoft Teams and Google Hangouts have quickly grown into the world’s largest ‘work from home’ experiment. The world seems to be working remotely. Virtual client meetings and group discussions are furiously being organised in an attempt to overcome movement and physical barriers to business, brought about by the Covid-19 pandemic. App-based or online video conferencing have become indispensable, being fairly reliable, easy-to-use and accessible. The workforce is organizing itself to be a ‘Work From Home’ force.

In a previous report by Regus Global Economic Survey Globally, 48% of execs said they have been working remotely for at least half their working week; in Malaysia it is 53%, says DNA. The survey also said that 65% of the respondents used video communication between managers and employees. In May 2018, Zug, Switzerland-based serviced office provider IWG found that globally, 70 percent of professionals work remotely.

2. Businesses Are Hiring Digital Specialists

Agility is now an imperative to survival; businesses who previously were inclined to postpone digital alternatives to routine business process and sourcing talent, find themselves quickly transitioning to digitalise key business functions, including supply chain management, invoicing and marketing – all requiring specialised digital skills such as data and AI, developers, coders and digital marketeers. 

On the flip side, daily or weekly wage workers will be most affected by the pandemic according to Monash University Malaysia’s Prof Mahendhiran Sanggaran Nair, in a news report in the Star. This opens up a pool of potential talents available for hire and re-skilling.

3. Outsourcing and Freelance Jobs

Hiring workers on a need-to basis will grow as businesses explore ways to reduce physical office spaces and fixed headcounts. in an uncertain economic environment, a core business and operations team is more likely to manage a team of experts specific to a project.

Programmes like MDEC’s GLOW (Global Online Workforce) was launched to assist Malaysians leverage on crowdsourcing platforms to generate income. In addition, there is a treasure trove of talents that businesses can look at for their next freelance or remote worker hire. Here are some Malaysian job sites and portals to explore:

  1. Upwork
  2. 123RF Limited
  3. KerjaDigital
  4. Supahands Dotcom Sdn. Bhd
  5. Ezyspark
  6. Freelancing.my
  7. Freetimeworkz
  8. Favser

The Future Is Digital

90% of future jobs will require digital literacy. Presently, there is a shift from traditional job roles to building ‘composite’ capabilities that require a mix of technical and professional skills. Technologies such as AI/big data analytics, cloud computing and intelligent automation are already mission critical roles in future-savvy organisations.

MDEC’s Premier Digital Tech Institutions (PDTIs) fills the demand by providing a pipeline of skilled digital talents for future jobs. A result of a collaboration between MDEC, the Ministry of Education Malaysia and industry leaders, the PDTI branded academic institutions deliver end-to-end solutions to ensure that future graduates are educated and trained into becoming dynamic members of an innovation-driven and digital-powered Malaysia.

Several PDTIs are also offering eLearning courses worthy of note during the MCO period, and they may just be where you find your next Cybersecurity or Data Science hire during and beyond the Covid-19 pandemic.

Let’s for a moment consider this; the International Data Corporation (IDC) predicted that by 2022, over 21% of Malaysia’s gross domestic product (GDP) will be contributed by the digital economy.  Even as we expect bumps on the year ahead, the digital economy certainly has the ability to weather challenges and will be one of the main areas driving Malaysia’s economic progress to deliver shared prosperity. The time is ripe to re-consider current plans and redirect businesses towards the digital economy, and encourage the digital businesses to tread new ground.

by Raymond Siva, CMO, MDEC


MEMBANGUNKAN TREND DALAM EKONOMI DIGITAL

Terjemahan artikel , Raymond Siva, Ketua Pegawai Pemasaran, Malaysia Digital Economy Corporation (MDEC)

Sejak dahulu, pelbagai faktor luaran seperti malapetaka atau bencana alam telah menyebabkan inovasi terhadap masyarakat dan industri.

Perkembangan sama berulang apabila dunia kini ‘diserang’ pandemik Covid-19 yang turut membawa pelbagai implikasi.  Malaysia turut tidak terkecuali sehingga kerajaan terpaksa menguatkuasakan Perintah Kawalan Pergerakan (PKP) bagi membendung penularan virus ini. Langkah ini secara tidak langsung telah memberi kesan kepada pelbagai urusan harian termasuk aktiviti perniagaan. Bagaimanapun, ledakan teknologi digital dilihat dapat membantu perniagaan terus beroperasi. Ironinya, pelbagai sektor mula beralih kepada penggunaan teknologi digital untuk beroperasi ketika ini. 

  1.  Syarikat melaksanakan aplikasi bekerja bukan dari pejabat

Aplikasi untuk bermesyuarat secara maya seperti Zoom, BlueJeans, Slack, Microsoft dan Google Hangouts kini berkembang dengan pantas sebagai ‘medium penting’ untuk menjayakan polisi komuniti bekerja dari rumah yang terbesar di dunia ketika ini. Masyarakat global kini ‘bekerja’ tanpa pejabat apabila mesyuarat penting bersama pelanggan dan perbincangan dalaman operasi turut dilaksanakan menerusi kaedah ini disebabkan keterbatasan yang timbul akibat pandemik Covid-19.

Aplikasi komunikasi secara sidang tele video menjadi  keperluan mustahak serta mudah untuk diakses dan digunakan. Pekerja sedang membiasakan diri dengan polisi serta budaya kerja baharu ini.

Perkembangan terkini menyaksikan kewujudan pelbagai aplikasi untuk mengadakan mesyuarat secara maya. 

Berdasarkan laporan terkini oleh Regus Global Economic Survey Globally, sebanyak 48 peratus pekerja mengakui mereka telah mula bertugas secara bukan dari pejabat sekurang -kurangnya lebih dua hari daripada lima hari waktu bekerja seminggu. 

Di Malaysia, laporan DNA menunjukkan kadar peratusan bekerja melalui kaedah ini telah mencapai 53 peratus.  Tinjauan sama juga mendedahkan sebanyak 65 peratus responden telah menggunakan aplikasi komunikasi video dengan pengurusan.  Pada Mei 2018, Zug, iaitu sebuah syarikat yang berpengkalan di Switzerland mendapati sebanyak 70 peratus sektor profesional di dunia kini beroperasi secara tanpa pejabat.

2- Perniagaan kini memerlukan pakar digital

Kepantasan kini menjadi sangat mustahak untuk meneruskan perniagaan. Syarikat yang sebelum ini kurang memberi tumpuan terhadap pendigitalan termasuk tenaga kerja kini dengan pantas mula mengaplikasi fungsi digital untuk perniagaan teras. Selain itu, pengurusan rantaian bekalan, invois dan pemasaran mula menerima sentuhan teknologi digital termasuk data, teknologi kepintaran buatan (AI), pemaju, pengekodan dan pemasar digital.

Melihat daripada aspek lain, pekerja yang menerima gaji harian atau mingguan merupakan golongan paling terancam oleh wabak ini. Menurut  Prof Mahendhiran Sanggaran Nair dari Universiti Monash dalam laporan The Star, perkembangan ini akan membuka peluang kepada kumpulan bakat yang berpotensi untuk ditawarkan peluang pekerjaan.

  • Sumber Luar dan Pekerja Separuh Masa

Mengupah pekerja berdasarkan keperluan asas akan mengurangkan penggunaan ruang pejabat secara fizikal dan mengatasi lebihan perbelanjaan. Dalam persekitaran ekonomi yang tidak menentu, syarikat biasanya akan menggunakan tenaga pakar yang penting untuk menyelesaikan sesuatu projek. 

Program Global Online Workforce oleh MDEC dilancarkan untuk membantu rakyat  Malaysia memanfaatkan platform crowdsourcing untuk menjana pendapatan. Di samping itu, terdapat lambakan tenaga kerja yang boleh ‘diintai’ oleh syarikat -syarikat untuk mendapatkan pekerja sambilan atau pekerja ‘bebas’ . Berikut merupakan beberapa laman web dan portal kerja Malaysia untuk diterokai:

  1. Upwork
  2. 123RF Limited
  3. KerjaDigital
  4. Supahands Dotcom Sdn. Bhd
  5. Ezyspark
  6. Freelancing.my
  7. Freetimeworkz
  8. Favser

Digital merupakan masa depan

Pada masa depan, dianggarkan sebanyak 90 peratus pekerjaan memerlukan kemahiran literasi digital. Ketika ini, terdapat ‘pergeseran’ kerana wujud ketidakpastian membabitkan campuran skop tugasan yang memerlukan kemahiran teknikal dan kemahiran profesional. Teknologi seperti analisis data, pengkomputeran awan dan automasi cerdas sudah menjadi peranan kritikal dalam organisasi pada masa depan.

Pada masa ini, terdapat peralihan dari peranan kerja tradisional untuk membina keupayaan ‘komposit’ yang memerlukan gabungan kemahiran teknikal dan profesional

Beberapa universiti dan kolej di bawah program Institut Teknologi Digital Premier (PDTI) anjuran MDEC telah menawarkan kursus e-Pembelajaran . Pada ketika PKP, syarikat -syarikat yang memerlukan pekerja berkemahiran dalam data sains atau keselamatan siber boleh menemui ‘kakitangan’ yangs sesuai untuk membantu melancarkan operasi. 

PDTI memenuhi permintaan dengan menyediakan saluran bakat digital yang mahir untuk pekerjaan pada masa hadapan. Hasil daripada kerjasama antara MDEC, Kementerian Pelajaran Malaysia dan pemimpin industri, institusi pendidikan akademik yang mempunyai reputasi ini berfungsi sebagai ‘penyelesaian’ untuk memastikan bahawa graduan masa depan dilatih menjadi pekerja yang dinamik . Semua ini bertitik tolak daripada inovasi serta didorong teknologi digital yang berkembang dengan pesat di Malaysia. 

Berdasarkan data Perbadanan Data Antarabangsa (IDC), dianggarkan lebih 21 peratus daripada Keluaran Dalam Negara Kasar (KDNK) negara akan disumbangkan oleh ekonomi digital. Di sebalik jangkaan berlaku kelembapan ekonomi pada tahun hadapan,  ekonomi digital tentunya mempunyai keupayaan untuk menghadapi cabaran dan akan menjadi salah satu bidang utama yang memacu pertumbuhan ekonomi Malaysia untuk mencapai hasrat Dasar Kemakmuran Bersama yang digariskan kerajaan. Kini  merupakan masa sesuai untuk mempertimbangkan semula rancangan semasa dan mengubah perniagaan ke arah ekonomi digital dan menggalakkan perniagaan digital untuk   berkembang.

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