In this article, we look at the adoption of artificial intelligence and machine learning (AI/ML) across the Asia-Pacific (APAC) region and the steps regulators are taking to ensure its safe and ethical use.
As the financial industry undergoes rapid transformation, staying ahead of the rising competition requires financial institutions (FIs) to leverage cutting-edge technologies, such as AI/ML. However, the increasing adoption of AI/ML raises concerns about potential risks, including the lack of transparency and privacy. To ensure compliance with the existing requirements, FIs must be aware of the relevant guidelines when designing and using AI/ML applications.
Strict regulatory oversight plays a significant role in shaping the strategies of FIs in the APAC region. Recognising the potential of AI/ML as key drivers of innovation in financial services, regulators actively promote their development and adoption.
Although no specific regulation exists for AI/ML use, regulators have issued extensive guidance and principles, launched schemes and initiatives, and offered financial incentives to support FIs in adopting advanced technology, promoting innovation and upskilling, and preparing for growth.
The Monetary Authority of Singapore (MAS) promotes AI/ML and advanced technology to digitise banking operations. To support this effort, MAS launched the Financial Sector Technology and Innovation (FSTI) scheme in 2015, which sanctioned SGD 225 million for FIs to adopt AI for risk management, customer service, and efficiency.1
Additionally, the Artificial Intelligence and Data Analytics (AIDA) Grant programme was launched in 2017, providing up to 50% funding support for AI and data analytics adoption.2 The following year in 2018, Veritas developed a framework for its ethical and responsible use. MAS also partnered with industry players to develop AI solutions in banking, including AI-powered virtual bank assistants and digital advisory tools.
Taiwan's government and the Financial Supervisory Commission launched the FinTech Regulatory Sandbox in 2018 to test innovative fintech solutions, including AI/ML. They collaborate with industry players to develop AI solutions, such as an AI-powered chatbot for customer service. Open banking is promoted, and guidelines for implementation have been issued, with several banks launching open banking platforms. The Financial Information Service Platform offers financial institutions access to a centralised data repository for developing AI/ML solutions.3
The Hong Kong Monetary Authority (HKMA) launched the Banking Made Easy Task Force in 2018 to promote AI/ML and Regtech usage across multiple digital journeys for banks in Hong Kong. Measures include the introduction of an open API standard.4
In 2016, the Fintech Innovation Hub was established to provide a platform for Fintechs to collaborate with banks.5 The government actively promotes Regtech solutions, with programmes like the Cybersecurity Fortification Initiative launched in the same year.6 The HKMA also collaborates with industry players to develop AI/ML solutions, such as an AI-powered anti-fraud system with the largest bank in Hong Kong.
Artificial Intelligence Roadmap 2021-2025 (AI-Rmap), and the Malaysian Digital Economy Blueprint in 2021 to support the adoption of advanced technologies in the financial industry.7
The Securities Commission's Capital Market Masterplan 3 promotes Regtech adoption, while the
Malaysia Digital Economy Corporation collaborates with the banking sector for fintech solutions.8 Efforts to encourage the usage of AI/ML technologies are also reflected when Bank Negara Malaysia (BNM), the central bank of Malaysia, issued guidelines for open banking, resulting in the launch of several banks' platforms.9
Australia has launched the Consumer Data Right in 2019, which allows consumers to access and share their personal data with third-party service providers, including banking data with other banks. This promotes competition and innovation in the banking sector by enabling fintech companies to access bank data and develop innovative solutions using AI/ML.
The Australian government also promotes Regtech solutions to enhance regulatory compliance. They established the Regtech Advisory Group to facilitate collaboration between fintech companies and public-private partnerships and develop an AI-powered financial assistant for customers.10 Additionally, the Organisation for Economic Cooperation and Development published AI ethics principles to address risks to human safety, data protection, privacy, and fairness.
The Philippine government has launched several initiatives to promote the growth of the fintech industry, including AI/ML solutions in banking. The Fintech Alliance.Ph and Digital Transformation Strategy aim to drive this growth, while the National Retail Payment System promotes electronic payments and digital financial services.11 Moreover, the Regtech Steering Committee supports Regtech companies and the Fintech Innovation Lab offers funding and support to fintech companies developing innovative solutions.
Governing bodies across APAC are investing heavily to promote the use of AI/ML in their financial sectors through public-private partnerships, subsidies, and initiatives. The implementation of these technologies is encouraged as long as it is done ethically, responsibly, and securely.
AI/ML encompasses diverse technologies that can optimise different banking processes, improve customer experiences, and strengthen financial crime and operational risk management.
Here are the examples:
Although AI and ML hold the potential to improve the effectiveness and efficiency of an organisation's business functions, there are various factors that can significantly impact the success or failure of an AI transformation programme.
With 25 years of experience in the financial services industry, Synpulse offers consulting and technology services across the entire value chain. Our expertise in AI/ML technologies, regulatory compliance, and risk management allows us to identify and address business problems while ensuring compliance.
Our capabilities include:
1 Financial Sector Technology and Innovation Scheme (MAS, March 2023).
2 Artificial Intelligence and Data Analytics (AIDA) Grant (MAS, October 2021).
3 Financial Information Service Co., Ltd – Index (March 2023).
4 The Next Phase of the Banking Open API Journey (HKMA, 2021).
5 HKMA-ASTRI Fintech Innovation Hub (ASTRI, November 2016).
6 Hong Kong Monetary Authority Strengthens Cybersecurity Controls on Banks (Norton Rose Fulbright, May 2016).
7 Malaysia Digital Economy Blueprint (Economic Planning Unit, Prime Minister’s Department, February 2021).
8 Capital Market Masterplan 3 (Securities Commission Malaysia, November 2021).
9 Licensing Framework for Digital Banks (BNM, December 2020).
10 The RegTech Association (2017). The RegTech Association - Home / 2022
11 Payments and Settlements - National Retail Payment System (BSP, April 2020).