For many people, 2022 is a year to forget. Of course, that’s what we said about 2021. And 2020.
But while no one will miss those Covidy times, it’s a safe bet that 2022 was truly horrible for many in the finance industry, be it traditional or digital.
The Federal Reserve finally called time on a decade’s worth of free money, and the adjustment has been painful. This is the first time in anyone’s professional memory when equities and fixed income lost money at the same time.
Inflation has returned with a vengeance, propelled onward by Russia’s terrifying war in Ukraine and the dismantling of global supply chains.
Crypto, the biggest theme of the past two years in digital finance, turned out to be merely the first high-risk asset to face the chopping block. It delivered its own Lehman Brothers-style systemic collapse, which is still unfolding. But the pain is everywhere. Big banks and startups are both slashing jobs.
Reasons for optimism
So why is DigFin feeling jolly? Is it early dips into the seasonal eggnog? No. Well, yes, that too. But the Fed’s interest-rate hikes are long overdue. The fantasyland of free money led to increasingly bizarre business models and mountains of fraud. But the underlying innovations might now be deployed in a far more serious and sustainable manner.
Moreover, although crypto/metaverse/Web3 (choose your branding) may have experienced a deserved comeuppance, there are exciting new themes that will occupy our attention. Generative artificial intelligence is the leading candidate for 2023 hype. It has real-world applications, including in financial services. And it’s a lot of fun to play with.
In the background, 5G, cloud, IoT, and advanced semiconductor design continue to provide superior ways to deliver the analytics, customer experiences and low-latency features we want.
And even poor old Web3 (cough) may find itself enormously useful, once the speculative coins are stripped away. Digital identity has never been more important. If we see NFTs as receipts rather than speculative monkey pics, proper business ideas can flourish.
Crypto is dead, long live crypto
To no one’s surprise, crypto and blockfin dominated DigFin’s coverage this year. DigFin is not a crypto publication; it’s a publication for financial institutions. But from DeFi to digital assets, blockchain finance claimed a huge amount of attention and interest. Everyone is talking about the crypto meltdown – but leading financial institutions are still building in this space.
As DigFin declared, “Crypto as we know it is dead; ‘blockfin’ is just beginning”. (Not one of our popular stories, though.)
Our two most popular blockfin stories are a sort of double-header.
“Partior aims to become the world’s ledger for banks” featured a talk with the platform’s CEO, Jason Thompson, who spoke of the urgency for a regulated blockchain clearing and settlement system. “If we lose control of currency, we’re in chaos,” he said.
DBS and J.P. Morgan, along with Temasek, are the main backers of Partior, which grew out of cross-border blockchain payments experiments run by the Monetary Authority of Singapore. It is one of several cutting-edge initiatives from the Lion City, which is moving quickly to establish itself as a regional and indeed global capital for Web3 finance.
JPM featured in our other top story, “J.P. Morgan Onyx wants to ‘liberate the bank account’”. J.P. Morgan boss Jamie Dimon is regularly in the press trashing Bitcoin, which many people assume means the bank is anti-blockchain. It’s the other way round. The bank is moving very quickly to influence what digital assets will look like, starting from its proprietary “JPM Coin” but with the long-run aim to leverage Ethereum. And it’s happening in Asia as much as it is in New York, as our profile of “global head of coin systems” Naveen Mallela shows.
(Another of our stories that was not on the most-popular list, but which DigFin thinks represents important themes this year, is “How Ethereum’s Merge will impact traditional finance”. The Merge was a notable engineering feat that moved Ethereum from the energy-wasting proof of work to a more scalable proof-of-stake consensus mechanism. Diehard Bitcoiners hate this because they regard it as opening a door to censorship. Anti-crypto crusaders dismiss it as part of a vast grift. DigFin thinks Ethereum will become important but boring infrastructure.)
And another thing…
Two other stories in the cryptosphere are worth mentioning.
Our third most popular story was “Hong Kong gives banks, brokers the crypto go-ahead”, about a joint announcement from the monetary authority and securities regulator. DigFin gave up a Sunday to bang this out and it was worth it, because Hong Kong is the first proper jurisdiction to give the industry clarity on this matter. “This is massive!” said Jehan Chu of Kenetic, and for once the hype was valid.
We expect the government to extend this regime to retail investors in 2023. You might say, no, that’s a terrible idea, look at FTX. But DigFin would say that Hong Kong retail investors already got ripped off by FTX, as well as by other exchange and stablecoin failures that will be realized in 2023.
As we predict in “The Fall of FTX: a tragedy in three acts”. This story generated a lot of nice comments from readers who appreciated the big-picture approach to events happening by the hour.
One big theme that DigFin shied away from was the metaverse. Sure, we touched on it. And this year it became a monster buzzword at conferences. But what’s it mean?
Instead we began 2022 with “Video games are the new frontier of fintech”, in which we predicted that financial services were going to integrate with games. This generated a lot of traffic, and set the tone for the year. Our story also raised critical questions about play-to-earn, virtual real-estate projects, and DAOs. Our skepticism was warranted, as was our belief that fintech was going to embrace gaming.
Payments and Wealthtech
Enough about Web3. Let’s talk about the top stories in payments. They are…oh dear.
“ANZ puts its new A$DC stablecoin to work” and “Mastercard embraces ‘card killer’ BNPL and crypto”.
The Mastercard story was especially fascinating for understanding how the leading payment incumbents are coopting disruptive technologies to support businesses that, traditionally, have relied on processing credit-card transactions. It was also a useful way to look at buy-now, pay-later models, which fell out of repute this year. But BNPL isn’t going away. It’s being refashioned on more solid business foundations.
Wealthtech claims its spot in our most-read stories with “DBS consumer bank’s idea of financial inclusion? Advice”. This is how DBS is using digital technology to move its retail business away from product pushing.
This theme was echoed in more recent pieces, such as “HSBC goes digital to bring advice to private banking”, which shows that it’s not just mass retail that responds to this trend. We also wrote in depth about UBS’s entering China’s onshore wealth industry, “UBS wealth management goes mid-market in China”, using digital tools to go after middle-class investors. This is a major departure for UBS, which usually caters to just the very richest clients. It’s a move DigFin has anticipated for years and more banks will follow.
Digital banking
Other big themes this year involve digital banking, which encompasses business models such as open or embedded banking. We wrote that emerging markets are going to be the major beneficiaries, rather than developed ones.
And our readers flocked to several stories in this vein, involving digital banks in India, Indonesia, Malaysia and the Philippines. These include:
“Open banking in India: overcoming acquisition costs”, which was part of a series on open banking in emerging markets; and
“UNO Digital Bank gets funded, goes live in Phils”;
“OVO leads digital payments pack in Indonesia: report”;
“Al Rajhi Bank goes digital in Malaysia”; and
“Hong Kong’s WeLab is ‘going big in Indonesia’”.
Top story of 2022!
All right. So what was DigFin’s top story in 2023? It was an evergreen that was published in 2020. This is cheating, as some of the traffic was accrued over three years, but this article’s hoovered up so much traffic in the past 12 months that it demonstrates sustained interest in its theme.
The story is “What is the India Stack? Nandan Nilekani explains”, featuring the chairman of National Payments Corporation of India giving a history lesson.
The India Stack includes Aadhaar, its identity registry; UPI, its mobile payments app; and a growing set of features for open banking. It has enabled mass digital transformation and fintech creation. It is a world-beating example of innovation in payments that is leapfrogging digital infrastructure in the industrialized world. The India Stack has the potential to be the basis for cross-border operations.
Many of our readers have been honing their background on the India Stack by reading our story, and DigFin regards this as a healthy sign. We expect India and Indian fintech to be a leading theme in 2023.
