MANILA - The Asian Development Bank said central banks in the region need to take a closer look at new technologies such as blockchain and artificial intelligence, among others, to improve financial markets.
Cross-Border Settlement Infrastructure Forum (CSIF) member organizations in the region, which include central banks and central securities depositories (CSDs), should adapt to the changing advancements in the field of financial market infrastructure, the ADB said.
In a report titled Recent Technological Advances in Financial Market Infrastructure in ASEAN+3, the ADB outlined 6 major technologies that are helping the financial market infrastructure meet the challenges of the digital age.
ASEAN+ 3 is the Association of Southeast Asian Nations with China, Japan and South Korea.
The 6 new tech discussed in the study are DLT (distributed ledger technology) or blockchain, artificial intelligence, big data analytics, cloud computing, cybersecurity and open API (application programming interface).
The study also showed that central banks and central securities depositories in the region are ready to make the changes, ADB's Economic Research and Regional Cooperation Department's Advisor Satoru Yamadera said in a webinar.
"The important finding is that all central banks in this region, they really need to consider those technologies...They need to keep up with technology changes, and they are ready to make changes and that is one important finding," he said.
"Things are changing rapidly and we may see new technology so we need to pay attention to all the developments," he added.
Blockchain has "sparked" interest among financial organizations globally amid the popularity of cryptocurrencies such as Bitcoin.
But while cryptocurrencies have yet gain acceptance as alternative mediums of exchange, DLT or blockchain "offers a plethora of uses" outside of cryptocurrencies such as the establishment of central bank digital currencies, the study showed.
Even the Philippines' Bangko Sentral ng Pilipinas said it would "experiment" on CDBCs for wholesale transactions by the fourth quarter.
Financial services is an "ideal candidate" of another technology, which is AI, said ADB's Economic Research and Regional Cooperation Department's Financial Sector Specialist Byung Wook Ahn.
Machine learing, robotics, artificial neural network and natural language processing are among the technologies under AI that could be applied, he said.
It could also be integrated to existing systems, he added.
Big data analytics, meanwhile, can help in the decision-making process and has a lot of uses including helping firms reduce cost, increase efficiency and understand customers better, the study showed.
Another technology discussed in the report is cloud computing, which enables access to shared and scalable information technology services or resources such as storage and apps, among others, the Manila-based multilateral lender said.
One of the most critical technologies central banks and CSDs should adopt is improved cybersecurity due to the wide variety of threats.
APIs, on the other hand, makes diverse services and resources interoperable and useful in different contexts, Ahn said.
Most central banks and CSIF members in the Asean are already in production when it comes the aforementioned technologies, he said. Some have been piloting several technologies such as the blockchain technology and cloud computing.
In terms of technologies, 6 out of 20 CSIF member institutions that responded to the survey said they are engaged in DLT/blockchain, 3 institutions with AI, 5 institutions with big data analytics, 2 with cloud computing, 8 with new cybersecurity and 10 with open APIs, data showed.
According to the study, the top 3 new technologies the members are trying to apply are DLT or blockchain, cybersecurity technology and open APIs.