In the past 10 years, customers have become accustomed to accessing financial services through websites or mobile apps of banks and other institutions. In future, instead of waiting for customers to come to their platforms, institutions must reach out to customers in cyberspace. The technologies are there, such as open APIs. But as I mentioned before, the technology has to be a means to an end that the consumer finds useful. And of course it must be secure and stable. 37. The second trend is that financial services will become increasingly real-time. Gone are the days when we were able to handle everything with batch mode operations. Customers are already expecting real-time execution in payment services, remittances, investment advice, and insurance applications – and this list will grow. This will require not only faster data connections or more computing power, but a whole range of new processes for assessment, risk controls and regulatory compliance. As banks upgrade their analytics and procedures to provide speedier customer services, regulators like the HKMA will need to 4/5  BIS central bankers' speeches  work with them to adopt new SupTech and RegTech solutions to better meet these new challenges. 38. The third trend is the rising importance of cross-border applications of Fintech solutions. Technology offers ways to overcome some of the long-standing inefficiencies in financial services, like cross-border payments or trade finance. The use of blockchain technologies comes to mind. We have conducted pilot schemes with our peers in the region to try out blockchain solutions.

However, governments in these countries found themselves unable to substantially respond to the emerging crisis with public money for the banking sector and countercyclical fiscal policy, due to lack of fiscal space and high debt. Financial markets then began to fragment along national lines and cross-border funding dried up, exacerbated by defensive risk management by banks and ring-fencing of liquidity by supervisors in the core countries. Lack of liquidity, coupled with capital depletion from domestic losses, precipitated a renewed credit crunch. Countries were trapped in a “bad equilibrium” caused by the three-way link between sovereigns, banks and domestic firms and households. Falling credit aggravated the ongoing recession, increased loan losses and further weakened bank balance sheets, which in turn pushed sovereign borrowing costs higher. Fiscal policy, under the pressure of losing market access altogether, took mainly the more expedient route of higher taxes, which led instead to lower growth and therefore renewed market jitters, somewhat defeating its original purpose. The fourth stage of the crisis was triggered by investors in both Europe and the rest of the world. Faced with a downward growth spiral, many investors reached the conclusion that the only way out for crisis-hit countries, given the institutional design of the euro area, was for them to exit from it. This would, it was believed, allow them to depreciate their currencies and regain monetary sovereignty. Fearing redenomination into lower-value currencies, investors sold off domestic public and private debt, further widening spreads and exacerbating bad equilibria within vulnerable economies.