jessica chew cheng lian : digital developments in malaysia's financial sector and the broader economy opening address by ms jessica chew cheng lian, deputy governor of the central bank of malaysia ( bank negara malaysia ), at the asian banker digital finance convention 2018, kuala lumpur, 22 march 2018. * * * it is my great pleasure to be here today at the 2018 asian banker digital finance convention. many of us here would remember what a “ kodak moment ” is. i believe the term for that these days is “ insta - worthy ”. kodak ’ s story is a familiar one, now infamous as a classic case of digital disruption. at the turn of the century, film was still very much the technology of choice. but within years, the digital camera quickly took over the mass market, eventually putting kodak out of business. and the story does not end there, as we all know. very soon, most people were taking pictures with their phones instead. this may be an old cautionary tale, but its message continues to be relevant. the digital revolution is real. it is inevitable. and it is pervasive in ways that change the way we live today, and in ways we cannot yet imagine. at its most fundamental level, perhaps the most significant change brought about by the digital revolution has been the change in paradigm. by this, i mean the basic assumptions that shape our thinking – whether in a business, social or political context. in the world of finance, some of the questions being asked today are : what makes a bank a bank? will digital currency ever replace central - bank issued money? or more likely, will central banks issue their own versions of digital currency and in the process, disintermediate banks? are banks selling financial products, or are they offering a lifestyle, opportunity and the freedom to pursue a new and different path in life? what business are banks really in? when everyone stopped using film in cameras, one wonders if kodak realised that it was actually in the business of capturing memories. or when smartphones burst into the mobile handset market, did nokia realise that their business was not selling mobile handsets, but connecting people with the world around them? three years ago, mckinsey predicted that technological advancements will redefine the landscape of finance, and then went on to argue that incumbents had – at most – a brief window of five years to adapt or risk becoming obsolete. you may or may not agree

that sector has found uses for consumer information and created an array of financial products and services unimagined even a few years ago. these developments, in turn, raise some new concerns, and have re - ignited some existing ones, among consumers and legislators. congress grappled with one of these issues, privacy, in the financial modernization law. concerns about abusive lending practices have also re - emerged of late. in all areas, but particularly in areas as sensitive as these, regulators should faithfully administer consumer protection laws as written. any necessary regulations should adequately inform consumers and protect them against abusive practices while also not discouraging legitimate extensions of credit, especially to those who might previously have been denied access to such credit. financial literacy will certainly play an important role in avoiding the growth of abusive or deceptive financial practices and in allowing consumers to protect their interests. i believe that legislation, careful regulation and education are all components of the response to these emerging consumer concerns. i also hope, however, that businesses recognize that it is in their long - term interest to maintain the confidence of consumers by avoiding deceptive and abusive practices and by respecting the privacy of their customers. finally, our payment system affects every consumer and business. this system too has been, and will continue to be, changed greatly by emerging technologies. from the time of its very founding, the federal reserve has had the responsibility to foster an efficient, safe and accessible payment system. during much of 1998 and 1999, our primary objective in this regard was to help banks and other participants in the payment system maintain smooth operations as the century date change passed. domestically, we achieved this goal by working directly with the banking sector. internationally, i was privileged to work through multilateral groups to raise the awareness of the international regulatory community of the nature of the y2k challenge. now, we can take a longer - term perspective and consider how we might facilitate innovation in the payment system. as an overseer and regulator, the federal reserve needs to approach payment system innovations with an open mind and a willingness to adapt. in a dynamic economy, markets need to play a key role in guiding the development of infrastructure. this means that innovation and competition will be central to the future development of the payment system – as they are in other areas of the economy. regulators should strive to remove barriers to innovations when we can do so without sacrificing important public policies. we should take every opportunity to foster competition and maintain the integrity of the payment system