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Redefining Property Payments: Manoj Dugar on HSBC's Blockchain Breakthroughs at Money 2020
Unlock the future of financial transactions as we sit down with Manoj Dugar from HSBC at the pulsing heart of Money 2020 in Bangkok. This episode promises a deep dive into the seismic shifts occurring within real estate payments as we navigate Singapore's bold moves to establish itself as a trailblazer in smart city development. You'll discover how the scrapping of corporate checks is just the beginning and the crucial role blockchain technology is playing in reshaping how we think about security and efficiency in property transactions.
With the construction industry perched on the cusp of a digital revolution, we examine HSBC's strategic pivot in response to Singapore's evolving market demands, under the watchful eye of the Monetary Authority of Singapore. The conversation meanders through HSBC's innovative journey from trade finance to real estate ventures, highlighting the Enbridge project's success in merging cross-border payment platforms and regulatory collaboration. Learn how HSBC's past blockchain escapades are charting a new course for future fintech solutions and what this could mean for your next property investment.
Finally, we broaden our lens to reveal how the advent of QR codes and bilateral payment corridors is revolutionizing digital transactions across Asia. Delving beyond real estate, we explore the potential for these innovations to transform sectors like healthcare and insurance, where transparency and secure digital identity verification are paramount. Tune in for an insightful forecast on how banks might harness blockchain for global data and identity portability, and how this could redefine the financial landscape. Remember to leave us a stellar review on iTunes and stay tuned for more enthralling discussions at the Money Pot.
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Rachel Morrissey:Welcome to the Money Pot. We are here live at the Asia Show in Bangkok, thailand, for Money 2020. This is amazing. This show has been so cool so far. I'm Rachel Morrissey. I am one of the co-hosts and the executive producer of the podcast. I'm also head of content for the US show and I am here with the content manager from the EU show, miki Tesfaya. Hi Miki, how are you doing?
Micky Tesfaye:Hey Rach, very well, thank you, we've got to stop meeting like this, huh.
Rachel Morrissey:I know we really do. We really do. We have a great guest today that is going to talk about something that is so completely unique. This situation is everything that is interesting to me about what's happening in fintech right now, so I want to introduce Manoj Dugar and I probably still messed it up, even though he taught me how to say it like three times, and he is the Managing Director and Regional Co-Head of Global Payment Solutions in Asia Pacific for HSBC.
Rachel Morrissey:So we are not talking about a startup today. We are talking about a traditional player and they are doing something kind of revolutionary Just to kind of start this off. He is based in Singapore and we got a note and I noticed from him that he is working on a solution to a real estate payment issue in Singapore. So Manoj, we're going to start there. Talk to me about this problem that you guys have encountered within Singapore real estate and why a solution is needed so quickly.
Manoj Dugar:Sure, Thanks, Rachel and thanks Micky for having me at the podcast, Excited to be here at Money2020 and speak to you guys. As you rightly said, I'm based in Singapore, been there for the last 10 years, but, more importantly, we've seen significant evolution of digital payment in the Singapore market landscape. As you know, Singapore was rated recently by Institute of Management Development as the fifth smartest city in the world. So the progress which we're making on the digital payment space, whether it's the hawker center payments which you're doing, the subway payments you're doing, the instant payment rails which are built up significant progress by the regulator there and the adoption as well.
Manoj Dugar:However, there are blind spots. There is no doubt about it. As in any other jurisdiction, you see blind spots and which we evidenced in the real estate industry as well, where the processes were manual, were fragmented, physical checks were still prevalent. Yes, we're talking about physical checks. So the Monetary Authority of Singapore has come out with a guideline that they would eliminate corporate checks by end of 2024-5. So it was important for us to work with some of the players in the industry to help in their digital transformation agenda and address this challenge.
Rachel Morrissey:So this is the part that's interesting to me, because I'm from the US, mickey is from Ethiopia, he lives in the UK. We are from two different worlds when it comes to checks. I do not have a checkbook I have not had a checkbook in years, in fact but my husband has a checkbook and he thinks I'm nuts, and everybody I know thinks I'm nuts because almost everybody in the US still needs a checkbook, specifically around things like real estate, where even when an individual is putting down a security deposit, that's a check. You know a security deposit, that's a check. Or when you make your first mortgage payment yes, you can automate them later, but that's a check.
Rachel Morrissey:There's still checks in the US and I'm always like this is the most ridiculous thing in the world. But then I find out that in Singapore, which I consider way ahead of the game in payments and in digital adoption, this is a problem you guys are facing too, and I think it's interesting. Why is the Singapore government phasing this out? Why have they decided this is an area that they are like? No more of this.
Manoj Dugar:Yeah, I would say it's not only in Singapore. Across geographies, you will obviously see adoption of digital payment infrastructure and more so, you see, in Asia. Overall, it's not that fixed checks have got eliminated, but has reduced dramatically over the years. Just look at Singapore, for example. We reduced the number of checks from almost 60 million to now 19 million transactions. From almost 60 million to now 19 million transactions. So which is like a 70% reductions in terms of check volumes.
Manoj Dugar:Given the demographics, aging population, the requirement for financial inclusion Sometimes checks do exist, potentially, but there has seen a significant reduction, as a result of which the cost of processing these checks does tend to increase. It makes sense for the government and for the country to try and see how we continuously move on the path in terms of demising these checks as well. That's one, and second is really the investment which has happened in the digital payment infrastructure uh, the building out of the real estate payment, the instant rails in singapore 10 years back, 10 plus years back. The building out of wallet capabilities, interoperability of QR codes. Clearly, there is significant investment into our digital payment infrastructure and you would want to ensure that you are reaching to a larger population to see adoption of digital payment infrastructure. So you'll see the path of reduction. On checks, it's challenging, not that it doesn't completely get eliminated, but obviously on the corporate side we do expect elimination and that's the right path to try and uh work towards 2025 deadline to eliminate corporate checks, not individuals.
Micky Tesfaye:Yet that's interesting okay um, yeah, very interesting, I guess, to comment. What I'm interested to find out is because you mentioned, singapore introduced real-time payments uh rails 10 years ago or something like this, right? Um, so why did you guys, when it comes to solving this problem around corporate check usage and the kind of need to phase it out, why are you kind of turning to blockchain? Because, I guess, to rachel's earlier point, um you not to burst Rach, but I've never written a check in my life.
Rachel Morrissey:Yeah, go ahead, be that way, baby.
Micky Tesfaye:But I guess in the UK part of that is because we have real-time payments there and for transactions like mortgage transactions, even larger payments you could do direct bank-to-bank transfers, instant transfers. So I guess how come blockchain is the solution you've identified for this specific problem?
Manoj Dugar:So, Micky, we obviously service a large breadth of client base, right from small medium enterprises to mid-market to large institutional clients across 60-plus countries, and one of the clients we were working with was property enterprise development in Singapore in the real estate sector, and this got accentuated during COVID era, where the real estate industry was significantly impacted with the way the processes were run, because it was manual, because it was fragmented, multiple stakeholders involved.
Manoj Dugar:I'm not talking about the end consumer, but it's just within the real estate ecosystem, which was quite fragmented there, and hence it was important for us to try and figure out how do we address the challenge, especially when they have a timeline ticking of meeting the MAS guideline of 2025, elimination of checks, and they obviously embarked on digital transformation.
Manoj Dugar:We are at the forefront as far as technology innovation is concerned. Digital adoption is concerned at the client end, and hence it was a great opportunity for us to partner with them and identify solutions to digitize that process and, more importantly, we spent fair amount of time with the client understanding their as-is process, what the end-to-end workflow is, how some of the smart contracting and, potentially, blockchain solution could help address that challenge and mickey to your point the reason we chose blockchain. Because of the fact that there were multiple parties which were involved in that workflow, the process was fragmented. It was important to bring them into the same ecosystem and that's where the blockchain technology really helped digitize the workflow from our perspective. So really, covid accentuated it. Most of the clients are going that path as well. The solutions could vary depending on the industry, but in this particular case, given the fragmented nature of the payment processes, given the number of parties involved, the solution really fitted in well.
Rachel Morrissey:So I want to go back just a little bit and unpack a little bit of what you said there, because you had a client specifically that saw this new rule coming down. They understood how vital it was to make this change. Can you tell me a little bit about how this whole problem came to you guys' attention specifically, why you guys decided to tackle it and that kind of that story that you had with this client?
Manoj Dugar:Yeah, sure, as I was saying, probably COVID accentuated it. Where the construction industry did get impacted because of the physical nature of the workflow manual, not a transparent process, some elements were opaque as well, fragmented nature. So the client came to us. We banked all segments of those clients because they would want to see how we could potentially help in the digital transformation journey, meet the MAS guideline but, more importantly, also improve the underlying workflow and transactions as well. So and we support many of these clients who are getting into the digital transformation journey, given all the developments which is happening on the technology side, on the platform side and whatever the regulators are doing as far as some of these rails are concerned as well. So it ticked all the right boxes and that's the reason we we supported this what's the general size of this market?
Rachel Morrissey:Like as far as the volume of transactions, what's the general size of it?
Manoj Dugar:I'm not sure the specific number at this point of time, but clearly you've seen significant growth in the Singapore franchise, because Singapore is becoming a hub to many of the growth happening in the other parts of the region as well. Right, but you've clearly seen a big shift from physical to electronic, which I talked about in terms of 70% reductions. But, more importantly, the velocity of transactions have also increased. Given the changes in business model at the client end, a lot more transactions are becoming smaller in size, but the volumes are increasing as well. So there has been disproportionate growth of the electronic transactions in Singapore and other parts of the world as well.
Micky Tesfaye:Interesting, very interesting, I guess, maybe to kind of transition forward, because there's something I was thinking about, which is We've talked quite a bit about the client-side demand, the regulatory demand for the check, the elimination of checks, and where you guys come in From HSBC's perspective, from the perspective of deploying a blockchain technology.
Micky Tesfaye:One of the things Rach and I were talking about is that a few years ago, I did an interview with someone from HSBC building some blockchain-based solutions, and it reminded me around 2016,. Around that time, a lot of the work in big banks was being done for trade finance for trade finance especially, but other similar areas where there was exactly the same types of issues you described right Multiple stakeholders, manual processes, huge opportunities for mistakes, need for transparency and all of these things. Early experimentations allowed you as a big bank to then move fairly quickly to react to a new set of emerging opportunities, driven by the regulator, for example, in this instance. So maybe the trade finance piece is something that keeps on going parallel, but how does that inform your ability to react to this and meet some client needs?
Manoj Dugar:True and, miki, partly. You addressed the answer in your question itself. When you think about like five, six years back, am I right? It was more about concepts. It was more about experimentation which you were talking about it as well. So we've clearly seen the adoption of the technology over the last four, five years and now it's more about used cases and commercialization and that's the path which we are embarking on.
Manoj Dugar:So clearly, while some of those experimentation was successful, now we are looking at more commercializing with real used cases and this was a real used case which had similar characteristics, if I could say. But clearly we could adopt those technology and implement that because of the work which we've done in the last four, five years using the technology. Uh, and obviously it's getting better and better with some of the smart contracting, with some of the programmable way of money movement. Uh, it's obviously enhancing our proposition as well. Uh, to your point, yes, now it's real used cases where we've seen the adoption in the industry, and real estate was a great example where we adopted this and implemented the solution.
Rachel Morrissey:So, when it was more conceptual and, as you mentioned, you've been doing this work for the past four or five years what are the industries or what other use cases have you seen that you actually learned from that you ended up using in this solution. Learned from that you ended up using in this solution. Like, what other kind of experiments were you doing that ended up in this solution, that, as actually you can see immediate.
Manoj Dugar:So, rachel, I think the way we look at some of these technologies. A couple of aspects One, obviously, working with clients in terms of identifying some of the problem statements and what are some of the used cases. So the real estate was one example. In some cases, we actually work with regulators in terms of adoption of this technology as well, and we believe that this technology, from a payment perspective, can really help transform the cross-border payment space. So the work which we are doing on Enbridge, for example, is a great example right Now.
Manoj Dugar:If you're in Thailand, for example, now for my 2020, and if a person from hong kong and my friend, alan, he just flew down from hong kong to thailand, he forgot to carry cash, which is the right thing he did, but he struggled to make some of the payments there, but he could use his qr codes to make payments in thailand as well. That's the enbridge platform which I'm talking about, which really really enabled Hong Kong FPS linkages, hong Kong FPS to the Thailand Prompt Pay, quick Pay linkages, which really adopted this technology. So my point is that we work with regulators in some of these used cases. There are commercial used cases and my partners in the securities and the trade businesses are also adopting some of these tools and technologies in multiple of their client-used cases as well.
Micky Tesfaye:So the Enbridge project, that's a blockchain or distributed ledger project, right, yeah, so that's actually super fascinating. So is that what is powering this current program or project? The real estate?
Manoj Dugar:So both of them have an underlying technology which we are leveraging as well, some of the build which we've done on the underlying technology to facilitate cross-border transactions and payments. There's some of these underlying technologies being used in these solutions as well because ultimately, it's bringing all the parties together, though the payments is not embedded yet, so it has an opportunity to embed some of the payments piece, potentially also From a cross-border perspective, because this is more domestic in nature. The real estate, what I referenced in terms of the used cases which we are using blockchain technology. There are some elements of cross-border also which is being used.
Micky Tesfaye:Got you. So the information is what's being transferred right now, not the payments. Is that a way to think of?
Manoj Dugar:it. Yes, most of your negotiation process, settlement process, information flow transparency is what is being flowed into this infrastructure as well.
Micky Tesfaye:Fascinating.
Rachel Morrissey:I didn't know about that. I find the QR code revolution in Asia really interesting because of this, the solutions that it can provide for cross-border payments, especially throughout Asian markets. But I mean, as an American, I come here and you know I downloaded my Grab app before I came and I set it up and then, as soon as I landed, it was useless to me because my eSIM wouldn't let me have the identity that I had set it up under, and so I couldn't transfer it and use it. And then the other part that I found really fascinating is, obviously, I put a card in the back end of the grab app, right, um, instead of a bank, right, I didn't do a bank to bank, I did a, I did a credit card, cause that's, I'm an American and that's how we think.
Rachel Morrissey:And, um, as soon as, so, I get into the taxi and I can't pay because I don't have any Thai cash on me. And then the guy was like oh, no problem, and he hands me a QR code and I'm like I don't think you understand, I can't, I didn't have the right apps or the right setup in order to really participate in the payment system, and I'm looking at it going. This is really interesting what it would do for travel, or what it would do for cross-border if, uh, if, if it was, have it had a wider adoption, even, and I so, when you're saying you can come from hong kong and pay, I'm like if only, um, you know, on the, when mentioning hong kong, right, that just reminds me.
Micky Tesfaye:But like singapore, hong kong, I guess they're super interesting from a real estate perspective too, given like the like limit pricey, yeah, and but given like that kind of, you know, geographical limit. So I'm just wondering as, just wondering beyond the check piece, how much is this kind of tokenization element going to come into the real estate industry and how much is things like this going to drive that process forward?
Rachel Morrissey:Well, and what other Asian markets would this be most attractive to? Next, like Hong Kong and Singapore, are these finite spaces, right? But there are other Asian markets that are more developed and less developed in this area, and so I'd be interested in that too.
Manoj Dugar:Yeah, I'll let you talk, sorry, since you talked about the QR code and the digital payment space. Clearly that's one area which is still being worked upon, I would say because they're just not about uh technology. But there are underlying regulations policy advocacy, which needs to be addressed, liquidity, which needs to be addressed to make it a lot more interoperable and have a same experience as you would have in the domestic infrastructure. You would want to have the same experience in the cross-border space as well. So some development still happening. There are bilateral corridors, uh, which have kicked off, am I right? So singapore has kicked off with thailand, singapore has kicked off with malaysia, singapore has kicked off with india as well. So some of the end consumer to consumer workflow. You could use some of these qr code to make cross-border transactions. From our perspective.
Manoj Dugar:To answer your question also is that obviously we've seen the adoption because there was a real problem in the real estate industry, but we believe that there could be opportunities across other sectors as well and we are in discussion whether it's potentially like e-marketplace or healthcare or insurance industry, where there are multiple parties involved. There are certain transparency challenges as far as the workflow is concerned. We believe that there could be adoption of these tools and technologies, and that would be city agnostic or country agnostic potentially as well, but early days. It obviously requires a lot of selling, not only to the, to our clients, but to the ecosystem participants, the used cases as well, and leverage some of the domestic infrastructure because that's a lot more matured as far as cross-border. That's where some work still needs to happen before we reach the end state.
Micky Tesfaye:That's so interesting, especially the healthcare. That's exactly what I was going to say, yeah especially the healthcare one and, to your point, Rich around the identity piece right like.
Rachel Morrissey:I guess that's one of the areas where secure identity kind of well, that's that's part of why I was so curious about this is like I mean, why would? Why would a QR code really need the identity piece that it? You know why? Why would the grab app, uh, all of a sudden question my identity when it's it's installed, it's it's set up and everything, but all of a sudden, because I have to transfer a SIM, like I, you know, I have to go from one SIM to another SIM inside my own phone which has all of the information inside of it that the connectivity on that side is also a little odd, right? The fact that I had to set up ready to go and the fact that all of a sudden I wasn't me anymore is kind of an interesting part of this equation, and I think about this, the tokenization all the time, because it does depend so much on identity, depends so much on on this part of the of the structure working, uh, from from market to market to market.
Manoj Dugar:True, uh, and that's why you see a varied payment infrastructure in many of the markets in asia. It also depends upon the end consumer behavior, the demographics of the country, the adoption of credit cards, as in probably in the US, but it may not necessarily apply in across most of the markets here in Asia, especially when you think about the ASEAN region, where credit card may not have been penetrated. Banking has not penetrated to the end consumers, to the end people in the country as well. So clearly that's where wallets and QR codes have got adopted as well. So you have some elements of banking which is done through those channels and that's why some of those channels have got a lot more prominence in these markets compared to markets like Singapore or UK or US.
Rachel Morrissey:Right.
Micky Tesfaye:I mean wow, what can I say?
Rachel Morrissey:I know it's really fascinating. So you were talking about it being used in other industries like healthcare and things like this. What's the client response that you guys have had? How excited are they about the nature of this solution and what's going on with that? Because I find this sort of fascinating, because this has got to be kind of blowing their minds.
Manoj Dugar:True. So obviously we've spoken about this over the last five, six months since we launched this Project Epsilon, as we call it in the real estate industry. It's got many of our clients interested and we've got more engagements now in terms of some of the real use cases, but I would say it's still early days. We obviously have to roll it out across real estate industry because that's a burning need right now. Other industry would require a lot more deep dive to be done so that at least the solution fits the end-to-end ecosystem players as well. It's early days, but we believe that it has the potential to scale up.
Micky Tesfaye:That's excellent. Yeah fascinating, I guess, just like to one other future gazing question, and it's honestly not even maybe relevant. But now that we started talking about identity, I'm super just like fascinated with this point you made earlier around Enbridge and the use of it not to move payments but identity. So is there an opportunity for banks like HSBC in the future to kind of start leveraging these blockchain technologies for data portability, for things like identity portability around the world, so that rich so I can pay for a taxi.
Rachel Morrissey:Rich can.
Micky Tesfaye:She's able to have identity.
Rachel Morrissey:So I can get to my hotel without. That's all I care about.
Manoj Dugar:Just to address your question, Enbridge is supporting payments on a cross-border basis, especially in trying to make some of the digital technology in these markets a little more interoperable as well. So it's more about settling on a cross-border basis using the underlying blockchain technology not necessarily the identity piece at this point of time, but some work to be done on that to bring it applicable for the identity management.
Rachel Morrissey:Okay, well, that's about it. That's about our time today. I am so thankful that you came in to talk to us about this. This is so interesting to us. Like I said, miggy lives in a more sophisticated area. I'm just stuck with my good old credit card and my load of debt, but I'm really grateful. Thank you so much, manoj, for coming in and talking to us.
Manoj Dugar:It's a pleasure to come and speak as well. Given the potential that this solution has and the technology has, we clearly want to see the adoption of that across industries as well and countries.
Rachel Morrissey:Yeah, I am looking forward to seeing this. I mean, I think I live in New York, so the idea that this kind of technology I mean to me this has much broader implication than just Singapore If we used something like this in the States, if this ever gets to that point, which it will eventually. But when you live in a place like New York and you, you understand how these real estate markets in these very tight areas work, which New York and Singapore have that in common, you can kind of see, oh, there's huge amount of potential right here, um, and then you see it globally. It's really interesting. So, thank you so much for coming in. That's it for this episode of the money pot. We love our listeners and if you would go to iTunes and give us a review, make it five stars so that people can find us. Yeah, come on. And if you would like to participate in Money 2020's Money Pot at the shows, go ahead and email us at podcast at money2020.com. As I said, thanks again for tuning in. We love our FinTech nerds.
