Joseph Schumpeter famously coined the term “creative destruction” to describe the process through which innovation drives economic progress.
Since his time, the pace of innovation has accelerated at an unprecedented rate.
While steam engines took over a century to revolutionise society, search engines achieved a similar impact between one to two decades.
Now, generative artificial intelligence (AI) has the potential to reshape industries and societies in a matter of years. In the face of rapid change, innovation has become critical for businesses to remain competitive.
The impact of innovation has also amplified with the advancement in technology.
Digital platform models demonstrate the ability to swiftly scale services globally, disrupt established business models and alter the way consumers interact with information and services.
Consider the stark contrasts between Blockbuster and Netflix, traditional taxi companies and Grab or search engines and ChatGPT.
Within Malaysia’s capital market, digital platform models such as the equity crowdfunding (ECF) and peer-to-peer financing (P2P financing) platforms have bridged businesses raising funds directly to investors.
Digital Investment Managers (DIMs) allowed investors with new affordable means to access curated investment portfolios.
AI-driven innovation has also gained early traction among Malaysian firms.
Large Language Models are used to analyse both structured and unstructured data, enabling deeper insights that inform credit decisions and client due diligence.
AI-powered cyber-threat intelligence platforms analyse huge amounts of data to detect emerging threats and inform effective countermeasures.
Meanwhile, machine learning tools in broking and fund management platforms provide investors smart strategies for trading and portfolio management.
Blockchain-based utility tokens, offered by Initial Exchange Offering (IEO) platforms in Malaysia, have emerged as a new fundraising mechanism, enabling companies to raise funds from investors in exchange for tokens that provide exclusive access to their products or services.
Securities are being tokenised (digital representation on blockchain) by intermediaries to automate administration of securities (leveraging on smart contracts) and reduce reconcilation effort between trustees or custodians and fund managers (single shared ledger).
Cryptocurrencies, despite its controversies, have capitalised on blockchain’s decentralised network to facilitate multi-party transactions without a ‘middle-man’ while maintaining immutable transaction records.
These instances merely scratch the surface of the transformative potential of emerging technologies like blockchain and AI.
Imagine the possibilities when combined with the power of quantum technologies.
The bigger question is: Are we ready to compete with regional or global players in this evolving technology landscape?
Synergistic Collaboration by the Securities Commission Malaysia (SCxSC)
Daron Acemoglu emphasises in his book Power and Progress the importance of key institutions in shaping the path of technology advancements to ensure societal and economic benefits.
As a securities regulator that prioritises digital innovation, the SC recognises the need to embrace emerging technologies while understanding their risks.
By working closely with capital market players, innovators and technologists, we can foster a path of purpose-driven and responsible innovation.
The SCxSC programme is part of the SC’s broader innovation agenda to harness technology to support the Capital Market Masterplan 3 (CMP3) objectives of catalysing competitive economic growth, empowering investors and shaping a stakeholder economy which is inclusive and sustainable.
To foster responsible innovation against the landscape of emerging technologies such as AI and blockchain, the SCxSC programme was expanded in 2024 to encompass four key series:
• Views from the Top: Conversations with C-suite leaders on opportunities for innovations enabled by emerging technologies.
• Innopolicy Roundtables: Insights from innovators, technologists, and industry players on the potential innovation outcomes and implications of emerging technologies to inform on policy development.
• Pitch and Match: Networking opportunities for innovators, industry players, and investors to facilitate collaboration and share ideas.
• TechTrek: Focus on cybersecurity and technology risk management in the context of technological advancements.
Our year long series of SCxSC engagements have centred around AI-driven innovation, tokenisation, cybersecurity, and RegTech.
These topics will take centre stage at the annual SCxSC fintech summit on October 1-2, 2024.
The fintech summit aims to deepen market understanding of emerging innovations underpinned by AI and blockchain, and foster collaboration by exploring use cases, opportunities, and potential partnerships that can drive the Malaysian capital market forward.
We believe that new ideas thrive when people from different industries work together.
By leveraging diverse expertise through the SC’s initiatives like SCxSC, aFINity, GROW and DIGID, we aim to empower the capital market to tackle challenges with innovative solutions.
Together, these programmes bring innovative minds to the capital market, enable pilots to experiment with new ideas, allow the entry of new digital models and co funding with industry on innovation – allowing for a dynamic and progressive ecosystem for responsible innovation.
Register for the SCxSC Fintech Summit here.
Featured image credit: Edited from Freepik
