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Speech by the President of the House of Representatives at the 2nd Cyprus FinTech Expo Conference - 13/11/2018

Speech by the President of the House of Representatives at the 2nd Cyprus FinTech Expo Conference - 13/11/2018

Distinguished guests,

Ladies and Gentlemen,

The time has come to realise that we have officially joined a new era, where everything that we know so far; structures, data, mechanisms, and services are now being digitised. Integrating into the core of the digital economy and society not only requires us to be resilient, but to also be cautious and alert to ensure smooth cooperation, so that we do not lose our own equilibrium, and above all we continue to keep to our fundamental principles.

The Fourth Industrial Revolution and the innovations it brings is now an integral part of our everyday life and, by extension, an integral part of the economy, industry, society, education, and science. The Fourth Industrial Revolution consists of many modern technologies, such as artificial intelligence, blockchain, the internet of things, large data analysis, and cloud computing. These technologies rapidly bring great changes to society, changes that we are called on to manage.

As the House of Representatives has a quick understanding of the great changes, it had organised pre-emptively in June 2017 a conference titled “The Fourth Industrial Revolution: Prospects and Dangers” so that it can publicly introduce the concept of this phenomenon, with the help of experts in the field. In the meantime, the House of Representatives organised in June 2018 a follow-up conference with the theme “The Fourth Industrial Revolution: Action Plan”.  And now, the next conference on this subject will take place in June 2019, where the practical results will be recorded.

The Fourth Industrial Revolution focuses on the field of economy and in particularly in the financial sector. This has an important and catalytic effect through the so-called fintech, which of course, is short for “financial technology”. 
Fintech is characterised as essentially a technological innovation that has revolutionised the finance sector, which in turn has created a series of new business models, applications, processes, and products. Financial technology companies put technology-driven innovation at the heart of their business, particularly in areas such as new payment systems or automated investment advice.

It is a broad concept that promotes easy-to-use provisions for banking and financial services, but is also divided into two categories: one category includes companies that offer digital tools to users for borrowing and money management, while the second category includes businesses that provide support services and help financial institutions to manage their services better.
Global corporations support their financial activities through digital tools, such as algorithms that consist of 'robotic consultants' and blockchain technology.  These services operate under the fintech umbrella.

Not only does the integration of these new technologies into the financial services significantly contribute to improving the efficiency of the youth of today, but also leads to a more established banking infrastructure. In addition, borrowers and investors can contact each other in a faster, more direct manner; thus, reducing the loan disbursement time, and in general, several banking actions and processes can be conducted more effectively.

However, the various benefits that Fintech offers - or rather it can offer - can also present several hazards, threats, and traps, all which require special handling. For example, there is a great deal of ease and speed in online lending, home and car loans, and retirement plans, but these procedures can also hide the dangers to borrowers by which they take on obligations that they cannot meet. It also appears that fintech threatens to abolish traditional banking structures, and for that reason large companies are reluctant to fully adapt their traditional systems towards new technologies, despite already having begun to invest substantial capital in doing so. In addition, although banks are provided with the opportunity to serve their customers better and more effectively through robotic consultants and other applications, this also leads to thousands of jobs being threatened at the same time. The entry of artificial intelligence and its contribution to the easier execution of complicated tasks is clearly worthwhile, but this replaces work that has traditionally been done by human resources.

Therefore, responsibility, methodicalness and prudence, both from the banking organisations and professional companies, and also from each individual user, is therefore required to prevent the various risks that can come from the convenience of fintech. Banking institutions must implement appropriate risk management procedures to address them, and at European Union level, many regulators and supervisors have already acted to promote the development of financial technology, whilst simultaneously also ensuring the robustness and security of their respective financial system. The European Parliament, which adopted a relevant resolution in May 2017, also plays an important role in this innovation. In addition, several other European organisations are helping to promote the sector through the publication of guides and handbooks.

Since April, the European Commission has produced a document to promote artificial intelligence in all socio-economic sectors, leading to the Republic of Cyprus signing a declaration of cooperation with other EU member states to achieve collaborative action in the field of artificial intelligence.

At the national level, our country owes - as part of the above European standard - to encourage as much as possible the active involvement of companies in the field of artificial intelligence in Cyprus, for the benefit of our economy, but also for our citizens and our society in general.

The banking institutions, organisations and companies which are present in Cyprus are called to familiarise themselves with all that fintech innovation has to offer, and to effectively adopt it into their services. In addition, they should also prompt their customers to familiarise themselves with the use of new digital tools so that they may execute their money transactions in a more effective way. There can be significant growth in the local economy by placing this innovation at the forefront and ensuring that corporations and users can cooperate in a smooth and full manner.

Due to its unique combination of favourable factors and comparative advantages - elements that make it extremely attractive to businesses and investment - Cyprus has great prospects of becoming a financial and business centre of excellence. In fact, financial services remain the fastest growing sector of the Cypriot economy. Cyprus’ strategic geographic position, its developed free market economy, the low corporate tax rate, the advanced telecommunication network, plus its professional human resources are the main factors that can make Cyprus an international fintech hub.

In addition, it is a significant asset for Cyprus that it has a full legal framework which consists of the harmonisation of data protection legislation, as well as other cyber security laws and regulations. All the necessary mechanisms have also been put in place to prevent and reduce money-laundering activities.

Regarding the involvement of the House of Representatives, I would like to note that on July 19th, 2018, the development of Blockchain Technologies in Cyprus has been put into practice, on the initiative of the President of the House of Representatives and with the cooperation of the Minister of Finance. On the 30th August 2018, the Council of Ministers decided to set up the Ad Hoc Working Group on the Development of Blockchain Technology in Cyprus, tasked with studying the potential applications of Blockchain technology in the public sector and not only. A basic pre-requisite for the implementation of this design is the adaptation of pilot projects in various governmental agencies, as well as the introduction of the necessary legislative arrangements.

I would also like to refer to the decision of creating a network of co-operation between all the organisations that are and will be involved, both state and private, so that we can effectively implement these areas of the Fourth Industrial Revolution. In doing so, Cyprus can successfully lead towards these new developments without leaving anyone behind.

The reality is that fintech is not entirely new, as the use of a credit card for online purchases or money transactions with online stores are also considered to be categories belonging to fintech. Now, however, this innovation and the services it offers are taking on larger dimensions, effectively remodelling trade and payments, and generally, money management and transactions.

We are clearly talking about the new order of things in terms of finance, and gradually all institutions and organisations will be called upon to adapt, and to mechanise the old traditional and time-consuming practices for the benefit of all.
So, let us all - individuals, banks, companies and states - be flexible and adapt to these new facts. We need to create the appropriate infrastructure and prerequisites for accepting digital change, but at the same time be cautious to the potential risks that may follow.
Cyprus can be a pioneer in the 4th Industrial Revolution.

 

Tuesday, 13 November 2018 – 9.30 a.m.
Filoxenia Conference Center


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