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Panelist Commentary on Fintech in Healthcare: Partnerships & Regulatory Frameworks – 27 October 2017

Panelist Commentary on Fintech in Healthcare: Partnerships & Regulatory Frameworks – 27 October 2017

A commentary by Yang Yen Thaw on his views in the panel discussion on Accelerating Innovation: Partnerships & Regulations on the topic “Fintech in Healthcare”. The panelists were Yang Yen Thaw, Managing Director of 2iB Partners, Astrid S. Tuminez, Regional Director, Corporate, External, and Legal Affairs at Microsoft Southeast Asia, Wayne Chia from Asia P3 Hub and Azmul Haque, Managing Director of Collyer Law.

The Fintech for Health event was organized by ACCESS Health International.

 

Accelerating Solutions: Co Industry Innovation and Public Private Partnerships for Health Regulatory Frame Works for the Integration of Fintech and Digital Health

This commentary deals with the talk on Fintech in Healthcare conducted by ACCESS Health International Southeast Asia Pte Ltd – Accelerating Solutions: Co Industry Innovation and Public Private Partnerships for Health Regulatory Frame Works for the Integration of Fintech and Digital Health. The questions it sought to address were – Co-industry partnerships and public private partnerships are the way forward. How can new partnership models accelerate adoption of new technologies and business models? How does a partnership move from idea stage to execution stage, in a way that is beneficial to all parties involved? What factors increase the likelihood of a successful partnership?

 

Fintech in Healthcare: Introduction

Fintech is basically an intersection of financial services and technology. Fintech aims to deliver a seamless user experience both in terms of anytime access to finance and automated payments through the omnipresent mobile phone. Fintech seeks to address opacity, complexity, lack of competition, poor business culture, or high operational costs. It aims to apply disruptive technology to traditional handling of finance, transfers and payments. Further, new technology like blockchain and crypto/virtual currencies have the potential to reduce the cost of and replace transacting in a financial system. Aggressive enforcement of laws, money transmission and other regulations represents an ongoing threat to FinTech companies.

The future of fintech depends on ability to withstand competition from global banks, adaptability by smaller fintech companies and to regulatory framework.

Healthcare can be addressed in several ways. It covers the maintenance, care and restoration of health of body and mind and the process, procedures and methods thereof. Healthcare seeks to prevent, diagnose and treat health issues. Healthcare varies across countries, groups, and individuals and is influenced by social, economic and regulatory conditions. According to the World Health Organization (WHO), a well-functioning healthcare system requires a robust financing mechanism; a well-trained and adequately paid workforce; reliable information on which to base decisions and policies; and well-maintained health facilities and logistics to deliver quality medicines and technologies.

However, the future on healthcare will also be more focussed on the distinctions between healthcare and sickcare, wellness and fitness, patientcare and doctorcare. Healthcare as a matter of opinion is most often 95% doctor care and 5% treatment. So, while regulation of the 5% can cover technology and healthtech, the 95% should be around post-technology and can be a focus for fintech.

 

Of legal and regulatory matters relating to Fintech

Though there are no specific laws to govern fintech, legal application would be in the form of the individual laws themselves i.e., laws relating to finance and technology respectively. Further, laws that affect fintech are – data security and privacy, consumer protection, AML, ATF, insurance and securities. Complications will further arise when there are cross-border transactions.

The other issues that fintech face are sharing and storing of information. Control of information and its flow on personal mobile devices, coupled with sharing over cloud and other common platforms and storage platforms, may require additional security measures by law. Some countries provide approved cloud storage providers. While these do not solve data and security issues, it does mitigate some of them.

Fintech is proceeding at high speeds. As most laws play catch up as well as regulate established practices, regulating fintech is a very difficult process. Besides, it is not efficient to introduce laws and regulations in an industry where disruptive technologies themselves face danger of becoming obsolete or replaced by newer technologies.

 

Of legal and regulatory matters relating to healthcare

Healthcare policies is influenced by social, economic and regulatory conditions of a country and varies across organizations, groups, and individuals. Whether healthcare is a matter of public or private service is also a factor when determining regulations. In many countries, the issue of regulating indigenous or alternative healthcare play a significant role in addition to regulatory treatment relating to homeopathy and allopathy practices. For instance, traditional Chinese medicine, acupuncture, holistic medicine, Ayurveda are examples some of indigenous and accepted healthcare.

There are various agencies that regulate public and private healthcare at different levels. Private organizations also participate in the regulations by providing accreditation, rankings, certification and additional oversight. Areas covered include practitioners and facilities, information flow, legal compliance, safety and other areas in the healthcare industry. Regulations of other regulatory departments are also pertinent such as regulations relating to food and drugs, disease control and prevention and environment.

All areas of healthcare, including physicians, medical directors, healthcare computer technology companies, healthtech, healthcare facilities and pharmaceutical companies, are subject to regulatory review and compliance.

 

Fintech in Healthcare

Areas where fintech in healthcare, public and private, exist or have possibilities are in finance, funding, payments and other monetary issues in healthcare. In developed countries, healthcare will not be provided unless there is “proof of payability”. In developing and underdeveloped countries, “right to life” does not include passage to good healthcare in the Golden Hour.

There are many ways to tie in fintech to healthcare, but this involves active tri-partite participation between Government, healthcare and finance institutions. A tech product that “talks” to these institutions or provides an appropriate platform will improve and provide a more congenial regulatory environment.

Fintech generally covers the following of which many are applicable to healthcare.

  1. Banking infrastructure
  2. Healthcare lending
  3. Consumer lending
  4. Consumer Payments
  5. Crowdfunding for healthcare projects
  6. Equity financing in healthcare projects
  7. Financial healthcare research and data
  8. Financial transaction security in healthcare
  9. Institutional investing in healthcare
  10. International money transfer
  11. Payments backend and infrastructure
  12. Personal finance, insurance in healthcare
  13. Point of sale payments

Some finance services in healthcare cover:

  1. Lending services
  2. Remittance services
  3. Personal finance services
  4. Litigation financing – for doctors and patients alike (medical negligence)
  5. Banking services
  6. Crypto and virtual currencies (substitute funding and alternate payments)

Some payments in healthcare cover:

  1. Out-patients or walk-ins in clinics (daily basis)
  2. In-patients (depending on duration of stay – predictable)
  3. Critical patients (whose duration of stay – unpredictable)
  4. Operative patients (costs – variable)
  5. Wellness clinics (periodic basis)
  6. Geriatric patients (neglected group)
  7. Road traffic patients (identifiable/Good Samaritan based)
  8. Psychiatric patients (may/may not generate income)
  9. Pathology labs (investigations/reports)
  10. Ambulance services (emergency services)
  11. Medicines (delivered at home)
  12. Home-services (post op dressing/health monitoring)

The other related areas for fintech in healthcare are:

  1. Payroll to ancillary staff such as ambulance drivers
  2. Independent healthcare related professionals – medical representatives
  3. Cost monitoring for medical supplies
  4. Third party private healthcare – nurses, hospices, private nursing
  5. Technologies like Blockchain are also potential platforms that bring fintech and healthcare together
  6. Medical litigation financing
  7. Medical negligence cover
  8. Insurance

Some payment services currently operating in healthcare:

  1. Payment gateway providers
  2. POS payments-point of sale-maybe on premise or cloud based
  3. Credit payments
  4. Services running on credit – via banks
  5. Mobile apps
  6. Integrated mobile and browser apps

Of legal and regulatory matters relating to fintech in healthcare

The objective of both fintech and healthcare regulation is to protect the consumer or end user. In most jurisdictions, there is hardly any government agency to integrate any planning, financing, policy making or drafting any legislation relating to fintech and/or healthcare. Though there are no specific laws to govern fintech and healthcare, legal application would be in the form of the individual laws themselves i.e., laws relating to healthcare, finance and technology.

While consideration of legislation and law-making, life and property are given paramount importance. Therefore, most laws and regulations in these areas are stringent. Given that healthcare and fintech are primarily these areas, one can expect higher compliance and due diligence. In addition to specific laws governing healthcare and fintech, combined issues of personal data on finance, health statistics and privacy of individuals need to be considered. Healthcare privacy would also include right to be or not to be treated.

Regulatory approaches will fail to cope with the rapid pace of innovation in fintech and healthcare due to speed of development. It is not possible for regulations to imagine technological advances and introduce anticipatory laws and if regulations are considered with restrictions on a reactionary basis; that would stifle innovation in fintech and healthcare. In the financial crisis of 2008, the introduction of the Dodd Frank Wall street Reform actually galvanized small fintech companies to innovate and disrupt the financial system. It is much harder to regulate these companies. Big banks, in a bid to limit risk and compliance, many times outsourced financial services to these companies who would find ways to skirt regulation and compliance.

Progress in electronic pricing and trading technologies will enable fintech companies to even weave an inextricable web of derivative transactions in healthcare. It is not difficult to image fintech in healthcare bringing in instruments where medical and healthcare loans could be repackaged into instruments such as healthcare backed securities, collateralized debt obligations, credit default swaps and other second order derivative structures. Regulation challenges would be compounded. Tech companies could take advantage as negative fast and first movers to go into financial and healthcare/healthcare areas where there is no existing regulation. Many such companies also carry a very low asset to equity ratio and since they take advantage of the fact that transactions move at high speeds and low costs, they may even close down at the first hint of regulation with no option of recourse left to the user.

 

Public Private Partnership – Regulatory Possibilities

Fintech in healthcare will have different applications in different countries. In an ideal world, there should be universal laws that are common and govern countries universally. But this is not possible under the current geo-political climate. Each country will have a unique approach towards regulating healthcare and fintech. With borderless and seamless deployment of tech products, cross-border regulation is highly complex.

 

Regulatory Sandbox

The objective of a regulatory sandbox is to construct a well-defined space, for a limited duration, within which companies can experiment with innovative tech solutions in a relaxed regulatory environment and with the support of a national regulator. Rather than preventing failure, a regulatory sandbox seeks to provide appropriate protections to limit impact of failure. Regulatory sandbox itself is an innovation of sorts and have been around only for the past few years. UK FCA reports success in meeting its overall objective of reducing time and cost of getting innovative ideas to market.

Regulatory sandboxes may work well in a country such as Singapore where its citizens and corporates comply with the law. Similarly, the regulatory sandbox can be deployed in states or provinces within a country that have a strict adherence or zero tolerance to legal violations. It will also work well with established companies and big players. In fact, some regulatory sandboxes have a minimum financial entry level requirement. However, in many jurisdictions, individuals and smaller companies may prefer the open market. Some companies may explore loopholes that the current regulatory climate provides and exploit them. There is no assurance that these loopholes will be revealed in a sandbox. Some businessmen will operate on the premise that it is easier to seek forgiveness than permission from regulators. Where the regulatory sandbox is intended to be for toddlers to swim around before entering the ocean, the pool itself may be infested with sharks. A regulatory sandbox prima facie appears to appeal more to the regulators who want to analyse and understand a new environment and therefore prepare regulations and paperwork. The sandbox itself may not provide a live environment or appropriate market size to test the product. Almost like applying what an individual studied in school or college to real life. Plus, there is the perceived danger of a company believing it is on a virtual watchlist if it fails in the sandbox. Further, even if the company passes the sandbox, it may decide against deploying the product in that country.

Having said all that, the advantages of a regulatory sandbox are – equity financing and higher probability of receiving investments due to perceived regulatory compliance, speed to market, more reliable financial innovation to the consumer, understanding a local regulatory climate as well as the process – its ease or difficulty – in obtaining a licence or approval.

 

Self-regulation

Self-regulation by fintech companies in healthcare may be considered as an alternative. However, self-regulation must contain a caveat in that the regulators’ approval need to be obtained before deployment. The difference is operating in a live and an international market as well. Self-regulation can commence with intent of compliance by setting out internal policies, rules and regulations. Government can provide guidelines and principles. This collaboration can bring about corporate policies which may contain:

  • Management and personnel management, training, systems and controls
  • Scope of direct and indirect liability of product and outcomes
  • PR, sales and marketing processes; representations made
  • Standard terms and conditions
  • Statutory and regulatory compliance
  • Systems and control processes periodic review

Consequences of non-regulatory compliance would include regular regulatory scrutiny, criminal penalties and civil sanctions, public announcements.

Many fintech entrepreneurs are seasoned. By not limiting functions of a fintech company within a “sandbox” and without the fear of big brother watching directly, fintech companies can be allowed freedom and innovation. By limiting fast and immediate exposure to the market by the aforementioned collaboration, the regulators can anticipate potential problems with the fintech product. The friendliness of the regulator can be displayed in the approach to the self-regulation.

Private public interaction and collaboration should further focus on the following:

  • Help craft consistent, thoughtful regulation for fair use of products
  • Reduce inconsistencies in the scope and application of local regulations (state, province)
  • Standardization of regulatory and supervisory expectations
  • Advancing policy initiatives
  • Coordination between regulators themselves.
…and last but not least, a mandatory selfie with Astrid S. Tuminez, Regional Director, Corporate, External, and Legal Affairs at Microsoft Southeast Asia, Wayne Chia from Asia P3 Hub and Azmul Haque, Managing Director of Collyer Law!

For partnerships, speaker and general business enquiries with 2iB Partners:

Contact Person Dylan Tan
Designation COO
Email Dylan@2ibpartners.com

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Trend of Trends

Trend of Trends

There are many trends around the world but I believe that most trends center around one key trend. In the past 10 years, what was this key trend that drove the economy and reaped in billions of dollars in revenue?

There are some buzzwords; E-commerce, cloud computing, cord-cutting, social media etc. But all of these seem to converge to one common point – Mobile. From 2009 to 2016, smartphone sales grew a whopping 9 times! Where having that smartphone in your pockets now was nothing but a dream 15 years ago, now almost everyone has a piece of that technology.

Some key players that rode this trend are now trading at at least 900% from where they were. Some even grew approximately by 9000%. It is also noted in most annual reports in 2016 that a significant portion of revenue growth in advertising also now comes from mobile.

I believe however that there may be a new key trend emerging, one that will be more powerful than mobile (mobile will now be a part of that key trend) and will serve to become a good bulk of the economy in the world, also bringing forth a new set of tech titans.

The advent of AI, machine learning and deep-learning

The world of machine and deep learning has been advancing at a rapid pace ever since the invention of deep learning neural networks. Tensorflow for instance, is an opensourced software Library for machine intelligence developed by Google. At a high level, TensorFlow is a Python library that allows users to express arbitrary computation as a graph of data flows. Nodes in this graph represent mathematical operations, whereas edges represent data that is communicated from one node to another. TensorFlow is primarily used for deep learning in practice and research.

Google also disclosed recently that it has created a new venture fund dedicated to investing in AI and machine learning companies. Many other start-ups are also riding the wave of this technology that is potentially world changing.

Self-driving cars

Interestingly one of the main crux of the driverless car is having the ability for a camera to process, learn and identify real life images. The self-driving car market has been one that has been advancing at break neck speed yet somewhat unnoticed by law makers.

Law makers are now taking steady steps towards preparing for a driverless future. It is amazing what the future holds with companies like Ambarella and Google and what they have in store in the foreseeable future.

Automated processes

When tossed with a tech conversation, most knee jerk thoughts come in the form of job displacement. This is especially so in Singapore’s very much process-driven economy. It is possible that much of our processes have room for automation, however, does this necessarily equate to the loss of jobs? It is an ongoing debate for employees and entrepreneurs alike. With regards to employees and job automation, I believe the important thing is to engage a proactive and pre-emptive strategy.

Many are concerned over the loss of the human element, termed the emotional economy and perhaps a loss of jobs. What I believe is that old skills are not disappearing but rather evolving. Marketing for instance has gone through many phases- physical advertisements, direct sales and now social selling following the digital uptake. There weren’t any digital marketing or SEO specialists jobs years ago. That being said, even with all these tools like Buffer, various automation and scheduling tools, good marketers who know their craft, know how to personalize and add the human touch to their messages. However, while the skills remains somewhat similar, there is a re-invention of it.

Similarly, for recruiters, there are now matching automation tools but that should not disrupt, instead it should make the recruiter more effective. There still needs to be the human element nevertheless. Hiring an employee by merely checking boxes is a recipe for disaster. A proper recruiter should make subjective judgements of cultural fits and many other qualitative and subjective factors.

Smart production and manufacturing

We are now embarking into the industry 4.0 where computers and automations will come together in a completely new way with lesser inputs from humans. Smart factories or Smart manufacturing aims to take advantage of advanced information and manufacturing technologies to enable flexibility in physical processes to address a dynamic and global market.

Smart manufacturing also utilizes big data analytics, to refine complicated processes and manage supply chains. Advanced robots and machinery operate autonomously and can communicate directly with manufacturing systems. Furthermore, these robots also have artificial intelligence that allows them to learn from experience. While exciting, I am genuinely picturing the I, Robot scene (2004).

Apple recently announced it’s intention to invest USD1bn into a US advanced manufacturing fund. Many other bigger manufacturing companies are also investing into smart technologies to make manufacturing more efficient. Supposedly, with the build up of these new types of factories, there will be more jobs created as service providers will build around these factories.

Big Data

It is said that 90% of data has been created over the past 2 years. If that is the case, in 5 years, the cost of managing big data would be too immense and costly using normal practice. Typically, organizations simply spend bigger and bigger checks to invest in bigger more robust servers. Now there are more efficient way to process and manage big data. Cloudera is a US-based company delivering the Apache-Hadoop based software. They see themselves as a modern platform for machine learning, advanced analytics and a deliverer of a modern platform of data management. -Apache Hadoop is an open-source software framework used for distributed storage and processing of dataset of big data using the MapReduce programming model.

Chips

With self-driving vehicles, cryptocurency and machine learning on the rise, the companies producing high end graphic chips and processing hardware are more in need than ever. Bitcoin made cryptocurrencies popular in recent years, but newer technologies, including Ethereum, have sparked a wave of mining using high-end gaming graphics cards. If the self-driving cars hits the roads and goes into mass production, companies like Nvidia should be raking in millions (which seems to be what investors are expecting).

Blockchain

Blockchain technology was originally developed as part of the digital currency Bitcoin. But the 2 are not the same. Blockchain can support a wide range of applications and it’s already being used for payment services, supply chain tracking and more.

In essence, a blockchain is a record of transactions, a digital ledger. These transactions can be any movement of money, goods or secure data—a purchase at a clothing store etc. It is designed to store information in a way that makes it virtually impossible to add, remove or change data without being detected by other users.

Today, transactions are verified by a central authority—like a government or a bank. Blockchain re-distributes this power since verification now comes from multiple users achieving a consensus.

Blockchain has the potential to change transactions, interaction with the government and verification of authenticity of everything from potatoes to shoes. It combines the openness of the internet with the security of Cryptography to give everyone a faster, safer way to verify key information and establish trust.

Blockchain’s potential is real but the technology is still in its early stages. Before it can be widely adopted, it will have to overcome a number of hurdles to maturity. One good sign towards maturity is the increased compliance required by SEC (US) and MAS (Singapore).

Where does this bring us?

I am of the opinion that the future is shaped by our collective imagination, efforts and experience. From a business angle, we need to stay ahead of these trends and have the right plan for the future. The sweet spot lies in the ability to combine traditional business practices with innovative technology without losing the human element. For this, we need large, tech saavy yet nimble and dynamic companies – the “super firms” of the future.

From an employee point of view, more proactive and pre-emptive steps may be required in order to stay relevant. Who knows, with the implementation of smart contracts, even lawyers may need to code!

 

-the following is purely an opinion and does not constitute advice of any form.

 

Dylan Tan – Director, 2iB Partners

 

For partnerships, speaker and general business enquiries with 2iB Partners:

Contact Person Dylan Tan
Designation COO
Email Dylan@2ibpartners.com

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The 4th Industrial Revolution and what does the future look like for SMEs?

The 4th Industrial Revolution and what does the future look like for SMEs?

The Conglomerate

The 1960s saw a plethora of conglomerates being used to raise finance with low interest due to their risk diversification and other factors. It was also glamorous to be seen owning diverse industries, like Woolies or Woolworths Group in UK. Free cash flows providing risk capital for investment and cross-selling between customer databases were some of the advantages. However, this was short lived as the conglomerate could not keep up with inflation, interest rate and manageability. It was difficult to sustain or justify the share price in the market. Conglomerates began consolidating, de-merging and returning to their core competencies.

The problems with conglomerates were many – cash management, costs, cross-subsidies, increased layers of often diverse management, decreased transparency in accounting and cash position, bureaucracy, inertia and difficulty in calculating true value of the stock. Spin-offs of subsidiaries of conglomerates to counter disruption or effective evaluate them were options, but too expensive to even consider. The conglomerate was no longer serving its purpose and are fast becoming disrupted with technology which contributed with increased confusion over digital, big data and data analytics due to their diverse nature. Take for instance conglomerates like Kodak who were too arrogant to recognize simple disruption by refusing to acknowledge digital photography.

The Digital Revolution

According to the World Economic Forum – “The First Industrial Revolution used water and steam power to mechanize production. The Second used electric power to create mass production. The Third (3IR) used electronics and information technology (technology) to automate production. Now a Fourth Industrial Revolution (4IR) is building on the Third, the digital revolution that has been occurring since the middle of the last century. It is characterized by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres”.

Technology brought about a new age of small businesses with big changes. Changes disrupting conglomeration. 3IR brought in a new age of entrepreneurship. Individuals began their own businesses. These companies brought in techies, nerds and geeks together to begin small but disruptive companies. The internet boom and bubble were born. With computers and the internet, the 3rd industrial revolution (3IR), everything began to change. Disruption. Information along with services and products were delivered at the doorstep. But traditional SMEs were scrambling to stay relevant. They still are.

4th Industrial Revolution

Riding on 3IR, the 4IR is further bringing in individuals who are fast embracing individual businesses or companies led by a key handful of people. Concepts like AI, AR, VR, IoT, robotics, autonomous vehicles, 3-D printing, nanotechnology, biotechnology, materials science, energy storage, and quantum computing merge the virtual with reality. Changes which used to take years are now converted into months and weeks.

Industries today are fast becoming disrupted with these technologies which are capable of rendering many, conglomerates and individuals alike, jobless. Typical cases in big companies were Novar plc and those mentioned above. However, even though businesses based on 4IR were disruptive on human capital, their valuations were based on projections and investments and not on the value of the company itself. Cost of the company was the exit potential it provided; mainly in trade sales or the holy grail of startups – the IPO. Technology might very well be a victim of its own success.

The Disruption

Many traditional industries which are primarily process driven, face problems of survivability and sustainability. Many are content to compete for the ever-shrinking market. While few key players continue to survive, ones without USPs or MSPs, are in clear and present danger of folding up. 3IR and 4IR provided power to the hands of small businesses and individuals. It became the great equalizer. What a small startup or SME can achieve in a few dollars would take a larger corporation weeks or months and a high budget. The digital revolution disrupts businesses and populations. Tech companies too have their own problems. Management and perception issues like those faced by Uber in the US and Housing.com in India. Wisdom and maturity are key issues ignored by these fast companies.

Advanced countries that have trained its citizens on process based thinking are in immense danger of having their jobs displaced by technology. While large companies build their own technology in-house, the problem is the objective and objectivity. Such companies have a specific direction and the in-house department solves that. Many a times the universality of application of that technology is lost. Not so with the smaller guys. Their problem-solving ability is more objective. More global. They begin ideating with the objective of scaling up, internationalizing and disrupting. But great care must be exercised with in-house tech or a tech acquisition. There are many failures such as Mattel Inc’s 1999 $3.6 billion acquisition of The Learning Company; who can forget Napster, a company in its death helped monetize customers for companies like Apple and Amazon; and my own personal favourite, Palm.

The CoAggregation

There is a solution. What is the future for SMEs if it cannot be a conglomerate or ride on 3IR and 4IR? A CoAggregate. Where smaller companies or SMEs in the same or similar sector create a larger company and co-own it. So as the age of conglomerates descend, the startup/entrepreneur/SME must also evolve. Both these forms of business need to adapt rapidly with changing their business models, collaborate, innovate and future-proof disruption. They need to survive and sustain. A process where the SMEs get together and co-own a larger enterprise while pursuing their own company interests. Creation of a matrix of complementary in-line companies – that are intertwined and where they are of the highest relevance to each other – ensures survivability and sustainability. Just as senior more experienced workers can impart invaluable experience and wisdom to millennials and millennials provide drive and innovation to the experienced, so also do traditional SMEs provide the valuable input to new and modern technologies and the latter provides not just customized, but a much broader perspective to industry applicability. Technology SMEs need the wisdom and maturity of the traditional SMEs. They must expand their business universe – together.

They must “CoAggregate”.

Yang Yen Thaw Managing Director, 2iB Partners

For partnerships, speaker and general business enquiries with 2iB Partners:

Contact Person Dylan Tan
Designation COO
Email Dylan@2ibpartners.com

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