How digital technologies will affect the future of finance in Asia-Pacific
Like many other sectors, the financial services industry has undergone profound change in the past few years. Along with unprecedented disruption have arisen opportunities from a new digital frontier where things are far from business as usual.
In a competitive field, digital banks have muscled in to challenge traditional players. Online is the main medium of transaction today, with e-commerce and payments driving the change. Customer service is increasingly fulfilled by bots that learn from AI-powered engines.
These trends, seen across the world, have also become common across Asia-Pacific. Though the region is diverse in terms of demographics and infocomm maturity, there is no question of the digital-first momentum that has been building up in recent years.
In Southeast Asia alone, the digital economy is expected to hit US$1 trillion in value by 2030, according to a yearly study by Google, Temasek and Bain & Company. To meet this demand, deep, impactful transformational efforts are needed across the finance industry’s various subsectors.
Payment gateways have to be upgraded to run 24/7 to ensure transactions go through smoothly and settlement is
near-instantaneous. For securities, stock exchanges have to be trusted to continue operating and transacting during periods of high-volume trading.
Meanwhile, retail banking, in meeting rising customer expectations, has to tap on AI to “force-multiply”, for example, to answer queries and fulfill online requests from customers.
At the same time, core banking, which connects so much of today’s financial services, is an area that is in need of upgrades as well. Many banks are finding that decades-old legacy systems are becoming exceedingly difficult to maintain and meet modern digital requirements.
With this rapid digitalization, new challenges have arisen as well. When so much is on the line, it is no wonder any disruption or outage in a financial services company’s digital services has huge impact today.
Just as crucial is security. Financial services have traditionally been highly regulated, which has led to high levels of data protection and robust cyber defenses.
However, defending one’s castle with a moat is not enough – today, financial services companies have to worry about their customers being defrauded by a variety of scams, which could arrive on victims’ personal devices and seamlessly penetrate the cyber defenses put in place by a bank.
Worryingly, Asia-Pacific has emerged as “ground zero” for cybercrime, according to a report by Check Point Research. The region witnessed the highest year-on-year increase in weekly cyberattacks during the first quarter of 2023, averaging more than 1,800 attacks per organization. This is higher than the global average of 1,248.
In Singapore, for example, law enforcement and financial services companies have worked with technology vendors and telecom operators to reduce the risk for customers.
Google has blocked malicious apps from being installed on Android phones while the country’s telcos have restricted the use of SMS handles to avoid spoofing by cyber criminals.
In an interconnected world, financial services companies clearly cannot do everything alone. Working with partners in the technology field, even fintech startups that are seeking to disrupt the market, is a surer way to keep abreast of change and tap on emerging opportunities.
Key digital transformation aspects that finance services companies should seek to improve in the coming months and years include:
Omnichannel banking
Providing customers with an integrated, seamless experi- ence across various channels, such as online banking, mobile apps, ATMs and physi- cal branches.
Personalization
Making use of data analytics, AI and machine learning (ML) to tailor products and services to individual customer needs and preferences.
Automation and process optimization
Implementing technologies like robotic process automation (RPA) and AI to streamline internal operations, reduce costs, and enhance efficiency.
Data-driven decision making
Utilizing big data analytics an advanced algorithms to make informed strategic decisions, optimize risk
Collaboration with fintech, opening banking
Partnering with fintech startups and embracing open banking initiatives to foster innovation, improve customer experiences, and expand service offerings.
This means simpler interfaces and integrated capabilities that enable a financial services company to better provision new services and scale up to meet changing business needs.
This means bringing the cloud experience of their organization’s apps and data to wherever team members may need them. Whether they are connecting from home or at a branch in another country, they should be able to tap on the digital resources that enable them to carry out their work effectively.
This means simpler interfaces and integrated capabilities that enable a financial services company to better provision new services and scale up to meet changing business needs.
Even for an industry that needs no introduction to the importance of uptime, the expectation of high availability has risen in recent years. A short downtime of hours is highly unfortunate, but any longer and it could attract regulatory scrutiny and penalties. Even high-profile, well-regarded digitally savvy banks have faced unexpected downtime.
Notably, government regulators have started imposing significant penalties for banks that do not meet standards for uptime. In Singapore, for example, repeated and prolonged disrupted to banking services have led to a months-long pause to non-essential IT changes for a bank.
The solution is to provide fault-tolerance in a growing part of the critical infrastructure. From the cloud to the data center to the edge, financial services firms have to broaden the idea of availability to larger parts of their highly complex digital setup.
The answer must be a solution that is simple to install and manage, protected from faults through self-monitoring and healing, and autonomous enough to seamlessly failover to avoid downtime.
These are not new to the sector since ML has been used to detect fraud for several years now, by analyzing vast amounts of transaction data in real-time to identify unusual patterns and suspicious behavior. However, recent improvements in Gen AI with larger data- sets can bring even more benefits.
Chatbots no longer have to remain static but can be trained on recorded interactions from customers to refine their responses to be more relevant and useful in future. With training, they can provide more helpful assistance by deepening their understanding of a bank’s services and products, as well as its processes, to enable customers to find an answer more quickly.
Need to identify clear path
In their continuing transformation journey, it is not unusual for financial services companies to be pulled in different directions from time to time. As technology refresh cycles shorten and digital priorities evolve, they have to adapt to new needs while keeping their focus on the business outcomes to be achieved.
With the right strategy in place and an awareness of the changing landscape, they can tap on the right technology to meet new challenges head-on. This will enable them to ride on a wave of change to exploit the opportunities arising from it.
