Since March 2020, the region has been undergoing varying degrees of lockdown, compelling most of us to find new means to accomplish everyday tasks. Grocery runs suddenly became contactless drop-offs and social gatherings were reduced to video calls. Work and school were confined to the recesses of our home, and the internet-enabled new passions from baking to gardening. The dramatic shift launched one of the biggest adoption booms in the internet economy’s history, leaving traditional industries, such as financial services, either on a launchpad towards digital success or digital oblivion.
Over the years, we have witnessed a steady adoption of open banking, neobanks (digital-only banks), and digital assistance banking – all driven by consumers’ need for seamless, frictionless experiences. But the pandemic left many across the region with no option but to try these services for the first time, and it’s unlikely these new users will return to analogue, less convenient ways to bank. So, what are some key trends that are revolutionizing this traditional industry into the industry of tomorrow?
The biggest trends that continue to share up the financial services industry:
- Open banking initiatives continue to grow. Many across APAC remain unbanked (73% in Southeast Asia and 58% in South Asia) and its governments have been applying a gentle but firm regulatory push for adoption. Additionally, many cultures in the region are relatively accepting of sharing their information across institutions, all which have poised the region to become a leader in open banking. In fact, Singapore has been leading the way for financial inclusion with its Singapore Financial Data Exchange (SGFinDex), which allows users to leverage their ‘SingPass’ account to retrieve their personal financial information across the country’s banks and government agencies.
- Neobanks are gaining momentum. Neobanks continue to drive further segmentation in the market, especially in a year that reinforced the need for availability, access and control over digital banking interactions. Originally designed as single-product services, some Neo’s now outperform traditional banks in customer service, product offering, and even margin. According to the IDC and Backbase report, 63% of APAC customers will be willing to switch to a Neobank or a challenger bank (smaller than a traditional bank but not entirely digital) in the next five years.
- Digital assistance enters the mainstream. A growing number of banks, such as Singapore’s DBS and New Zealand’s ANZ, are turning to AI-powered digital assistants to help tailor solutions for their clients. In 2020, more people than ever before sought the help of AI-powered interfaces to solve their banking inquiries, slowly edging these platforms towards mainstream acceptance.
- Record year for financial fraud. Digital adoption enjoyed a steep curve last year, but unfortunately, financial fraud was also rampant. Threat actors have been targeting the industry for years now and in 2018, the World Economic Forum claimed that fraud and financial crime is a trillion-dollar industry, and institutions lose nearly three dollars for every dollar of fraud (once associated costs are added to the fraud loss itself).
Implications: What’s next for financial services organizations?
With these trends in mind, here are some key takeaways for organizations to be agile, flexible and scalable:
- Accelerated cloud adoption: Over the years, cloud adoption in the finance sector has been limited, but last year was a turning point. The scale of new users who turned to digital financial services reached a tipping point. As a result, many digital-only players scaled to new heights while regulators and traditional banks had to embrace digitization and even accelerate their own pace of innovation.
- The undeniable need for AI: Still in its early days, the applications of AI in the banking and finance sectors are just starting to prove their effectiveness. AI can help improve banking processes, tailor offerings to best serve the customer’s needs and approve loans and new accounts almost instantaneously. In the case of surveying a loan applicant’s credibility, AI can provide insights about the applicant, including their financial history and the likelihood their loan will default, all while methodically surveying for and flagging any potential fraud.
While this represents opportunities for organizations to modernize infrastructures, optimize digital transformation and strengthen their security posture, it comes with its own set of challenges that needs to be managed. With an increasingly complex application landscape, the task of transformation becomes even trickier to navigate.
In an ever-increasing digital world, agility to seize new opportunities is the difference between success and failure. In the coming weeks, we will be bringing together thousands of security and network professionals, developers and architects for our flagship event, Agility 2021, to discuss the latest innovations and ideas in application security, delivery, and infrastructure.
From discussion forum on Kubernetes app risk identification to application flow control lab sessions and interactive demonstrations on securing modern apps at the API level, the content shared at Agility 2021 will deep dive into great details on how best to deliver exceptional digital experiences to your customers.
Want to find out more about what you can do to deliver agility and seize opportunities in your organization? Register today!