Financial Institutions Must Adapt and Innovate or Be Left Behind

Outdated systems are preventing one in four Asia Pacific banks from investing in disruptive technologies, says Greg Watson, citing a recent Fenergo survey.

New financial technologies are completely transforming the finance industry, shaking up traditional ways of thinking and reshaping financial services as we know it. As banks begin to explore the benefits of new technologies such as big data analytics and artificial intelligence (AI) they will soon reap the rewards of increased efficiencies and improvements to client life cycle management (CLM).

However, not all banks across APAC are getting on board. A recent survey showed that legacy infrastructure is preventing almost one in four (24%) banks in APAC from investing in new, disruptive technologies. This is a major concern considering the same survey showed two of the biggest issues facing banks across APAC are keeping on top of rising regulatory requirements (33%) and managing Know Your Customer (KYC) compliance issues (24%) – issues new technologies could help address.

This lack of investment in new technology, coupled with maturing infrastructures, creates barriers to digital transformation and puts banks who aren’t adapting at risk of being left behind. Stuck with old, manual processes, banks who decline to update their processes are faced with negative impacts on operational efficiency, client experience and, perhaps most urgently, a bank’s regulatory compliance positioning. And it hurts the bottom line too; 33% of APAC banks have lost clients due to inefficient, manual onboarding processes costing them approximately USDD 10 billion per year.

The same study also showed that 34 per cent of APAC banks surveyed have not invested in any technology to improve client onboarding at all, despite almost every single respondent (99%) agreeing that underinvestment in technology directly impacts client onboarding and retention.

Big Data Analytics and AI

For the banks experimenting with new technologies, big data analytics and AI are proving most popular in APAC, with 68% of banks having experimented with these respective technologies to improve CLM, closely followed by natural language processing (51%). Big data enables large and varied data sets to be mined for hidden patterns, unknown connections, new market trends and customer preferences. The outcome helps financial institutions and other firms to make more informed business decisions and better tailor products and services to customer requirements.

When it comes to KYC procedures – a major concern for banks across APAC – AI can speed up processes through intelligent document scanning, sifting quickly through a vast array of external data sources, and then creating a risk profile that it will keep current throughout the client life cycle. In anti-money laundering (AML), AI can not only reduce the slew of false positives, but also enhance alerts with additional data and potentially recommend next steps.

The Way of the Future

By investing in new technologies, financial institutions have the capacity to completely transform, becoming a flexible, scalable, information-based endoskeleton, which will enable them to change and evolve over time. Collaboration with disruptive regtech and fintech providers is one of the easiest ways for financial institutions to automate the flow of data and streamline compliance processes. Despite this, 44% of banks across APAC have still not taken that step.

There is no questioning the fact that financial institutions must adapt and innovate or be left behind. Yet, while so many banks across APAC understand the importance of digital transformation, the prevalence of decades-old technology is holding them back. To keep up with a digital-first client base, financial institutions must take a hard look at their technology stack and see how they can work with it – or rather, work around it. A flexible, configurable digital solution with a strong client-centric focus can help bridge the gaps and enable financial institutions to transform how they do business and maintain their competitive edge.

Greg is Head of APAC Sales and Global Head for Corporate & Institutional Banking at Fenergo.

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