In an era where data is paramount, financial institutions, banks, and investors in Southeast Asia are increasingly harnessing artificial intelligence (AI) to enhance decision-making processes. The proliferation of advanced technologies—such as machine learning (ML), natural language processing (NLP), and generative models—has revolutionised the financial sector, allowing firms to extract deeper insights from vast datasets.
As algorithmic trading becomes more prevalent and big data analytics informs investment strategies, the competitive landscape shifts toward those who effectively utilise data.
A Deloitte report predicts that AI will likely determine the banking and capital markets sector’s winners and losers in the coming five years. The journey has already started.
Drivers of increased data use
In his book Bank 4.0, author Brett King says traditional banking structures are becoming obsolete due to emerging technologies and changing consumer behaviours. He posits that the banking of the future will be embedded in customers' daily lives through technology.
Kelvin Cen, head of Southeast Asia at Bloomberg, comments that data is the lifeblood of the financial sector and there are many ways to apply different forms of AI in the industry – including machine learning (ML), natural language processing (NLP), information retrieval (IR), time-series analysis and generative models.
“We’ve seen the rise of algorithmic trading in stock markets and big data being mined to inform investment decisions. Artificial intelligence is now being applied to a greater degree to gain even deeper insights that can aid in financial decision-making,” he continues.
According to Cen, machine learning algorithms are being given the task of identifying patterns and predicting market trends, while generative AI can analyse news, social media, and other unstructured data sources that can give analysts an edge to quickly uncover deeper insights on markets. “The financial world is more data-driven than ever before and those who make clever use of data have a significant market advantage,” he concluded.
Southeast Asia's data investment surge
Cen believes that the use of AI is expanding rapidly as Southeast Asian firms seek the productivity gains the technology can offer. AI-related investments will likely continue to accelerate going forward.
“One trend we can already observe is the shift towards multi-model AI, such as text-to-programming and even voice presentation. This capability is gaining traction as organisations look to scale AI applications across their entire operations.” Kelvin Cen
Cen suggests that the key to all of this is having high-quality, holistic and timely data as a foundation. “While experimentation with AI is progressing rapidly, many companies in the region are prioritising their data infrastructure. They’re investing in ensuring that their data is cutting-edge, with a strong emphasis on privacy and security,” he continues.
Cen posits that many market participants regard AI as a medium-term play. “While the ground keeps shifting on the technology itself, the data that firms invest in today will provide them with a competitive advantage regardless, enabling access to future tools and applications – AI or otherwise – that are not yet available,” he remarks.
Growth areas in SEA’s financial services
Cen posits that Southeast Asia's financial services industry is experiencing robust growth, driven by factors like strong economic performance, diversification into new sectors, and improved investment accessibility.
Emerging markets like Indonesia, the Philippines, and Vietnam are witnessing increased demand for retail banking and consumer finance products. Beyond consumer finance, areas such as impact investing and active wealth management are also gaining traction.
“We’re seeing technology and the access to quality data are together creating a more favourable investment environment, attracting businesses and investors to the region,” says Cen. He declares that Indonesia, Thailand, Vietnam, and the Philippines are increasingly attractive to investors due to their relatively robust economies, burgeoning middle classes, and growing consumer demand.
“Southeast Asia's attractive investment landscape, coupled with public infrastructure spending and data-driven investment strategies, offers promising opportunities for businesses and investors,” he continues.
Unique but similar: notable distinction among competitors
Asked whether he sees a notable distinction between banks, financial services and insurance firms, Cen comments that traditionally, banks, financial services firms, and insurance companies have operated in distinct sectors.
He explains that banks have primarily focused on deposits, loans, and payments, while financial services firms have specialised in wealth management and investment advice. Insurance companies have traditionally been more risk-averse, adopting new technologies at a slower pace.
“The financial services industry is undergoing a significant transformation driven by factors such as technological advancements, regulatory complexities, increased competition, and evolving customer expectations. Asia is a hotbed of innovation so consumer expectations echo this,” he goes on.
Cen remarks that electronic trading and digitalisation are becoming essential for firms to remain competitive and meet customer demands. He further adds that financial institutions are also investing heavily in technology to automate their processes and improve their efficiency. “This shift is expected to continue in the years to come as technology continues to advance and regulatory frameworks evolve,” he adds.
Regulatory catch-up
According to Cen, many Southeast Asian countries are strengthening their AML frameworks and regulations. He cites calls out Singapore, as an example, that continues to cement its position as a financial hub by focusing on safeguards against financial crime, including money laundering and terrorism financing.
Cen points to a growing trend of increased cooperation between Southeast Asian nations, given the interconnectedness of their economies. He further comments that cybersecurity laws are also being strengthened.
“Progress is being made on this front and it is important policymakers and industry continue working together on cybersecurity regulations, given the cross-border nature of cybercrimes and the need for interoperability to prevent regulations conflicting across jurisdictions,” he adds.
Role of technology in Asia’s FSI sector
“We see all forms of AI helping with digital transformation in finance. This includes the streamlining of workflows (i.e. maximising efficiency), surfacing of significant business insights (i.e. alpha generation and revenue opportunities) and reducing operational errors,” says Cen.
He observes some firms prefer to develop smaller models instead of building their large language model (LLM). “It’s a more economical approach to AI investment and gives them the nimbleness to pursue valuable use cases. AI will enable new business models in financial services and help strengthen fraud detection and security,” he continues.
Cen believes it is early days to know how AI applications and the sector will develop but the surge in AI adoption over the past few years shows it’s something that sophisticated market players are investing in going forward.
