Despite early apprehensions about an economic recovery in 2024, we continue to see investments in digital transformation initiatives within the financial services sector in Asia. We also continue to see digital services rising on the back of understanding and adopting technologies like analytics, cloud, and mobility. A targeted outcome, though, continues to be around efficiencies, convenience, and accessibility.
However, some innovations, like artificial intelligence and digitalisation in general, bring new risks in areas like cybersecurity, operational resilience, and ethics.
In this podcast for FutureCIO, Joseph Lo, head of enterprise platforms at Broadridge, shares his views on what he sees as vital financial services transformation trends in Asia in 2024 and perhaps beyond.
State of the financial services industry in Asia
The Asian Business Review reported that in 2024, companies will increasingly embed financial (EmFi) services in their core value propositions. It projected APAC as the most promising EmFi region globally, with a total revenue potential of 305 billion USD in 2025.
Along with Lo's observation that the financial services industry and financial technology are booming in the Asia Pacific (APAC) region, he also observes an enthusiasm for using AI for data analysis, visualisation and personalisation of customer service.
"With the advent of mobile apps and tools, consumers expect digital personal AI-based experiences. The reality is financial services firms can't personalise that customer experience without strong digital foundations and mastery of their data," he added.
Lo remarked that most businesses in APAC try to achieve a balance between meeting increasing customer demands and managing their data house while maintaining their desired velocity.
Addressing rising risks
As the financial sector evolves with technology, so do the risks. In addressing the rising risks associated with using new technologies, particularly generative AI, Lo said that people are concerned about "information that sounds right but is wrong, privacy, and how the data could be used inadvertently."
He said that users also fear the potential of generative AI to say or do things that are against an organisation's policies and practices and its rising costs.
"We're seeing that the firms doing this right are centralising their AI capabilities around centres of excellence with experts that can scale based on the clients' ambitions. It allows guardrails on multiple dimensions to handle information and risks related to compliance, protecting customers' privacy," explained Lo.
He said some firms have data usage governance councils, a dedicated group that reviews all available and useful data to create a personalised customer experience.
Pushing innovation boundaries
With a highly regulated financial services industry, Lo said leaders are taking an interesting approach to welcoming emerging technologies. They focus more on practical applications than introducing AI-powered innovations in heavily regulated areas like investment advice or detailed financial analysis.
"They recognise the importance of considering specific customer situations and goals to do that. So, they're leaving that on the table for now and instead leverage AI for basic tasks like summarising meeting minutes, drafting outreach emails, and accelerating software engineering projects. This broader use of AI enhances productivity and efficiency, showing that successful firms use AI across the board for internal operations and customer-facing services," the Broadridge executive said.
Lo concurred that the financial services sector could use emerging technologies like AI to optimise operations.
"Think about all the processes where paper or an email come in, and you do something with it. But what if the AI can help understand what that email is about and do that faster? Or when you see a customer, you can use the AI to gather the information about the customer," he said.
Lo believes it is vital to integrate legacy systems with newer technologies while addressing safety issues. As much as he admires the original cloud-like computers, he thinks modernisation is necessary for real-time data availability and integration.
Citing Broadridge as an example, Lo said they "make tactical upgrades, focusing on real-time needs like bookkeeping, transaction processing, and order management. We create wrappers around functions and modernise over time based on customer needs".
One of the strategies the company enacted 3-4 years ago is a common data model that normalises and labels data flowing through their systems for consistent integration. He said the process helped them keep pace just in time to launch their products.
Key issues and trends for CIOs
Lo cited a Broadridge survey of 500 CIOs and senior executives in 18 countries about Fintech expectations for 2024, which highlighted a strong emphasis on moving critical workloads to the cloud, cybersecurity, and AI in the APAC region.
"While firms recognise AI's importance, they are cautious with generative AI, adopting more of a wait-and-see approach. Our survey showed 81% of APAC firms believe AI will significantly improve customer experience, so that tells you where people are," he reported.
He also cited a growing competition for digital talent, which he believes is crucial for successful digital transformations.
"Only 22% of APAC firms have reached advanced digital transformation stages, so they're looking for people who understand and have done this before," Lo said.
Click the PodChats player to hear Lo discuss the digital transformation initiatives within the financial services sector in Asia:
- What is the state of the financial services industry (FSI) in Asia today? To what extent has digital transformation become the norm for these?
- How are FSIs balancing the aspiration to go digital against the need to deepen customer connection?
- As banks evolve (and mature in their use of technology), some risks get amplified. How are banks addressing the risks that come as a result of going digital/modernisation?
- The FSI is one of the most regulated sectors. How do FSIs push the boundaries of innovation using emerging technologies like AI while recognising that any innovation needs to be aligned with regulation?
- There is genuine interest in adopting new technologies like AI. How should FSIs, particularly those with legacy systems and technologies in place, safely address the issue of integrating new technologies with legacy ones while minimising any potential disruption?
- In recent years, we've seen a spate of disruptions at major banks in Asia, many of which are due in part to technology and/or process issues. Are today's systems and processes so complex that they lead to unplanned disruptions? What can be done to minimise/mitigate these?
- What critical issues and trends will CIOs need to know in 2024 and beyond?
