Next-gen tech is speeding up financial sector change in Asia

Financial institutions in the Asia Pacific have been accelerating efforts to utilise the ABCDs of innovation – artificial intelligence (AI), blockchain, the Cloud and digital; indeed the region is often the most or second most advanced in terms of tech adoption

by David Becker
Next-gen tech is speeding up financial sector change in Asia
A digital network of connected online cloud storage. 3D image by Christoph Burgstedt/ Science Photo Library via AFP.

(ATF) Despite the massive disruptions that have taken place this year with the pandemic, in many sectors innovation has seemed to only accelerate as businesses seek to return to growth.

At Broadridge, we have sought to understand such trends through market surveys and direct client engagement, to see how leaders in the global financial industry have approached technology adoption and its role in driving business transformation. 

What has become clear is that financial institutions in the Asia Pacific (APAC) region this year have been accelerating their efforts to develop and leverage next-gen technologies including artificial intelligence (AI), blockchain, the Cloud and digital – What we call The ABCDs of Innovation®. 

Over the summer, Broadridge published its Next-Gen Technology Pulse Survey of c-suite executives and their direct reports from 500 financial institutions across APAC, the US and Europe Middle East & Africa (EMEA). Subsequent assessments and ongoing conversations within the industry have demonstrated that the ABCDs remain a key driver of innovation and transformation in APAC. 

On a global basis, APAC is often either the most or second most advanced region in terms of technology adoption. In each technology area, a unique combination of business focus and external factors have come together to drive progress. 

Here is where we have seen such trends emerge across the region –  

As a result of the pandemic, many firms have reprioritized their longer-term investment strategies. The challenges of adapting to the new normal are driving firms to accelerate these strategies into nearer-term priorities: 

·      54% globally plan to increase investment in artificial intelligence;

·      60% in APAC will focus on increasing automation of manual tasks through AI and robotic process automation; 

·      58% of those surveyed globally plan to increase investment in interactive digital technologies;

·       52% in APAC plan to improve their ability to quickly gather and analyse data moving forward; 

·      50% globally agree that the pandemic increased the need to mutualise – in other words, share or outsource – processing functions to reduce costs and increase resiliency; 

·      60% in APAC will look to enhance digital communications for clients across multiple channels.

APAC’s emerging leadership in next-gen technologies

Among these trends globally, APAC firms have also shown some of the highest levels of adoption across ABCD technologies.

When asked if their digital transformation was either at a planning, early, mid or advanced stage, 53% of financial firms in APAC said they were at an advanced stage, compared to just 45% for EMEA and 49% for North America. Early in the pandemic, APAC led the global shift towards work-from-home arrangements. Since then, there has been a consistent urgency to digitize as many business functions as possible. 

On AI strategies, APAC firms are closely aligned with their US peers with 43% and 44% respectively at a mid or advanced stage of adoption, compared to 38% of EMEA firms. AI adoption among financial institutions has focused on data mining and post-trade processing, as well as market analytics and trading systems. APAC institutions, being mobile-native and data driven, are strongly positioned to remain among the fastest adopters globally.

This trend of adoption was similar for cloud strategies, with 40% of APAC and 42% of US firms saying they were at an advanced stage, compared to only 28% of EMEA firms.  As cost pressures and regulatory requirements grow, the Cloud has become an integral platform to adopt next-generation technologies and increase efficiencies across capital markets, wealth and asset management, and banking.

Distributed ledger technology and blockchain have seen slightly more divergence in adoption with 61% of APAC and 70% of US firms either planning or currently in the process of adopting blockchain technologies. At the same time, however, the technology has moved well beyond the proof of concept stage to serve as a practical solution for the buyside and sell side to improve resilience.

At a higher-level, the pandemic has also changed the role of fintech providers.

Some 70% of survey respondents have stated that fintech providers' ability to offer innovative uses of next-generation technology has become more important. This is crucial for us at Broadridge, as close partnerships are needed to ensure innovative technologies can be effectively implemented to simplify complexity and help improve resilience. 

The road ahead for a return to growth

Looking at where technology adoption has played a key role across the financial industry thus far this year more broadly, we can draw a few conclusions.

First, financial services firms have demonstrated a strong ability to adopt new approaches during the pandemic in order to remain resilient and serve their clients effectively. Both past and active investments into digital, cloud, and mutualised technologies have likewise demonstrated their importance in maintaining business continuity through a highly uncertain period. 

Second, the pace of digital transformation is continuing to accelerate everywhere across all segments of financial services. Firms want to drive digitisation and mutualisation much more fundamentally to improve client experience, resiliency, and cost. 

Finally, different regions increasingly have different expectations around the outlook of an eventual recovery heading into next year. Following the return to flexible office arrangements in APAC, there has been more optimism around how business continuity and growth can be maintained as Covid-19 continues to be managed across the region. 

At the same time, the lessons in innovation and flexibility from remote working earlier in the year will likely mean the region remains a world leader in technology adoption and innovation going forward. An ongoing driver of this will remain APAC’s forward thinking central banks and regulators that are helping shape the future of how technology can best be used to improve financial markets, with organizations like HKMA, MAS, ASX and others as prime motivators for the industry.

As we explore these themes in conversations and related studies over the coming months, Broadridge will continue to offer next-gen technology solutions for financial institutions that help transform their business and get them ready for what lies ahead in an uncertain world.

# David Becker, Head of Asia Pacific, Broadridge Financial Solutions

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