Driving digital into the heart of Asia's financial ... · 2 Driving digital into the heart of Asia’s financial services industry. The financial services industry is at the heart

Driving digital into the heart of Asia’s financial services industryThe (uneven) road to an integrated future

Research partner

Foreword 1

1 Role of digital in fueling the ASEAN potential 2

2 The technologies that bind — embracing financial inclusion 4i. Digital adoption ii. Digital partnerships iii. Responding to the FinTech threat iv. Bracing for (digital) disruption v. Reaping the rewards of digital disruption vi. Agility in the customer experiencevii. Harmony in ASEANviii. Integrating ASEAN’s digital economy

3 Into the looking glass — future prospects for FIs 16i. Predictions for the futureii. The race to embrace innovationiii. Top technology influenceriv. Evolution of customer touch points

4 Financial services everywhere 22

5 Appendix — survey demographics and detailed country findings 24

Contents

Foreword

Liew Nam SoonASEAN Markets Leader

Brian ThungASEAN Financial Services Leader

ASEAN is in the midst of an economic revolution. Empowered by the rapid rollout of digital-ready infrastructure, local economies are being supercharged by breakneck innovations in smart devices, data processing, and real-time communications technologies.In an effort to gauge the progress of digital integration within the ASEAN region, we commissioned FST Media to conduct an online survey of 141 senior financial services executives from the six major ASEAN economies (Singapore, Malaysia, Thailand, Indonesia, Vietnam and the Philippines) and Hong Kong-based executives with a regional remit that includes ASEAN.

Surveyed executives represented a diversity of industry subsectors, including commercial banks, credit card companies, credit unions, investment management firms, insurers, investment banks, mortgage businesses, payments services, retail banks, securities providers, wealth and asset managers, and private banks. These subsectors were assigned into four primary financial services sectors: retail and other banking providers; insurers; wealth, fund and asset management organizations; and payments providers.

This study seeks to explore the impact of digital disruption on the local financial services landscape and each country’s capability and capacity to effectively support the region’s digital economic growth.

A few interesting findings from the results we note are that 45.6% of the financial institutions (FIs) have initiated digital projects and have some way to go (26%) to reach full digital operations, except for wealth, fund and asset management clients, who are either still assessing the viability or consider themselves as fully digital.

It also seems that FIs are pulling all stops in responding to FinTech disruption as 45.7% are building their own innovation labs, investing in high potential start-ups and recruiting talent with technological and digital experience to lead transformation projects concurrently.

Alongside that, the financial institutions (FIs) share similar aspirations and objectives in respect of digitalization and innovation in order to future-proof their business. The challenge to remain relevant in the face of ever-changing consumer demands is too real to ignore, what with an uptick of non-financial services providers making a play for the same set of customers and offering a like-for-like financial services offering at a sometimes preferential price or pace.

Moving out of their comfort zone has never been so pertinent but just how far is the gap between aspiration and actualization?

We hope you find this study insightful and happy to have a chat to further the discussion on your digital needs and aspirations.

1The (uneven) road to an integrated future |

1Digital has cemented its place as one of the foundational pillars of economic growth, establishing critical infrastructure that continues to facilitate greater interconnectivity between nations, social groups, individuals and businesses, all seamlessly delivered through a multiplicity of devices, data, and automated processes — a process neatly defined as the ‘digital economy’.Underscoring the region’s progressive economic surge, S. Iswaran, Singapore’s Minister for Communications and Information, anticipates ASEAN’s digital economy will undergo exponential growth over the next decade, reaching S$270 billion by 2025.

“We are already the world's fastest-growing region in terms of internet adoption, with 3.8 million new users coming online every month,” Iswaran said. If ASEAN governments support digital connectivity and ASEAN businesses keep pace with the shift towards digitization, the payoffs will be significant,” Iswaran said at a 2016 industry forum.1

Role of digital in fueling the ASEAN potential

| Driving digital into the heart of Asia’s financial services industry2

The financial services industry is at the heart of this digital economic spur, pioneering key innovations in on-demand customer service, intuitive interaction platforms, and automated systems that facilitate and encourage economy activity across the region.

ASEAN as a region is fragmented and comprises multiple diverse economies and cultures. There are varying degrees of maturity in terms of the infrastructure, innovation, regulatory frameworks and financial resources. However, the proximity between countries means that innovation and solutions are easily shared and transferred. For example, Singapore-developed solutions can be deployed in other markets with an appetite or potential for them. Similarly, banking services or products developed for the Singapore market can be deployed to support the unbanked populations of Indonesia, the Philippines, or Vietnam.

Furthermore, when it comes to ‘industry inclusion’, financial institutions too often struggle to heed to the demands of the consumers. Navigating the uneven regulatory landscape pose as one of the key challenges for FIs, alongside difficulties in overhauling legacy systems or adopting interoperable technologies, which can stifle innovation, which plays a key role in putting the region on a consistent economic growth trajectory.

Integration is crucial to help enhance intra-ASEAN trade and ensure that economic growth remains robust and surging, with a collective GDP rising from $37.6 billion in 1970 to $2.6 trillion in 2017.2

In order to support integration efforts, digitalization is key.

1 “Integrated digital economy can benefit Asean”, The Straits Times, August 23, Lee Xin En 20162 UN Conference on Trade and Development


2 The technologies that bind — embracing financial inclusion

Digital adoption

Digital is the fulcrum upon which the financial services industry are delivering next-generation innovations in customer service, operational and resource efficiencies, and cost savings.

Overwhelmingly, financial institutions (FIs) have sought to overhaul their manual process infrastructure, with nearly nine out of ten revealing they have adopted some form of digital infrastructure; just 13.4% of surveyed FIs declared they are still in the assessment phase for digital adoption.

Rate of digital adoption within financial institutions (FIs)

Industry breakdown (%)

Digital is still under assessment in our organization

We have initiated digital projects

We are in the proof-of-concept stage

Digital is in full operations in our organization

5016.67033.33

2537.5 25 12.5

8.9948.3213.4829.21

16.6745.8320.8316.67

Retail and other banks

Insurance Credit and payments

Wealth, fund and asset management


More than a quarter of surveyed organizations have fully implemented digital — a significant portion of whom are represented by the banking sector. Still more said that while they have initiated digital projects, they have yet to implement a full digital program. Wealth, fund and asset management firms revealed a decisive split between ‘digital progressives’ and ‘digital laggards’, with one in three declaring they are fully digital ready, while exactly half said they are still in “assessment phase” for digital adoption.

Of the developed regions surveyed, Hong Kong appeared to be lagging behind both Malaysia (36%) and Singapore (29%), with less than one in five organizations fully embracing digital. Vietnam-based FIs were among the few to have a significant number of institutions retaining predominantly manual processes, with 33.3% still in the assessment phase for adopting digital.

Industry average

13.4%


45.6%


15%


26%



Digital partnerships

Digital partners (from cross-vertical partnerships with technology vendors to collaborations with FinTech and insurtech rivals or even established incumbents) offer considerable value for financial services organizations, allowing them to pool their collective skills to shape product development, innovate and customize customer service portals, and maximize the efficiency and productivity of internal processes.

While the survey revealed a dearth of quality partnerships across the region, there was nevertheless a clear willingness to pursue these collaborations — should an optimal partner be found to support their organization’s innovation goals.

Rate at which financial institutions (FIs) are optimizing digital partnerships


Curiously, just over one in five surveyed executives from across industry believed their businesses were yielding maximum value from their digital partnerships, with a significant majority of organizations either partially meeting their objectives or still assessing their viability.

Furthermore, wealth and asset management companies appear to lag behind their industry counterparts due perhaps to the relative paucity of digital resources (both technologies and skills base) at their disposal. Only a quarter of all banks, and even fewer insurers, believe they are deriving maximum value from these partnerships.

Singapore executives appear to be most buoyant over the benefits of these partnerships, with 32% of all respondents believing they add value to their organization.

21.3%

Yes, our digital partnerships are generating maximum value

35.4%

We are only partially meeting partnership objectives

42.5%

We are still assessing how to establish digital partnerships appropriately

0.8%

Our digital partnerships are yielding diminishing returns








25.8433.7139.331.12

016.6783.330

12.55037.50

12.541.6745.830

Industry average

6 | Driving digital into the heart of Asia’s financial services industry

“ Working together with regulators and like-minded industry players, financial institutions in Asean can transform more seamlessly by fully optimizing digital partnerships that are aligned to the organization’s and customers’ interests. They can leverage the strengths of these partnerships to complement their existing capabilities in order to achieve greater economies of scale, cross-sell into each other’s customer bases to expand their market share and distribution network, giving customers more choices and better engagement as well. This will create a win-win outcome for everyone involved.”

Brian Thung EY Managing Partner for Financial Services ASEAN


Unsurprisingly, as the most technologically sophisticated and well-resourced sector within the financial services industry, banks have proved among the least resistant to adopting FinTech initiatives. More than half of all surveyed banking executives have embraced FinTech challengers to inspire their own innovations, actively investing in start-ups, establishing in-house innovation labs, and recruiting tech-savvy talent to lead digital transformation projects and reskill their existing workforce. Insurers rated second only to banks in their willingness to embrace FinTech developments. Yet, perhaps suggesting some technology deficiencies, a significant number of insurers also expressed some uncertainty in implementing these innovations, despite a willingness to adopt them.

Singapore is rated among the world’s leading FinTech hubs and it is no surprise that the FIs here are leading the charge in FinTech adoption. Singapore-based financial institutions have adapted to their start-up rivals at furious pace, with 61.3% already embracing FinTech innovations. Hong Kong, another FinTech powerhouse, is still keeping pace, with a 37% adoption rate.

Responding to the FinTech threat

FinTechs (as both industry rivals and collaborators) have proved to be one of the industry’s most potent transformative forces over the last decade, not only inspiring pioneering technological and customer service innovations within their own sector, but also compelling FIs incumbents to fully embrace digital and adapt to an increasingly consumer-centric market.

FI’s response to the rise of the FinTechs


11.8%

Building our own innovation labs

7.9%

Investing in start-ups and facilitating acceleration of their growth

25.2% Recruiting talents with technology background and experience to lead digital transformation and providing reskilling of existing workforce

45.7%

All of the above

9.4% Would like to experiment with FinTech partners but do not know where to start



Recruiting talents with technology background and experience to lead digital transformation and providing reskilling of existing workforce

All of the above

Would like to experiment with FinTech partners but do not know where to start




11.24 3.3626.9750.567.87

16.6733.3333.3316.670

12.55012.512.512.5

12.54.1720.8345.8316.67

Industry average


According to the results of the survey, banking and insurance institutions still appear to be burdened by legacy infrastructure. Both sectors, as well as the payments industry, were struggling to effectively integrate new technologies within existing systems and architectures, with one-third of all industry respondents rating it as the most significant hurdle in responding to digital disruption.

More than a quarter of surveyed executives also felt they were obstructed by internal hierarchies, preventing them from balancing multiple, often conflicting interests within their respective organizations.

Wealth managers were particularly concerned over the lack of technological talents and in-house skillsets they are able to draw upon, with one in three rating it as a top order concern. Perhaps owing to the region’s relatively forward-thinking regulatory authorities (widely considered among the world’s most digitally progressive and change-responsive regulatory authorities), regulation and government policy was rated by only a small portion (13%) of the industry as an encumbrance to digital transformation programs.

Executives from Thailand and Indonesia appeared most encumbered by red tape, with one in three respondents from each market concerned over government-mandated strictures. By contrast, only 3.2% of Singapore representatives said they were troubled by the heavy hand of regulation.

Respondents, otherwise, were divided evenly into two camps, with Hong Kong (40.7%) and Philippines-based (50%) executives relating their concerns over legacy, while Singapore- (42%), Malaysia- (32%) and Vietnam-based (33.3%) executives stressed the potential of internal disputes and hierarchies to impede an organization’s response to disruption.

Bracing for (digital) disruption

Digital disruption has presented both challenges and opportunities to FIs. While the digital revolution has inspired a greater focus on customer demands and capacity to deliver these service innovations at pace, it has also put inordinate pressure on existing technology infrastructure to deliver these changes — requiring a significant overhaul of potentially decades-old infrastructure.

Biggest challenge in responding to digital disruption


18%

Integration with complex existing systems and architecture

30.4%

Not having suitable technology talents and skillsets in-house

37% Balancing multiple, often conflicting, needs from all around the organization

1.6%

Resistance to change in the organization

13% Regulations and government policies

Industry average



Balancing multiple, often conflicting, needs from all around the organisation

Resistance to change in the organisation

Regulations and government policies




33.7114.6126.978.9815.73

16.6733.3333.3316.67

37.5 12.52512.512.5

33.3320.83 20.838.3416.67


For surveyed executives, the digital revolution has proved an unmitigated boon for customers. More than one in three surveyed executives rate the insights derived from customer data as the most significant benefit to arise from digital disruption — a sentiment shared by a plurality of both banking and insurance sectors. Similarly, 37.4% said the transition to digital has delivered vast improvements in service speeds, particularly for wealth industry representatives.

For payments providers however, many of whom seek to compete with traditional incumbents on differentiated price points and tailored service offerings, digital implementations have helped to drive down product costs and allow for more personalization of product offerings.

Reaping the rewards of digital disruption

For financial services, which survive off the whims and wants of their customers, the ability to deliver intuitive, seamless, and swift service to their clients remains the critical path to success.

While some organizations are facing an uphill battle adapting to the rapid pace of digitalization, many others are reaping the benefits of phasing out analogue processes and infrastructure. Digital transformation has ushered in a wave of innovative technologies, enriched by a surfeit of transactional data — and leveraged through analytics — to develop dynamic and uniquely tailored service portals: from touch payment services and fast-payment NFC chip-enabled devices to intuitive mobile banking apps.

Foreseeable business benefits from digital disruption


36.6%

The ability to capture contextual insights from abundance of customer data

37.4%

To improve speed of service to customers

16.3%

Creation of cheaper and more tailored products

9.7%

The ability to offer customers location and behaviour based promotions








37.6537.6514.1210.58

33.335016.670

252537.512.5

37.537.516.678.33

Industry average


With FIs seeking ever more insight into the workings and unique needs of their customers, it is perhaps little surprising that data analytics was ranked by a plurality of respondents as a definitive game-changing technology for FIs.

The progressive shift away from desktop computing to portable smart devices was also acknowledged as a key transformative force within the industry, with more than one in three industry executives rating mobile services as the principle game-changing technology for FIs. Respondents from the banking and insurance industry were split evenly between analytics and mobile, with cloud still retaining considerable relevance for insurers).

On a country-by-country split, data analytics retained its primacy across the region, with the exception of Malaysia and Indonesia, where mobile services was ranked by a majority of respondents (56% and 50% respectively) as the definitive game-changing technology.

Thailand-based executives strongly emphasized the influence of data analytics on industry transformation, with 66.7% rating it as a game-changing technology. A plurality of Singapore- (46.7%) and Philippines-based (46.2%) executives also rated analytics as the definitive game-changer for the industry. Representatives from Hong Kong were split evenly between the two transformational technologies.

Future game-changing trends for the FIs’ operating platforms


Cloud services

Web services

Data analytics

Mobile services

Offshore managed services

15.5%

Cloud services

4.9%

Web services

41.5% Data analytics

35.7%

Mobile services

2.4% Offshore managed services




20.834.1741.6729.174.16

012.55037.50

15.294.7138.8238.822.36

16.66066.6716.670

Industry average


Surveyed financial services organizations appear to have had mixed success in delivering on-demand services and products. Nearly four out of five said they have experienced roadblocks in the delivery and execution of customer-personalized products. More than a quarter have suggested that, while they are willing to embrace tailored product delivery, they have yet to find the right technology to support this service. Executives from Thailand (44.4%) and Vietnam (50%) agreed that an inability to find the right technology has stunted on-demand service delivery.

While uptake was generally low, the banking and insurance sectors appear to be well ahead of their industry counterparts in terms of their ability to offer personalized products via digital channels; wealth management and payments trail well behind, exposing a critical black spot in their customer service offerings.

Agility in the customer experience

The willingness to embrace digital has empowered FIs with the capacity to deliver services dynamically and fully on-demand.

Agility of FIs in response to increasing customer expectations for on-demand services and products


23%

We have implemented technology to allow product personalisation

26.6%

We know it is critical but have not yet found the right technology to achieve this

21.2%

We try to create new products but are unable to get them to market fast enough

29.2%

While our products do not change frequently, we continue to evolve distribution channels




27.632522.3725

033.3333.3333.33

0502525

21.7421.7413.0443.48

We have implemented technology to allow product personalization




Industry average


Harmony in ASEAN

Integration of ASEAN-based financial services remains an enduring goal for a highly diverse and disparately developed region. Digital economic integration brings with it simplicity and ease of trade between states, effectively eliminating tedious manual (often paper-based) processes and, in turn, boosting regional economic growth. Importantly, it also serves to drastically drive economic empowerment of the region’s underserved and unbanked population.

As collaborative digital infrastructure is progressively — though unevenly — rolled out across the region, the prospect of further integrating ASEAN’s economies and financial industries has increased greatly. Yet the complexities of aligning multiple — and sometimes conflicting — regulatory frameworks has consistently upended these integration efforts.

Critical factors to enable FIs’ move towards an ASEAN integrated digital economy


38%

Integrated payments platform

55.8%

Harmonisation of policies around KYC, AML, cloud computing, capital rules

6.2%

Standardization of data location

While a majority of FIs see the harmonization of KYC (Know Your Customer), AML (anti-money laundering), cloud computing policies, and capital rules as the ideal path to integrating ASEAN’s digital economy, more than one-third of the sector also recognize the necessity of assimilating the region’s varied payments platforms to drive integration further.

A majority of representatives from the banking, insurance (and wealth industry revealed a preference for pursuing harmonization policies, with half of all payments providers — perhaps unsurprisingly — seeing the integration of the region’s payments network as key to furthering the region’s digital integration.

Regions were split relatively evenly between the two integration methodologies, with Malaysia- (69.6%), Vietnam- (66.7%) and Hong Kong-based (64%) executives favoring policy harmonization, while the developing markets of Thailand (66.7%) and the Philippines (62.5%) backed payments. Singapore representatives, one of the premier hotbeds of FinTech innovation, remained split between the two integration paths, slightly favoring policy harmonization (55.6%).




39.4756.583.95

066.6733.33

50500

39.1352.178.7


Harmonization of policies around KYC, AML, cloud computing, capital rules


Industry average

ePay


A majority of respondents from across industries saw infrastructure incompatibilities and varying levels of technology maturity across the region as major barriers to ASEAN’s progressive digital economic integration.

The developing economies of Thailand (66.7%), Vietnam (66.7%) and the Philippines (62.5%) appeared most concerned over the readiness and differing levels of infrastructure maturity across the region, with three quarters of executives from these states considering it the greatest hurdle to innovation, indicating a significant disjoint between the runaway economies and advanced banking cultures of Malaysia and Hong Kong. Nevertheless, a notable majority of Singapore representatives (59.3%) also revealed similar concerns over infrastructure incompatibilities.

Curiously, Indonesian executives were most troubled by the discontinuity of Asia-Pacific’s trade policies, with 40% rating it as a barrier to integration; one in three Hong Kong based executives revealed similar levels of concern over trade policies hampering further integration.

Both the Philippines (37.5%) and Singapore (25.9%) also highlighted differing agendas as one of the barriers to integration, with Malaysia (26.1%) and Indonesia (26.67%) revealing particular unease over domestic security challenges hindering these efforts.

Integrating ASEAN’s digital economy

Hurdles in the move towards ASEAN Digital Economy integration


16.8%

Different country policies on trade

16%

Domestic security issues and challenges

16.8%

Different agendas and views

50.4%

Varying levels of readiness and maturity in terms of infrastructure




14.4719.7411.8453.95

016.675033.33

12.512.52550

30.434.3521.7443.48





Industry average


“ To truly drive digital into the heart of the Asean financial services industry and achieve digital economic integration, we need localized digital strategies that are fit for purpose of each and every market. ASEAN especially is a consumer and SME driven economy with huge potential for growth. FIs who are fully cognizant of this and understand how and where to look for the right industry partnerships in order to get access to opportunities to further grow their customer base will achieve success.”

Liew Nam Soon ASEAN Markets Leader


3 Into the looking glass — future prospects for FIs

Predictions for the future

While the looming encroachment of ‘big tech’ players remains ever present across the industry, the industry remains confident of its own place in the future financial services sector. However, this future will be predicated on the industry’s capacity to evolve rapidly, embrace technological transformation and perhaps even join forces with their competitors to meet the challenges of digital disruption.

Today’s FIs are facing an unprecedented challenge to their industry primacy, not only from dynamic start-ups and customer-centric FinTech and insurtech players, but also from a host of cross-vertical technology giants (for example, Google and Facebook) and platform service providers (including Uber and AirBnB).

The future of financial services in the next 10 years


0083.3316.67

0 25750

8.245.88805.88

8.338.3366.6716.67




Takeover by tech superpower companies (Alibaba, Tencent, Google, Apple, Facebook, Amazon)

Platform or on-demand companies like Uber, Grab, and Airbnb will take over daily financial transactions through digitally connected communities

More industry convergence between banks, insurers, FinTechs, Telcos and ecommerce companies

All this disruption is just a phase and the financial services ecosystem will end up in a similar state with the same major banks and insurers still dominating the industry

Other (please specify) - “Many of the traditional banks will be out of business. Final nail in The Coffin after the financial crisis”


A significant majority of respondents believed convergence between FIs and their rivals in the FinTech, telecommunications and e-commerce sectors as an inevitability, perhaps a recognition by FIs of the successful customer-centric approach of these start-ups and how they continue to influence consumer demands.

Yet most remained skeptical of the impact of big tech players (Alibaba, Tencent, Google, Apple, Facebook, Amazon, etc.), with less than one in ten respondents considering them a force to be reckoned with over the next decade, despite the overwhelming advantage they hold in data aggregation and analytics capability. Only Malaysia- (20%) and Vietnam-based (16.7%) executives expressed notable unease over the increasing influence of big techs.

What is more, representatives from Vietnam remained most conscious over the encroachment of platform or on-demand companies (including Uber, Grab, and Airbnb) on ASEAN’s payments network.

A small portion of insurers and wealth managers were doubtful over the influence of both platform and big tech players, believing that disruption is ‘just a phase’ and that the financial services ecosystem will end up in a similar state with the same major institutions still dominating the industry.

One participant, however, took a decidedly pessimistic turn, believing it was the “final straw” for incumbent banks in the aftermath of the financial crisis.

Industry average

7.3%


6.5%


77.2%


8.2%

All this disruption is just a phase and the financial services ecosystem will end up in a similar satate with the same major banks and insurers still dominating the industry

0.8%

Other (please specify) — “Many of the traditional banks will be out of business. Final nail in The Coffin after the financial crisis”


Overwhelmingly, as customers demand ever-more efficient and seamless payments services, ePayments and eLending were expected to continue their rapid-fire rollout. Indeed, more than half of surveyed executives predicted these services will mature considerable over the next 12 months.

Developing markets, and those with large ‘unbanked’ and mobile-dependent populations, including Thailand (80%), Vietnam (83.3%), Indonesia (87.5%), and the Philippines (60%), were particularly buoyant over the prospects of ePayments and eLending, with 52% of Malaysia-based executives also anticipating breakneck development of these services.

Nevertheless, there was a notable disjuncture between the predictions of banking and insurance executives, perhaps owing to each sector’s discrete customer interaction model. A plurality of insurance executives put greater confidence in the development of robo-advisory services — a likely nod to the industry’s rapid uptake of artificial intelligence (AI) chatbots as well as digital customer service portals. By contrast, a significant number of banks stressed ePayments and eLending as the standout technologies for innovation over the next year, indicating the increasing importance of keeping pace with their FinTech and big tech rivals in the payments space.

Interestingly, despite the significant inroads made by robo-advisory technologies within the wealth management sector, surveyed executives did not expect the technology to evolve significantly over the next year.

More mature markets (Singapore, Hong Kong and Malaysia) saw greater promise in expanding upon existing banking service technologies. Executives from these developed markets expect Application Programming Interfaces (APIs) and RegTech (technology systems that address regulatory challenges) services to experience more rapid development.

The race to embrace innovation Fastest developing technology areas in the next 12 months


13%

Regulatory Technology (RegTech)

8.1%

Social ecommerce

18.7% API

9.8%

Robo-Advisory

50.4% ePayments, eLending




11.765.8821.184.7156.47

16.6733.330050

12.500087.5

16.6712.520.8333.3316.67


Social ecommerce

API

Robo-Advisory

ePayments, eLending

Industry average


Nearly one in three financial institutions rated AI and chatbots as the top technology influencer on financial services over the next 12-18 months, with the emerging technology rating highly across all FIs. However, banks, insurers and wealth managers also expect significantly more influence from the further development of Open API data sharing capabilities (empowered through various government-mandated Open Banking schemes) and cognitive technologies.

More than one in four FIs believe the emergence of challenger players (FinTech and insurtechs) as likely to cause significant ructions within the industry, with ever-greater pressure on FIs to collaborate or risk losing greater market share to these agile and highly responsive services. Despite the opportunities that smart-sensor backed Internet of Things (IoT) and telematics technologies present for insurers (particularly in the claims process), less than one in ten believed it would have a significant bearing on the industry over the next 18 months, among which include 33.3% of Thailand-based executives.

An average of one in four participants from each surveyed region (ranging from a low of 20% in Hong Kong to a high of 36% from Malaysia) believed the emergence of challenger players, and collaborations with these start-ups, would fundamentally transform incumbent FIs.

Artificial Intelligence (AI) and chatbot technologies also rated highly across the board, with representatives from Singapore (33.4%), Malaysia (32%), Hong Kong (50%), and the Philippines (30.8%) as shaping industry developments markedly over the next 18 months.

Perhaps reflecting the country’s large, mobile-dependent banking population, executives from Vietnam (43.6%) were the only group in significant numbers to rate mobile apps as having any bearing on the industry’s development. Thailand-based executives also revealed their interest in emerging Internet of Things (IoT) technologies, with 33.3% rating it as their top technology influencer in FIs over the next 18 months.

Top technology influencer Top technology influencers in financial services, in the next 12-18 months


30.1%

Artificial Intelligence (A.I.) and chatbots

26.8%

Emergence of challenger players (banks and insurers) and collaboration with Fintech and Insurtech

13.8% Open API data sharing

8.1% The Internet-of-Things / Internet-of-Everything

4.1% Cognitive analytics

13.8%

Mobile apps




27.0627.0618.823.534.712.3516.47

37.529.174.174.178.338.338.33

33.3316.670033.3316.670

37.5250 025012.5



Open API data sharing

Augmented reality in customer experience

The Internet-of-Things / Internet-of-Everything

Cognitive analytics

Mobile apps

Industry average


A significant majority of respondents believe that while human interactions will remain a key part of their engagement strategy, digital will take on an ever more prominent role in these interactions. Two-thirds of surveyed banks saw this as the most likely evolution, with more than half of all insurers also agreeing.

Nevertheless, nearly one in five executives are confident in the continued presence of the “human touch”, believing that even by 2020, human-only interactions will retain their place as customers’ primary touch point. Wealth and asset management firms in particular concurred with this sentiment, shunning digital for human-only interaction points (owing, perhaps, to the industry’s ongoing dependence on cultivating rapport through face-to-face interactions with their clients).

Overwhelmingly, however, executives were confident that further digitization would see the progressive assimilation of financial services into customers’ everyday lives. Upwards of 77.8% of Singapore executives, 60% of Indonesia executives, and more than half of all executives from Hong Kong, Malaysia, and Thailand, were confident of realizing this integration pathway by 2020, creating a seamless — and digitally empowered — payment and banking experience for consumers.

Evolution of customer touch points

Despite the considerable promise around digital-only ‘neobanks’, executives remain skeptical of adopting a purely digital-centric approach to customer experience. Indeed, a small minority believed their customer touch points would evolve into purely digital-only services.

As digital becomes a ubiquitous part of customers’ social interactions (from social networking services, such as Facebook and WhatsApp, to big tech players, including Samsung, Google and Apple, all integrating digital payments into their service), FIs’ digital touch points are also seamlessly enmeshing themselves into customers’ everyday lives.

Evolution of customer touchpoints by 2020 for FIs


17.7%

Human interaction is still our primary touchpoint

13.3%

Services via mobile apps

3.5% Digital-only financial services

56.6%

Integration of financial services with customers’ everyday lives through digital opportunities

8.9% Automated services via chatbots and A.I.




13.1615.791.3261.847.89

66.67016.66016.67

02512.55012.5

26.094.354.3556.628.59



Digital-only financial services


Automated services via chatbots and A.I.

Industry average


How do you ensure you are automating intelligently?In this Transformative Age, the opportunities that emerge from disruption are ready to be seized.

ey.com/fsinsights #BetterQuestions

4Below are the key

takeaways to sum up our observations of the above findings

and what it entails to create a sustainable and

harmonious business landscape where FIs,

regulators, FinTechs and non Fin-Tech industry players can co-exist.

Financial services everywhere

Continuous innovation toward integrationFor FIs to benefit from the region’s rapidly expanding digital economy, it is incumbent on the industry to not only embrace but to also keep pace with today’s leading-edge technological innovations.

While many in the industry (particularly retail banks) have been quick to adopt digital infrastructure in order to drive customer experience innovation, too many others are still trapped in the assessment phase, effectively relinquishing the benefits already being realized by the early digital adopters — from rapid product design and delivery, better customer engagement through dynamic service portals, and critical cost-cutting efficiencies and productivity gains.

Further embracing digital innovations will also help to reduce the disparities that exist between the developed and developing markets and avail more individuals of financial solutions that can improve their quality of life and achieve their personal and professional aspirations.


Foster the right partnershipsBeyond the necessary upgrades in digital infrastructure, the willingness to foster partnerships with non-FI providers — among which include emerging technology, eCommerce, telecommunication and other on-demand service providers — will have a mutually beneficial impact across the financial services sector, harmonizing the long-standing incongruities that have hampered collaborative innovation between the banking, insurance, wealth and traditional payments industries.

Convergence is unavoidable and FIs can use that to their advantage to gain access to new customers that they would otherwise not be able to via joint marketing and distribution activities. In exchange, non FIs will also benefit from a wider breadth of products that can be offered to their existing customer base without having to develop their own.

Financial inclusion as a mindset for sustainabilityFIs should continue to work closely with regulators to level the playing field between FinTechs and non FinTechs to make sure the local regulations can work for inter-operability of their offerings, which is a key element for financial inclusion.

In a period of increasing global skepticism over free trade and open markets, financial services and non-financial services providers alike have a crucial role to play in promoting greater financial inclusion and integration in order to support the region push towards a digital economy and inspire innovations that drive economic growth for all ASEAN nations.

Only by embedding financial services into the life and various touchpoints of the consumers will we see a truly sustainable ecosystem.


5 Appendix — Survey demographics and detailed country findings

Survey DesignExecutives from across ASEAN and Hong Kong’s financial services sector were surveyed on their organization’s digital program, gathering insight on digital adoption and partnerships, industry and regional integration strategies, and predictions for future technology developments within the industry.

Executives from a highly targeted subscriber list (from FST Media) received an email with a link to an online survey page. The survey consisted of 17 multiple choice questions, with some questions offering participants an opportunity to provide open ended responses.

Surveyed executives represented a diversity of industry subsectors, including: commercial banks, credit card companies, credit unions, investment management firms, insurers, investment banks, mortgage businesses, payments services, retail banks, securities providers, wealth and asset managers, and private banks.

For the final analysis, these subsectors were assigned into four primary FI sectors: retail and other banking providers; insurers; wealth and asset management organizations; and payments providers.


Survey ResponsesOur surveyor, FST Media, received 141 responses from selected countries across the ASEAN region (113 responses) and Hong Kong (28 responses).

Surveyed ASEAN countries included Singapore, Malaysia, the Philippines, Indonesia, Thailand and Vietnam. Surveyed Hong Kong-based financial services organizations were included only if they had an existing presence in the ASEAN market.

Banking sector executives accounted for the vast majority of responses, representing 98 out of a total 141 responses; insurers (27 responses), as the next largest group, represented one-fifth of the total responses.

Executives from Singapore (33 responses), Malaysia (29 responses), and Hong Kong (28 responses), represented two-thirds of the total responses for the survey, with Philippines, Indonesia, Thailand, and Vietnam-based executives making up the final third of responses.

Representatives included a vast sweep of senior industry executives, among which include the C-Suites, company directors, heads of digital and automation, and other decision-makers.


Demographic profiles

Analysis and Reporting (%)


Credit and payments

Insurance Wealth, fund and asset management

27.6

20.4

7.4

18.5

11.137.5

12.512.59.2

7.1

7.1

12.5

15.3

7.4

25

25

12.537.5

7.4

13.3 48.2 25

Singapore Malaysia Thailand Vietnam Indonesia Philippines Hong Kong

98 27 8 8Total:


16.67%

58.33%

16.67%

8.33%

33.33%

16.67%

33.33%

16.67%

6.25%

56.25%

25.0%

12.5%

10.0%

50.0%

20.0%

20.0%

12.0%

48.0%

36.0%

4.0%

18.52%

44.44%

18.52%

18.52%

9.68%

38.71%

29.03%

22.58%

Q: Where is your organization at with regards to digital adoption?

5016.67033.33

2537.5 25 12.5

8.9948.3213.4829.21

16.6745.8320.8316.67


Insurance

Singapore

Vietnam

Malaysia

Indonesia

Hong Kong

Philippines

Thailand

Credit and payments


ASEAN + HK Region Breakdown





15

2613.4

45.6

Industry average (%) Industry breakdown (%)

*Weighted against industry peers


33.33%

33.33%

33.33%

18.75%

37.5%

43.75%10.0%

30.0%

60.0%

32.26%

38.71%

29.03%16.0%

36.0%

48.0%

18.52%

33.33%

48.15%16.67%

33.33%

8.33%

41.67%

Q: Is your organization fully optimizing digital partnerships?

Singapore

Vietnam

Malaysia

Indonesia

Hong Kong

Philippines

Thailand






42.5

0.8

21.3

35.4





25.8433.7139.331.12

016.6783.330

12.55037.50

12.541.6745.830



Q: What is your organization’s primary response to the rise of FinTechs?



Recruiting talents with technology background and experience to lead digital transformation and providing reskilling of existing workforce

All of the above

Would like to experiment with FinTech partners but do not know where to start

45.7

11.89.4

25.2

7.9





11.24 3.3626.9750.567.87

16.6733.3333.3316.670

12.55012.512.512.5

12.54.1720.8345.8316.67

19.35%

61.29%

6.45%

3.23%

9.68%

8.0%

36.0%

8.0%

12.0%

36.0%

14.81%

37.04%

18.52%

29.63%

8.33%25.0%

25.0%41.67%

33.33%

33.33%

33.3%

12.5%43.75%

12.5%

31.25%

10.0%60.0%

10.0%

20.0%

Singapore

Vietnam

Malaysia

Indonesia

Hong Kong

Philippines

Thailand




35.48%6.45%3.23%

12.9%41.94%

24.0%

8.0%

16.0%

20.0%32.0%

40.74%7.41%

14.81%

18.52%18.52%

25.0%33.33%

25.0%16.7%

16.67%16.67%

33.33%33.33%

31.25%

31.25%

25.0%12.5%

50.0%10.0%

20.0%

20.0%

Q: What is your biggest challenge in responding to digital disruption?

Singapore

Vietnam

Malaysia

Indonesia

Hong Kong

Philippines

Thailand




Balancing multiple, often conflicting, needs from all around the organisation

Resistance to change in the organisation

Regulations and government policies

37

1.618

13

30.4





33.7114.6126.978.9815.73

16.6733.3333.3316.67

37.5 12.52512.512.5

33.3320.83 20.838.3416.67



Q: What is the greatest business benefit that you foresee coming from digital disruptions?





37.4

16.3

9.7

36.6


30.0%20.0%

50.0%

33.33%

33.33%

10.0%

23.33%

32.0%

48.0%

12.0%

8.0%

38.46%

34.62%

7.69%

19.23%

40.0%

30.0%

20.0%

10.0%

33.33%

33.33%

16.67%

16.67%

50.0%

31.25%

6.25%

12.5%

Singapore

Vietnam

Malaysia

Indonesia

Hong Kong

Philippines

Thailand






37.6537.6514.1210.58

33.335016.670

252537.512.5

37.537.516.678.33


13.33%26.67%

6.67%

6.67%

46.67%

8.0%56.0% 4.0%

32.0%

50.0%

50.0%

16.6716.67%

66.7%

30.0%10.0%

10.0%50.0%

34.62%

15.38%

46.15%

3.85%

6.25%43.75% 6.25%

43.75%

Q: What trend do you see as a game changer for your organization’s operating platforms, in the next 12 months?

Singapore

Vietnam

Malaysia

Indonesia

Hong Kong

Philippines

Thailand


Cloud services

Web services

Data analytics

Mobile services

Offshore managed services

35.7

2.4

15.5

4.9

41.5





20.834.1741.6729.174.16

012.55037.50

15.294.7138.8238.822.36

16.66066.6716.670



Q: How agile is your organization in responding to the increasing customer expectations for on-demand services and products?

We have implemented technology to allow product personalization




21.2

2329.2

26.6


25.93%

25.93%

22.22%

25.93%

30.43%

21.74%

43.48%

4.35%

16.0%

28.0%

24.0%

32.0%

11.11%

44.44%

22.22%

22.22%

33.3%

50.0%

16.67% 26.67%

20.0%

33.33%

20.0%

12.5%

12.5%37.5%

37.5%

Singapore

Vietnam

Malaysia

Indonesia

Hong Kong

Philippines

Thailand





27.632522.3725

033.3333.3333.33

0502525

21.7421.7413.0443.48



44.44%

55.56%

26.09%

69.57%

4.35%24.0%

64.0%

12.0%

66.67%

22.22%

11.11%

16.67%

66.67%

16.67%46.67%

53.33%

62.5%

25.0%

12.5%

Q: In your opinion, how best to enable the move towards an ASEAN integrated digital economy?

Singapore

Vietnam

Malaysia

Indonesia

Hong Kong

Philippines

Thailand



Harmonization of policies around KYC, AML, cloud computing, capital rules


55.8

6.2

38





39.4756.583.95

066.6733.33

50500

39.1352.178.7



Q: In your view, what would be the biggest hurdle in the move towards an ASEAN integrated digital economy?





50.4

16.8

16.8

16


3.7%

25.93%

59.26% 11.11%13.04%

26.09%

47.83%

13.04%

28.0%

12.0%

44.0%

16.0%

11.11%

11.1%

66.7% 11.11%

16.67%

16.67%

66.67%

40.0%

26.67%

26.67%

6.67%

37.5%62.5%

Singapore

Vietnam

Malaysia

Indonesia

Hong Kong

Philippines

Thailand





14.4719.7411.8453.95

016.675033.33

12.512.52550

30.434.3521.7443.48



3.33%10.0%

3.33.%

80.0%

3.33%20.0%

72.0%

8.0%

12.5%6.25%

81.25%

80.0%

20.0%16.67%16.67%

16.67%

50.0%

7.69%11.54%

76.92%

3.85%

90.0%

10%

Q: What will the financial services industry look like in the next 10 years?

Singapore

Vietnam

Malaysia

Indonesia

Hong Kong

Philippines

Thailand





All this disruption is just a phase and the financial services ecosystem will end up in a similar state with the same major banks and insurers still dominating the industry

Other (please specify) - “Many of the traditional banks will be out of business. Final nail in The Coffin after the financial crisis”

77.2

0.8

6.57.38.2


0083.3316.67

0 25750

8.245.88805.88

8.338.3366.6716.67






Q: Which area will develop the fastest through technology innovations in the next 12 months?


Social ecommerce

API

Robo-Advisory

ePayments, eLending

50.4

13

9.8

18.7

8.1


20.0%

10.0%

33.33%

33.33%

3.33%

12.0%

12.0%

52.0%

20.0%

4.0%26.92%

15.38%

23.08%

19.23%15.38%

10.0%

80.0%

10.0%

16.67%

83.33%

6.25%

87.5%

6.25%10.0%

60.0%

30.0%

Singapore

Vietnam

Malaysia

Indonesia

Hong Kong

Philippines

Thailand





11.765.8821.184.7156.47

16.6733.330050

12.500087.5

16.6712.520.8333.3316.67



33.33%

26.67%13.33%

6.67%

13.33%

3.33% 3.33%32.0%

36.0%4.0%

8.0%

20.0%50.0%

20.0%

10.0%20.0% 16.67%

33.33%33.33%

16.67%

18.75%

25.0%6.25%

43.75%

6.25%

20.0%

30.0%

10.0%

10.0%10.0%

20.0%

30.77%

23.08%23.08%

3.85%

11.54% 3.85%

3.85%

Q: What do you foresee will be the top technology influencer in financial services within the next 12-18 months?

Singapore

Vietnam

Malaysia

Indonesia

Hong Kong

Philippines

Thailand




Open API data sharing

Augmented reality in customer experience

The Internet-of-Things / Internet-of-Everything

Cognitive analytics

Mobile apps

13.8

3.3

4.1

8.130.1

13.8

26.8





27.0627.0618.823.534.712.3516.47

37.529.174.174.178.338.338.33

33.3316.670033.3316.670

37.5250025012.5



Q: How will the customer touchpoints evolve by 2020, for your organization?



Digital-only financial services


Automated services via chatbots and A.I.

56.6

17.78.9

13.3

3.5


7.41%

77.78%

7.41%

7.41%

13.04%

52.17%

13.04%

4.35%

17.39%32.0%

4.0%

4.0%

8.0%52.0%

11.11%

55.56%

22.22%

11.11%

33.33%50.0%

16.67% 13.33%

60.0%

6.67%

20.0%

12.5%

37.5%

12.5%

37.5%

Singapore

Vietnam

Malaysia

Indonesia

Hong Kong

Philippines

Thailand





13.1615.791.3261.847.89

66.67016.66016.67

02512.55012.5

26.094.354.3556.628.59



Liew Nam SoonEY ASEAN Markets [email protected]

Country contacts

Brian ThungEY ASEAN Financial Services [email protected]

Contact us

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