Financial services technology driven by risk management

The ability to lend well in crisis conditions has received a lot of attention especially among the APAC’s largest institutions

The return of risk management as a key driver for technology investments and business decisions, particularly in what seems to be a point of entry for a crisis: credit risk. Financial institutions must ensure that they can withstand the pressures of a slow growth, high delinquency period, and investments will be forthcoming into credit decisioning systems, collections and recovery, asset–liability management, and stress testing.

“This year, one imperative stands out, which is lending. Lending serves as an indicator for the eventual income growth and profitability of banks, and the ability to lend well in crisis conditions has received a lot of attention especially among the Asia/Pacific region’s largest institutions,” said Michael Araneta, associate VP at IDC Financial Insights Asia/Pacific.

2021 however is seen to introduce new trends in fintech-related activities by banks and insurers. Although fintech companies have seen challenges at the outset of 2021, there is greater willingness by incumbent financial services institutions to collaborate.

This is seen even in the most traditional business activities like lending and deposit-taking. Araneta continues, “The lending ecosystem is witnessing radical transformation. From owning the entire value chain of lending from origination to servicing, focus is shifting to specialization in parts of the overall digital lending value chain. Banks and financial institutions are looking to build capabilities to orchestrate various components of lending value chain effectively through collaboration.”

Furthermore, other priorities in ensuring quality of customer services have come to the fore. Ganesh Vasudevan, research director at IDC Financial Insights Asia/Pacific said the experience of 2020 has made banks and insurers more confident in their ability to deal with digital transactions. With investments into cloud, virtualised infrastructure, and real-time payments systems, they can cope with the sheer growth in the use of digital channels among customers and staff.

“The effort around operational risk management and business continuity has sustained them amid lockdowns and remote work phenomenon. Financial institutions are also much more able to support the emergence of new modalities of customer interactions, which enhance face-to-face interactions or replace them altogether,” he said.

Some of the key financial services predictions that will impact the IT industry and both technology buyers and suppliers in Asia/Pacific are:

  • Prediction #1: By the middle of 2021, 50 per cent of lending decisions in retail banking will be supported by fintech propositions, underscoring accelerating bank–fintech collaboration.
  • Prediction #3: By 2024, 50 per cent of in-branch transactions will be initiated as prestaged transactions or appointments for specialists that start on digital platforms and fulfilled on bank-owned technology and locations.
  • Prediction #6: By 2024, 75 per cent of all consumer and small business loans will be originated through AI-enabled and automated processes.

The full set of Financial Services predictions for Asia/Pacific* are found in the document IDC FutureScape: Worldwide Financial Services 2021 Predictions — Asia/Pacific (Excluding Japan) Implications.


Leave a Comment

Related posts