Financial institutions in Southeast Asia and Hong Kong are well underway in their journey toward digitalisation as nearly nine in 10 (87%) of those surveyed have adopted some form of digital initiatives. While more than a quarter (26%) of those surveyed shared that digital infrastructure is comprehensively implemented across their organisations, one in seven financial institutions (13%) are still assessing the need for digital adoption.
Among the financial institutions, banks are among the leaders with 91% indicating that they have initiated some levels of digital adoption in their organisation. This is followed by the insurance sector (83%), and the credit and payments sector (75%). Interestingly, the wealth, fund and asset management sector revealed a decisive split between digital progressives and digital laggards: a third (33%) of wealth, fund and asset management companies have fully embraced digital, while half (50%) are still assessing the need for digital adoption.
This is according to the EY report Driving digital into the heart of Asia’s financial services industry, which surveyed more than 140 senior executives in the financial services sector across Southeast Asia (Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam) and Hong Kong (executives who have a regional remit that includes Southeast Asia).
The survey also revealed that financial institutions in Malaysia are leading the pack in digital adoption as 36% of them have fully embraced digital. This is followed by Vietnam (33%), Singapore (29%), Indonesia (25%), Philippines (20%), Hong Kong (19%) and Thailand (17%).
Brian Thung, EY Asean Financial Services Leader says: “With digital transformation being the heart of next-generation innovation for financial services industry to enhance customer service, operational and resource efficiencies, and cost-savings, it is heartening to note that a significant majority of financial institutions have already embarked on their digital journey. Given the diverse levels of maturity in the digital and business landscape, it is not surprising to see the differing speeds at which financial institutions in the various countries approach digital transformation. However, with the expected boom in digital economy across Southeast Asia, financial institutions that seek to tap on this digital economic spur need to accelerate their transformation accordingly.”
Opportunity to Yield Greater Value from Digital Partnerships
Digital partnerships, ranging from cross-vertical with technology vendors to collaborations with fintech rivals or even established incumbents, offer considerable value for financial institutions. Digital partnerships offer the opportunity to pool their collective skills to shape product development, enhance customer service, and maximise the efficiency and productivity of internal processes.
Yet, only 21% of those surveyed believed that their businesses were yielding maximum value from their digital partnerships, with a significant majority either partially meeting their objectives (35%) or still assessing their viability (43%).
Wealth, fund and asset management companies appear to lag behind their industry counterparts – none believe they are yielding maximum value, and only 17% are partially meeting their partnership objectives. On the other hand, a quarter (26%) of banks shared that their digital partnerships are generating maximum value. Just 13% of insurers as well as credit and payments companies shared similar sentiments.
Singapore executives appear to be most buoyant over the benefits of these partnerships, with 32% of all respondents believing they add value to their organisation.
Thung says: “Working together with regulators and like-minded industry players, financial institutions can transform more seamlessly by optimising digital partnerships that are aligned with the interests of the organisation and their customers. They can leverage the strengths of these partnerships to complement existing capabilities to achieve greater economies of scale, cross-sell into each other’s customer bases to expand market share and distribution network. This allows customers more choices and better engagement – creating a win-win outcome for all parties.”
Barriers to Successful Digital Implementation
Digital disruption has presented challenges and opportunities to financial institutions. While the digital revolution has inspired a greater focus on customer demands and capacity to deliver these service innovations, it has also put pressure on existing technology infrastructure.
Particularly, the survey revealed that legacy infrastructure appears to be the most significant hurdle for banking (34%) and insurance (33%) institutions as well as credit and payments companies (38%). Notably, the challenges of integrating legacy infrastructure with digital are felt most acutely among respondents from the Philippines (50%), Hong Kong (41%) and Singapore (36%).
For the wealth, fund and asset management sector, the lack of suitable talent to drive technology transformation projects (33%) was a top concern.
Liew Nam Soon, EY Asean Markets Leader says: “Overhauling legacy systems or adopting interoperable technologies can be a resource-intensive project for financial institutions. Yet, to truly drive digital into the heart of the financial services industry and achieve digital economic integration, localised digital strategies that are fit-for-purpose for each market is needed. Financial institutions that are cognizant of this and understand how and where to look for the right industry partnerships to gain access to opportunities to grow their customer base will be the ones that are well-placed for success.”
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