Why Asia’s financial sector must embrace the fourth industrial revolution

Digitization of services and products will force an inevitable transformation of organizations in the industry

By Connie Leung, Senior Director, Financial Services Business Lead – Asia, Microsoft

At SIBOS 2017, a key theme is centred around “Building for the Future”. As the industry is increasingly facing disruption from industry players, and even organizations outside of the sector, business leaders in the financial services industry (FSI) today are at the edge of being outplayed by newer entrants in the new digital age.

According to Klaus Schwab, founder and executive chairman of the World Economic Forum, we stand on the brink of the Fourth Industrial Revolution. The rise of digital technologies, as well as new entrants like FinTech companies, are disrupting conventional banking methodologies that cater to Asia’s highly mobile, social and connected customers. From mobile banking apps, to cashless payment options, technology is changing the face of financial services offered today, but is also disrupting traditional FSI operations.

By estimates, there will be approximately 1.7 billion digital banking consumers in Asia by 2020[1]. This presents an unprecedented opportunity for FSI organizations to capture new and existing customers who are adopting digital services to fulfil their banking needs.

Change is inevitable, and they acknowledge the need to transform now. However, the digital transformation of FSI organizations in Asia is still in its beginning stages as compared to other sectors, although the signs are clear that this will accelerate in the next five to 10 years.

“Businesses that lack leadership with the skills to ideate, plan, and lead a digital transformation strategy must address their skills gaps.”

As part of the recent Microsoft Asia Digital Transformation Study, we surveyed business decision makers who are shaping or influencing the digital strategies of financial organizations with more than 250 employees. The signs are clear – 81% of organization leaders are well aware of the need to transform to become a digital business, but less than a third have a full digital transformation strategy in place.

Inevitably, technology is at the center of how FSI organizations can transform themselves to be more agile and responsive to new market paradigms. Emerging technologies including Blockchain, Internet of Things, Artificial Intelligence and even quantum computing, are now being evaluated by FSI leaders for deployment to accelerate transformation.

Earlier, the Monetary Authority of Singapore and The Association of Banks in Singapore announced that they have led a consortium to successfully develop software prototypes of decentralized inter-bank payment and settlements with liquidity saving mechanisms. The prototypes are developed on three Distributed Ledger Technology (DLT) platforms and deployed on Microsoft Azure.

The move by the Singapore authorities to explore DLT signifies a shift in openness in the industry to collaborate in an open and transparent manner, and could mark the start of more innovative solutions in the future. It is also testament of the relevance of new technologies being explored and implemented in the sector as a step towards industry transformation for the digital age.

At Microsoft, we recognize that FSI organizations in the region are still navigating their way through the course of transformation, and we are committed to empowering them to shape the future of banking.

Click to view the white paper

In this whitepaper, “Winning in the fourth industrial revolution: How the financial sector must transform digitally to lead the race for relevance”, we examine in detail the areas FSI leaders are prioritizing in their transformation journey, as well as some of the key barriers they face in implementing an organization-wide strategy.

FSI leaders will also find viewpoints on how they can realize digital transformation within their organization across teams and functions, while addressing industry-specific challenges.

The future will belong to organizations and leaders that evolve their strategies and offerings to serve their customers for a digital-first world. I look forward to hearing your thoughts on how your organization is evolving for the digital age.

 

 

 


[1] McKinsey & Company, Digital Banking in Asia – Winning Approaches in a New Generation of Financial Services (2014)