It takes more than tech to make financial services more inclusive and data-driven

Young woman using smartphone analytics

By Connie Leung, Regional Business Lead (Worldwide) Financial Services, Microsoft Asia

The recently concluded Singapore Fintech Festival (SFF) provided me with a great opportunity to speak with leaders from a wide variety of financial services institutions (FSIs). And their message was clear: the industry is experiencing a seismic tech-driven transformation as it pursues new products and services for customers across the region, to ultimately ensure better experience for them, on their terms.

With high mobile-penetration and a tech savvy population, Asia has become an engine for innovation, especially in financial technology. FSIs and ecommerce players are coming up with new ways to pay, borrow, insure, invest, and save. Innovation has created better products and services for customers, and has led to greater financial inclusion, delivering services to people who previously lacked financial access. While these shifts have obvious societal impact, they also create new challenges for FSIs. Now, they need to deliver 24-hour service availability at customers’ fingertips, multifunctional one-stop shop apps and the same level of security as a bank vault.

Tech leaders at FSIs know already that continual digital transformation is a necessity if they want to keep up with evolving trends in the industry, as well as customers’ changing habits and expectations, including those that are unique to the region. Across Asia, industry leaders agree that data has become the new currency, forming the foundation of new products and services that best meet the needs of customers. At the SFF, they also pointed out that successful change involves more than adding new features or services to an existing app. It requires a holistic approach and data-driven culture.

Technology enables change, but ultimately, it’s people who drive it. That’s why FSIs must start with a solid tech foundation, while also transforming product-focused and siloed organizations into agile, data-driven and customer-centric businesses that embrace tech at every level.

Why data and AI are key to digital transformation

Businessman using futuristic mobile phone

Data and AI are at the heart of most efforts to digitally transform FSIs. It’s not hard to see why. Data analytics and AI can be deployed in a variety of ways, ranging from biometric authentication to customer service bots to detecting cybercrime with machine learning. AI can also analyze huge amounts of data with a speed and accuracy that no human can match, creating a new, untapped resource for firms. As a result, FSIs can reduce costs, drive efficiencies, and increase revenues through better personalization of services.

The path to a data-driven business model for FSIs inevitably involves the cloud. Now, with Microsoft Cloud for Financial Services FSIs can gain agility, efficiency, scalability, security and resilience from the cloud, and combine it with an industry data model and capabilities which are tailored to the financial vertical.

There is no one-size-fits-all approach to digital transformation. By definition, technology plays a central role. But during our conversations at SFF, several business leaders from across the finance industry emphasized that transformation is also about organizational change.

Transforming platforms

In order to unleash the potential of data and AI, financial institutions need to start with a solid technical foundation that’s powerful enough to support new capabilities, according to Standard Chartered bank’s Managing Director for Data, Analytics and AI Transformation Shiler Khedri.

“We are in an era of financial services where we need to provide whatever, wherever and whenever the customer demands therefore the future of our bank is going to be an augmented, autonomous and cognitive one. Developing a strong foundation is a key to success. Moving away from patching and getting our data platform, API management, digital platform, cloud foundation etc. fundamentally right will help us to take a leap towards the future of banking,” she said.

And while most organizations understand the need to switch off legacy systems that slow down digital transformation, it’s often harder to leave behind “legacy thinking”, Ms Khedri said, especially when it means convincing employees to abandon systems that might have been successful for many years, but which might be less promising in the years to come.

“Next to legacy system, one of the other elements we need to pay very close attention to is the legacy mindset. Especially when legacy is associated with success, changing it is a lot harder,” she said.

Customer-centric thinking

Asian young woman paying with smartphone in a cafe.

Second, FSIs need to do away with silos and put the customer first. Too often, FSIs are product-focused, with credit, loans, savings, and investments staff all sitting in different departments. This no longer satisfies customers, who expect a super app with all services combined. Many FSIs are also turning to AI to personalize the user experience to suit the customer’s lifestyle.

That’s certainly true for large, complex, customer focused businesses like AIA, an insurer that works across 18 markets in Asia. The CIO of AIA Hong Kong and Macau, Patrick Lam said that the insurer is partnering with other FSIs to expand its range of services, leveraging open APIs, which allow products and services to be brought to market more quickly. AIA is also using AI and big data for a range of functions, including the creation of hyper-personalized experiences for their customers.

“The customer demands quite a lot, and we have to ensure that all the journeys we are building, and all the customer experiences will be able to serve the customer well,” he said.

“I can imagine going forward 5, 10 years, we will continue to be focused on data, because obviously, data-driven decisions are key for the tech-savvy customers. They demand more, and so we have to provide more.”

Tech intense cultures

Young woman uses digital tablet on virtual visual screen at night

Finally, this level of customer focus combined with tech intensity requires deep cultural change. FSIs need to embrace technology at every level of their organizations, according to Ivan Mazzoleni, the Cultural Energy Orchestrator (CEO) for Flowe, a digital bank under Banca Mediolanum in Italy.

“In a competitive environment, there is no room for companies that don’t have a clear understanding of tech. I don’t mean that everyone needs to code, but any company should have some roots in technology. And technology should not be isolated or siloed in the IT department. Everyone from the communications manager to the marketing manager to the legal department needs a common background and a common language around the organization’s major technology trajectory,” he said.

He also emphasized the need to integrate environmental sustainability and personal health into the culture and banking experience. “We need to create a common culture around ‘innovability’ — a combination of innovation and sustainability — to encourage the use of technology to nurture sustainability with an innovative mindset. Everyone in the organization needs to embrace technology to better serve and engage customers,” he added.

Looking ahead with trust

Trust is critical for any organization seeking to undertake a digital transformation. That’s particularly true for FSIs, which handle sensitive personal financial data and operate in a highly complex regulatory environment.

Microsoft is committed to working with its partners and customers to deliver this trust. With more than 90 compliance certifications across different regions and industries regimes, Microsoft’s cloud can address the most rigorous security, regulatory and privacy demands.

Microsoft is also committed to ensuring the responsible use of AI across its own business and is advocating for responsible democratization of AI solutions in FSIs. We have partnered with regulators and the financial industry to develop principles that can be translated into practical action. This includes working with the Monetary Authority of Singapore as part of the Veritas Initiative, which provides guidance on using AI fairly in areas such as credit risk. Microsoft led work on regulation in Phase 2 of the Veritas initiative, collaborating with financial institutions and other participants to identify key regulatory considerations in implementing responsible AI, which will help the industry accelerate responsible use of AI technologies.

Empowering the industry to succeed

The finance industry is undergoing a massive transformation. This technological shift has spurred tech businesses and non-bank players to enter the market, bringing innovation, better technology, and new business models to the finance sector. This new crop of FSIs will spur competition and improve customer experiences, while providing inclusive and affordable access to banking and financial services for all. Financial inclusion will, in turn, have an impact on the broader economy, boosting GDP by between 9% and 14% in many Asian markets, according to recent ADB research.

The pandemic created new urgency for FSIs to digitally transform. In fact, employees in the finance sector are more likely than those in any other to say digital transformation has increased since the pandemic started (85% versus a survey average of 72%). IDC predicts FSIs will more than triple their spending on public cloud services to US$21.9 billion by 2025, while spending on AI will maintain a compound annual growth rate (CAGR) of 22.5% between 2020 and 2025.

These numbers make it clear that FSIs everywhere have recognized that data and AI will play a critical role in their future success. But digital transformation is a complex long-haul journey. And while the pace might be different for each FSI, at Microsoft we’re empowering each of them to define and reach their destination.


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