A perfect storm of financial services transformation
THE FINANCIAL services industry is undergoing a perfect storm of transformation caused by changes in the regulatory environment, intense competition from fintech startups and increased investments in digital tools by traditional players.
Predicting the future is a tough task and in an industry that’s changing as fast as financial services, that’s even harder, but as we look ahead through 2019, there are some cues we can take from the focus of banks, insurers and asset managers in Thailand and elsewhere in Asia Pacific to revamp their technology for smoother integration with tech giants.
The year ahead should also see financial firms making more use of big data to launch entirely new products and develop more tailored pricing, as well as increase their efforts on digital solutions for small- and medium-sized enterprises (SMEs) and corporate banking. This list is by no means exhaustive, but hopefully it’s a good start to get people excited about 2019. So, here are some of the top trends to keep an eye on this year:
1 Technology upgrades for better integration with digital giants
For established banks and insurers, it’s important to upgrade and elevate their enterprise technology and expertise to the same level of digital sophistication of Internet giants and platform players such as Line in Thailand and Japan, Alibaba in China or Flipkart in India. That will help them achieve breakthrough, more integrated financial services products. Nowadays, for example, you have leading insurance players in India, Singapore and other countries in Asia Pacific selling a number of protection products through e-commerce sites, ride-hailing apps or online travel companies. Banks in Thailand are also partnering with digital giants to make sure they are an integral part of their customers’ daily life. The question every bank and insurance chief information officer should now be asking is: how can I make sure we have the right technology and culture in place so that we can integrate our products and services and be nimble enough to partner with the big tech/digital players?
2 Enhanced pricing with digital tools and wider use of big data
Digitisation will need to move from optimising the overall customer experience to product design, and be more central in developing sophisticated pricing models. Financial services firms should make more use of Big Data for the purpose of pricing, especially for segments where structured data availability is very limited, and particularly where pricing is limited. Having that ready would help banks and insurers develop and offer structured bundled products: think having your car insurance, along with home insurance and a savings account as one offering. In Thailand, for example, we already have insurance companies using tools such as internet of things devices to collect more data in order to provide custom pricing, a trend that should become more prevalent as the technology and know-how around Big Data analytics gets more widespread.
3 Think small to make it big
There will be a greater focus on small- and medium-sized enterprises (SMEs) in Thailand and other Southeast Asian markets in the coming year, given the macro outlook for greater protectionism and rising nationalism around the world. Financial services firms should heed that call and focus on offering more banking and insurance products to SMEs. But in order to better service that segment they’ll have to use more Big Data for the purpose of underwriting policies, for example. They should also use digital channels for smarter and more efficient distribution of financial products to SMEs, which has been lacking in most countries in the region.
4 Direct-to-consumer links to improve governance pitfalls
In a world with increased scrutiny of conduct by financial service providers, insurance companies and wealth management firms will have to focus on building a more direct relationship with their customers. This would replace an over-reliance on commission-based relationships via agents, as these can be prone to poorer or weaker governance. Digital will be the fastest, most efficient way for financial firms to do that, given the prevalence of smartphones and other devices at the hands of millions of people in the region. Companies will likely begin to sell services and products through their apps directly to consumers, bypassing the middlemen and creating a more agile and efficient business.
5 The evolution of human-assisted “roboadvice”
Fully automated wealth management services and “roboadvice” tools have been all the rage the past years. We will see a much greater level of simplification and digitisation in the area of wealth management, with an increased focus and greater maturity in the area of robo-assisted manual advisers. This hybrid model will combine bid data that financial firms have been building and optimising the past years, with new analytics tools that human advisers can use to create smarter, more nimble and personalised solutions with the human touch that customers want.
Contributed by NONTAWAT POOMCHUSRI, country managing director and head of financial services practice, Accenture in Thailand