In a business environment strongly tied to compliancy and regulatory changes, increased customer turnover, and the ever-present need for increased efficiency at lower cost, the most successful financial institutions in 2014 will be those that can navigate all these challenges and still deliver an innovative, multi-channel experience to customers.
Crucial to this will be the use and adoption of technology to out-innovate competitors.
To improve service levels, increase data visibility and create value, the financial service sector has to embrace technology trends sweeping the market.
According to IDC's annual 2014 top 10 predictions for the worldwide financial services market, mobility remains Asia Pacific's "biggest tech disruptor" for the financial services industry. Among the other predictions in the report:
- Consumers will minimize their face-to-face traditional interactions in favor of purpose-built applications that provide immediate and focused value.
- Also, credit analytics, liquidity and asset liability management, information and cyber security, and enterprise risk dashboards and reporting are some other specific areas that are expected to do well.
Lastly, IDC foresees that financial organisations are expected to move from ad hoc infrastructure projects towards managed services as cloud initiatives mature, allowing them to leverage on cost-effectiveness and the scalability paradigm of the cloud.
From processing to real-time
Because of these trends, there is a huge opportunity for banks to innovate on their core banking projects, in particular channels, risk and compliance, and integrated data management.
By transitioning to a real-time processing platform, banks could realise tremendous gains in scalability, increased performance of mission-critical systems, and long-term cost savings. Michael Araneta, research director for IDC Financial Insights Asia/Pacific remarks, "channels, data management and analytics capabilities are areas of focus for banks looking at core banking system improvements as they seek not only to upgrade core transactional engines but also to improve the way they engage with their customers."
Such core transformation projects can create opportunities for banks to out-innovate their peers.
Some hot markets for core modernization include Australia, Taiwan, Malaysia, Singapore and Hong Kong, said IDC in the 2014 predictions report, and key divisions for modernization include customer acquisition, market intelligence and operations.
Out-innovate for competitiveness
We expect that IT spending in the financial services sector is likely to grow at a very healthy pace, especially in developing regions.
According to the latest IDC predictions, overall IT worldwide spend in financial services will exceed US$430 billion in 2014, and will grow beyond half a trillion dollars by 2020. In Asia Pacific alone, the compound annual growth rate for IT spend in the financial services sector will exceed five percent in the next five years: 6.84 percent for banking, 5.6 percent for insurance and 6.2 percent for capital markets.
Sign up for CIO Asia eNewsletters.