APAC banks leveraging fintech innovation more than other global markets, Finastra research reveals
Finastra research reveals that fintech partnerships are a critical part of APAC banks’ strategies, with 87% – a higher proportion than any other region – planning to connect with an average of four fintechs in the next 12-18 months, and just 12% planning to build their own solutions in-house.
The research, conducted by East & Partners, finds that the core motivations of APAC respondents to integrate fintech solutions are reducing operational costs (43%), deploying new technology with greater ease (47%), and leveraging technology expertise not available in-house (52%).
Digital transformation remains a priority, with APAC institutions investing an average of $293.2 million in transformation in 2023, although this is behind the global average of $367.6 million and substantially less than European banks, which are investing an average of $886 million. Over half of APAC respondents (54%) said they have digitalized their customer-facing processes in the last 18 months, which is slightly above the global average of 47% and only second behind Europe (73%). Interestingly, whilst more APAC respondents feel they are ahead on their digital journey (26%) than the global average (19%), similar proportions in APAC (34%) and globally (33%) believe they are behind by more than a year. This is substantially lower in the Middle East, where only 12% feel they are ahead and 62% say they are behind.
The research was conducted amongst 783 interviewees at 260 banks in Asia Pacific (Hong Kong, Singapore, Australia, Indonesia, Thailand, Malaysia, Japan), the UK, Europe, the Middle East and the Americas, as well as 393 interviews with North American community markets banks and financial institutions. The findings explore the current appetite in the marketplace for fintech investment and integration, and Environmental, Social and Governance (ESG).
Other insights include:
- Banks are using fintechs to enhance the customer experience – when searching for a new fintech partner to improve their customer offering, APAC banks are prioritizing online portals / banking channels (52%), transparency across processes, such as providing the customer with real-time updates on onboarding progress (50%) and improving end-to-end connectivity and value-add services (45%).
- Organizational ESG priorities vary globally – in APAC, the main priorities are securing longer-term funding internally (63%) and ensuring board and management alignment on sustainability initiatives (61%), whereas the top global priorities are reducing banks’ own carbon emissions (49%), followed by board and management alignment on sustainability initiatives (46%). These stats are similar for banks in the Middle East, whilst in Europe a larger proportion (74%) are prioritizing reduction in carbon emissions, followed by settling on definitions and terms (67%).
- Appetite for green lending continues to soar – A fifth (20%) of APAC banks plan to increase their exposure to green lending in the next year, but this is set to accelerate quickly with 59% planning to do so in the next 12-18+ months.
“In an environment characterized by uncertainty, high inflation, fluctuating interest rates and recessionary risks, banks are under an increasing amount of pressure to drive operational costs down while continuing to improve how they serve their customers,” said Isabel Fernandez, EVP Lending at Finastra. “Our survey demonstrates the recognition from banks that they cannot navigate these waters alone. They are instead opting to partner with fintechs, with a preference for plugging into a platform of integrated fintech solutions, to help them to adapt quickly while reducing costs.
“The research also shows that ESG is continuing to expand throughout a bank’s internal operations and external offerings. At Finastra, we champion the idea that finance is open. Whether through our open platform for collaboration and innovation – FusionFabric.cloud – or our belief in open technology, mindset and culture, we are helping banks future-proof their offerings and drive a better future for the communities they serve.”
"Major inflection points in recent years have had, and are still having, a dramatic impact on how financial services is evolving,” said East & Partner Global Head of Markets Analysis, Martin Smith. “This is forcing institutions to reconsider how they manage risk, increase their agility, and fast-track innovation to evolve with new demands. We partnered with Finastra to better understand and showcase how banks are adapting to this environment. We believe that despite the challenges facing global banks, the industry’s focus on collaboration and driving ESG initiatives forward, highlighted by the research, will ultimately have great benefits for financial institutions and their customers, today and in the future.”
Access the full reports and findings here:
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