Liew Nam Soon delves into digital strategies and their impact on customers

He discussed the five sector-specific developments that financial services organisations across Asia-Pacific need to manage to be successful.

Opening doors for opportunities and managing them is vital for financial services organisations to navigate the dynamic industry landscape to manage risks whilst staying competitive.

Offering valuable insights is Liew Nam Soon, EY Asean Regional Managing Partner. He is responsible for business performance and client services in assurance, consulting, tax, strategy, and transactions businesses in the EY Asean Region. In his role, he leads EY teams in helping clients digitally transform their businesses, building eco-systems and alliances across different industry sectors. He is also a board advisor to many EY clients.

Previously, he was EY Asean Markets Managing Partner and EY Asean Financial Services Managing Partner. Having worked with some of the largest financial services institutions across Asia, Nam Soon has extensive consulting and industry experience in retail, SMEs, private, corporate and investment banking, asset management, insurance, private equity, and FinTech. 

Nam Soon, as a judge at the Asia Banking & Finance Awards 2024, discussed how financial institutions should leverage opportunities for digital transformation and emerging technologies.

What do you believe are the key factors for businesses to successfully navigate today's dynamic and uncertain market landscape?

Businesses today face a gamut of uncertainty in the landscape, from increased geopolitical tensions and slow economic growth to elevated interest rates and domestic challenges. Beyond these challenges, tightening monetary policies and margin contractions also add to the pressures that financial institutions face.

To this, EY research highlights that there are five sector-specific developments that financial services organisations, especially banks, across Asia-Pacific, need to manage to be successful: 

Customer expectations: EY research found that post-pandemic, consumers in Asia-Pacific are looking to increase their use of mobile banking. Indeed, advances in technology have led to a rise in the number of players providing financial services digitally and consumers are increasingly turning to them to address their needs. As a result, consumer expectations are changing, as they expect a seamless omnichannel and personalised banking experience. Hence, traditional banks and financial institutions will need to invest in customer-led innovation to increase agility and deliver augmented financial experiences.
 

Open ecosystem models: Banks are turning to open application programming interfaces (API) to deal with the challenge of legacy IT systems. Open APIs integrate banking into ecosystems, creating a connected network of financial institutions, software suppliers, and FinTech communities. These facilitate banks’ collaboration with multiple ecosystem partners to incorporate specialised tools and solutions, extend distribution channels, and enrich client services. At the same time, banks are leveraging Banking-as-a-service—supplying on-demand client-facing financial products or back-end financial structure and services—to expand revenues beyond the traditional banking perimeter. Such embedded finance (EmFi) enables cross-sector convergence and ingrains finance components into customers’ purchasing experiences to provide more tailored yet friction-free access to financial services.
 

New technologies: Banks in Asia-Pacific are taking a bigger, bolder, and more innovative approach towards technology. Progressive institutions are leveraging cloud services and open API to deploy newer applications and software development techniques. Notably, two transformative developments most pertinent to Asia-Pacific are advanced artificial intelligence (AI) or generative AI (genAI), as well as digital money. Banks need to understand the implications of these technologies early so they can keep pace, especially as the keenest competitors they may face may well be digital disruptors.
 

Competition for talent: EY research has found that employees in Asia-Pacific’s financial services sector are looking for greater flexibility in their work arrangements. Specifically, 41% of Asia-Pacific’s financial services employees want fully remote or remote-first work flexibility, and 85% agreed that their company’s approach to work flexibility will affect their ability to attract talent. Hence, banks need new strategies to manage, motivate, and retain existing employees and to attract the new generation of talent.
 

Environmental risks: Asia-Pacific is amongst the most vulnerable to declines in natural capital, climate change, and natural disasters. Whilst banks have introduced a range of initiatives to support the transition to net zero, these offerings typically target corporates with limited options for retail products where greenwashing can be a concern. Beyond supporting clients and consumers on their sustainability journey, banks in Asia-Pacific are also facing challenges in ensuring appropriate risk management around environmental risks. Hence, there’s an urgency for banks to make sure that their activity, as well as that of their clients, is supporting the push towards decarbonisation. 

Can you share some insights into how organisations can effectively leverage technology to enhance their operations and stay competitive?

Globally, Asia-Pacific is leading in digital banking adoption, driven by favourable demographics, a booming technology segment, a large unbanked population, and supportive frameworks. Indeed, following the pandemic and with the introduction of emerging technologies, consumers are increasingly inclined towards digital interactions, personalisation, and convenience. Banks are responding to this trend by refining their distribution outreach as consumers embrace omnichannel and self-service platforms. 

Examples include digital wallets in an all-in-one app that allows cashless and cardless payments, from bill payments to cross-border remittance; as well as partnerships between banks and digital platforms or ride-hailing companies to enable EmFi to provide integrated services and easier access to financial products digitally and directly, thereby helping to extend customer reach. Real-time digital payments are also progressing, and cross-border payments are another area that is evolving rapidly. 

As a result, according to the Global Payments Report 2024 by Worldpay, consumers in Asia-Pacific used digital wallets for 70% of e-commerce transaction value in 2023. Digital wallets accounted for over US$2t in Asia-Pacific’s e-commerce transaction value in 2023, which represented over 64% of global online digital wallet spend. 

Real-time payments, together with embedded and decentralised finance, and generative AI (genAI) are amongst the powerful forces shaping the banking landscape today. EY research also found that Asia-Pacific is expected to account for more than half of the US$606b EmFi market by 2025, with embedded payments and lending taking up more than two-thirds of EmFi activity. 

Notably, genAI has come to the forefront as a means for banks to accelerate innovation. Research from EY-Parthenon reveals how decision-makers at retail and commercial banks globally view the opportunities and challenges of genAI, as well as highlighting initial priorities. Specifically, the three main areas where genAI is changing ways of working at banks are: enabling greater productivity by automating sales-related activities (66%), enhancing existing technological capabilities (63%), and accelerating broader innovation (54%). Whilst it’s no surprise that productivity and automation top this list, banking leaders clearly see how the value of genAI extends beyond process improvements and cost savings and can help them strengthen their capabilities and foster more and faster innovation.

In shaping their genAI strategies and plans, banking leaders must recognise genAI’s position alongside Web3, blockchain, quantum computing, and other disruptive technologies. Long-term roadmaps must reflect how these technologies, when deployed in the right combinations, can transform core business functions (e.g., operations, finance, risk management, product development, and sales). More importantly, they can also open new revenue streams and create entirely new value propositions.

How has ESG-related regulatory risks evolved for financial institutions?

Globally, there is a greater regulatory oversight on environmental, social, and governance (ESG)-related reporting and climate-risk management. Notably, financial regulators globally are focussing on net-zero transition planning. This could be driven by authorities requiring firms to have transition plans in place to manage their exposure to financial risk or as a means to effect social change where financial institutions are leveraged to transition society to a lower carbon future. 

For example, companies listed on the Singapore Exchange that are in the financial, agriculture, food and forest products, and energy industries are required to provide mandatory climate-related disclosures as part of their annual sustainability reporting for FY 2023.

The financial services sector has a central role to play in the decarbonisation process, mobilising an enormous amount of capital to succeed in the world’s journey to net-zero. Hence, the Monetary Authority of Singapore convened an industry-led initiative called the Green Finance Industry Taskforce to focus on a few key initiatives, including the development of a Taxonomy. The Taxonomy is designed to promote the development of an environmentally sustainable economy for Singapore and ASEAN by defining science-based and robust technical screening criteria for economic activities and projects that are aligned with Singapore and the region’s overall environmental objectives.

As well, regulators continue to perform deep dives and stress tests on financial institutions to assess their climate risk management. Concurrently, regulators are also addressing greenwashing risks caused by the misalignment of ESG-related fund names and objectives. Regulations to address sustainable investment labels, disclosure requirements, and restrictions on the use of sustainability-related terms in product naming and marketing will likely come forward. 

What do you see as the most pressing regulatory challenges facing the financial services industry today and how can organisations proactively address them whilst maintaining competitiveness?

With digitalisation becoming business-as-usual for corporates and consumers, this has created a regulatory challenge that many financial institutions are facing. For a start, legacy systems in financial institutions mean that updating the systems can be a massive undertaking that has a widespread impact on clients and consumers. Hence, regulators are placing greater scrutiny on the standard of digital resilience and increased operational resilience on IT systems, third-party service providers and innovative technologies in financial institutions, especially banks. Financial institutions are also required to reduce deficiencies in IT outsourcing, IT security or cyber risks, and data governance. 

Additionally, there is significant debate relating to AI. Whilst some governments are actively developing guidelines to support coordinated approaches to the responsible use of AI, there are others that are still weighing in on how to future-proof intervention and avoid stifling innovation. Along with sector-agnostic regulation, financial regulators are considering the need for new rules to complement existing ones relating to AI. 

As well, the enabling of open finance—the next stage of the evolution of open banking—expands data access and usage beyond payment and transaction data, whilst also including other areas of financial activity such as insurance, is drawing interest from clients and consumers as well as regulators. In Southeast Asia, a growing number of initiatives are underway to link domestic payment systems and enable frictionless cross-border payments. For example, Singapore’s PayNow system is linked with India’s UPI and Thailand’s PromptPay. This has allowed greater convenience for consumers and corporates but bring the risk of financial crime. Hence, some jurisdictions are adopting a regulatory-driven approach for open finance frameworks to avoid regulatory fragmentation. Open finance regulatory will require financial institutions to set up multi-year strategic, operational and technological transformation programmes. 

As digital transformation and emerging technologies create exciting opportunities for financial institutions, they need to be mindful of their digital strategy and the broader impact on their clients and customers, as well as the ecosystem. Importantly, they need to understand the expectations of regulators under existing rules and actively monitor developments in technologies and regulatory guidance. Internally, having cross-functional teams for technology projects to address risk and compliance and a governance framework for digital or new technological adoption to maximise upside value and minimise risk will be helpful. 

How do you see the role of FinTech evolving in the financial services industry, and what opportunities do you believe it presents for both traditional financial institutions and emerging players?

Southeast Asia is one of the fastest-growing markets when it comes to digital device adoption and boasts amongst the most enthusiastic mobile app users globally. The region’s rapidly expanding population of tech-savvy individuals is fast-tracking digital innovation, with individuals and businesses in the region being amongst the most receptive towards FinTechs and novel ways of consuming financial services vis-à-vis even peers within the more mature global markets. Further, Southeast Asia is a flourishing market for cross-border e-commerce—a space where FinTechs are well-positioned to win share from banks. The region’s cross-border transactions increased rapidly in recent years, driven by economic growth, digital infrastructure development and growth in tourism. 

The evolving landscape means that financial institutions, software suppliers and FinTech communities have the opportunity to work closely together to drive innovation and design new products and services. Additionally, by collaborating with FinTechs to further combine APIs with organisational structures such as low and no-code platforms, modular technology architecture and microservices, financial institutions will be able to innovate faster and more cost-efficiently.

As a judge at the Asian Banking & Finance awards, what qualities or attributes do you personally consider essential for an entry to be recognised as a winner?

The ability to see past challenges and recognise that these are opportunities for the organisation to innovate, tap into new technologies, skills, and thinking to do better and be better—for the industry, clients and community. More importantly, how the financial institution embeds such a mindset in their organisational culture so that the impact extends beyond business growth but uplifts the entire ecosystem together.