Partnerships, carbon action, talent acquisition key for SEA banks’ in 2024: analyst

Developing new workforce capability is now a necessity given macro factors.

Southeast Asian banks should focus on investing in partnerships and talent acquisition, as the need to make a more agile and resilient organisation becomes more important in 2024, according to an EY analyst.

Partnerships are now integral to Southeast Asian banks' strategy to transform, given the continued talent and skills gap seen in the market, said Li Yun Sea, EY ASEAN banking and capital markets leader. 

“Developing new workforce capability is now a necessity, not a good thing to have, as macro factors continue to challenge the resiliency of banks both internally and externally,” Li said.

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Tech transformation a “bright spot”
Apart from filling out the talent and skill gap in their workforces, banks are also advised to develop their technological capabilities– in particular, transform from traditional banking to more “cognitive banking.”

“Going from traditional to cognitive banking, one which is interactive rather than reactive, allows faster and more optimal decision making, which will improve customer retention, growth and expansion,” Li said.

Technology will reportedly play a critical role in enabling Southeast Asian banks’ growth, such as with customer engagement through transformed digital channels and offerings, Li noted.

Advanced technologies like GenAI, will also continue to be growth accelerators as they catalyse the optimization of processes and empower strategic delivery of customer -focused solutions with differentiated pricing, segmentation and portfolios that will see new revenue growth. 

“Banks should not be looking at short-term cost cutting measures only, but re-prioritizing investment monies into value and growth drivers that include the re-skilling of staff, infrastructure and technology. Leveraging data to identify these value and growth drivers is key to align investment costs with strategic outcomes,” Li said.

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Decarbonization a key concern
Meanwhile, decarbonization remains a key issue for banks, especially given their role in enabling transition of customers.

“[There’s] an urgency to accelerate decarbonization and support effective transition planning for Southeast Asian banks’ customers,” Li wrote. “Banks play a critical role in enabling the transition of customers that are impacted by climate risk and need to support the implementation of mitigation and adaptation measures by customers that are affected.”

Apart from sustainability, banks are further expected to prioritse two more issues: impact on performance from inflation and compliance requirements.

“Inflationary pressure and foreign currency volatility will continue to impact performance, as we’ve seen in recent months, though to a lesser extent in 2024,” Li warned.

On the topic of compliance, Li warned that there is likely to be increasing risk due to changes in businesses operating models, cross border transaction flows and new product types, such as digital assets. 

“Banks are required to comply with varying regulatory standards across various jurisdictions in the region, so it’s fair to say we can expect tougher regulatory scrutiny and penalties will also drive up compliance costs going forward,” Li added.