For many businesses across the globe, 2020 was a year of extraordinary challenges. Across Southeast Asia, financial institutions faced challenges such as squeezing margins, increasing costs, heightening asset risk and reducing demand in some segments. But the pandemic also reshaped human behavior and changed how financial institutions operate, laying the foundations for a new type of financial services provider to rise from the ashes of COVID-19 pandemic in 2021 and beyond.
In 2020, as is well documented, for both the region’s consumers and its financial institutions, lockdown restrictions accelerated digital adoption.
According to the EY Future Consumer Index, how Southeast Asian consumers engage with financial services providers has changed forever. To the industry’s credit, as consumers turned to digital channels to meet their financial needs, institutions mobilized quickly to meet their customers’ expectations – leveraging new technologies to broaden customer engagement across digital channels.
As banks collaborated with governments to provide support relief and stimulus measures, data-driven strategies and investment in artificial intelligence (AI) and machine learning (ML) became even more critical. Insurers ramped up their digitization efforts, shifting their businesses online and migrating processes to the cloud. Fund houses and distributors tapped into FinTech to improve the customer experience, beef up direct-to-consumer capabilities and gain access to the broad range of data needed to decode today’s fast-moving and interconnected markets.
In parallel, consumers went through three years of technology adoption in as many months. As branches closed and in-person meetings moved online, digital identity verification, self-service and “talking” with AI-infused chat bots became ingrained behavioral habits for hundreds of millions of the region’s consumers.
Emphasis on digital models for financial services institutions
Now, at the onset of 2021, despite ultra-low interest rates, the industry is poised to capitalize on the advances made during the pandemic and pivot to sustainable growth. Banks, insurance and wealth management firms are racing to fill in the gaps exposed by a growing credit risk event, taking advantage of the opportunities emerging from hyper-transacting and hyper-digital customers.
As supply chains shift and financial institutions make increasing use of digital technology, they will remake their business models, dialing up resilience, reliability and efficiency by:
- Focusing on hyper-personalization
For financial institutions with a wealth of data available, hyper-personalization represents a window of opportunity to stay ahead of the curve with a value proposition that makes customers feel not just well served but understood.
In banking, hyper-personalized solutions will celebrate customers’ individuality and meet their lifestyle banking needs, increasing customer satisfaction, loyalty and activity. We can expect Southeast Asian banks to optimize their existing data by integrating new sources of contextual intelligence to better understand their client’s current needs and even predict their future ones. Cognitive banking will begin to emerge, with embedded functionalities such as interactive voice response, multilingual bots, natural language processing, machine vision and AI-powered recommendations. Eventually, this will lead to a seamless customer experience that feels as intuitive and natural as chatting with a friend.
In insurance, delivering on hyper-personalized experiences and the potential for smarter underwriting and claims will require advanced automation and AI. Insurers need to be able to recognize a consumer’s context — taking into consideration their unique circumstances at any given moment — and respond in an empathetic and relevant manner.
Similarly, greater connectivity and hyper-personalization will see wealth management become as convenient and engaging as online shopping or social media. In the future, we can expect wealth as a service, delivered through a fully digital intermediary. Thanks to a range of data feeds, this intermediary will have a unique understanding of its sole customer. And thanks to AI, it will have the power to conduct smart searches of the entire market on the consumer’s behalf and learn from them.