Key takeaways from the Temenos Regional Forums in Asia-Pacific
The Asia-Pacific financial sector is undergoing rapid transformation. Consumers' expectations have significantly increased as a result of the digital revolution and the emergence from the Covid-19 pandemic. Temenos held a series of industry forums to engage global and regional banks, fintechs and hyperscalers in a discussion on how the banking industry should both respond and reposition itself to navigate an evolving banking landscape more effectively.
More than 1,100 combined attendees from the industry gathered across 11 cities between August and November. Each event’s agenda was tailored specifically to the trends and opportunities present in that specific market. But overall, these topics revolve around huge disruption that financial institutions are seeing in the industry, including:
- Digitally savvy customers with ever-increasing expectations
- High adoption of disruptive technology like AI, Cloud, APIs, and analytics
- Strategies to progress open banking and regulation requirements
- Continuous technological advancements such as distributed ledgers, augmented reality, quantum computing and the Metaverse
- Fierce competition across multiple areas between traditional banks and new players
- Facing immense changes throughout the banking landscape, financial organizations are responding with new banking business models, which include the considerable growth of Banking as a Service (BaaS). With BaaS, financial providers can offer products and drive revenue in a volume play by distributing through the channels of non-banks – often with massive customer reach. This will be critical to consider moving forward with analysts predicting the BaaS market will be worth $3.6 trillion by 2030
Shifting business models
This entails a need for unprecedented levels of business agility for bankers operating in the region. Banks require the ability to provide innovative financial solutions to their customers.
They need to be able to deconstruct legacy banking systems, distill the essential elements that bring value to customers, and then recompose those crucial components into cutting-edge, agile value propositions to become the banks of the future.
Because of this, it is even more important for a banker to look at several important considerations when selecting a technology platform for his or her bank.
For 29 years, Temenos has been on a mission to put customers at the forefront of banking. By helping them face industry challenges and seize valuable opportunities, we make banking better for over 1.2 billion people today. Fuelled by industry-leading investment in research and development, we offer rich, localized and packaged functionality with open technology – which runs on any hardware, database or platform and ensures upgradability.
However, acknowledging that success with emerging business models in banking requires the right technology and platform for agility, scale, and innovation. This platform should enable banks to:
- Compose new banking solutions based on granular banking capabilities
- Integrate with third-party solutions in a fintech ecosystem, such as the Temenos Exchange
- Consume solutions any way you want, including on-premise, and on any private or public cloud or as SaaS
Everyone’s Banking Platform
The theme for the Temenos Regional Forum 2022 is ‘Everyone’s Banking Platform’. More than just a marketing slogan, these words were carefully chosen to communicate our vision and ambition.
We’ve built a platform where services can be built and consumed by everyone, regardless of the segment that the banks serve, company size and location – whether an established bank, a challenger or a fintech.
This platform will help banks operate more cost efficiently, with more agility, enabling them to compete better and grow their revenues. Developers and ISVs will benefit by selling their solutions through the platform’s open marketplace. Non-banks will gain by embedding financial services into their brand offer. And end-users will win because banking will seamlessly integrate into their everyday lives through the platform.
Next-generation digital banking in Asia-Pacific
Asia-Pacific is poised to be the next battleground for digital and neobanks, with existing players stepping up their expansion plans in addition to the entry of new players. This is because the region has the potential to become a huge market for digital banks.
The hybrid banking model, gig economy, and the increased need for financial inclusion are some trends paving the way for new financial services needs in the Asia-Pacific region. To address the changing expectations of today’s consumers, digital banks have emerged providing innovative financial products and services to address these market trends and segments who have not been adequately served before, such as the unbanked and underbanked population. In countries such as Indonesia, Philippines, and Thailand, this has become more prevalent.
It is a response to the shifting expectations of today’s consumers in the Asia-Pacific region. The growth of embedded finance has become one of the most exciting topics when it comes to digital banking. Specifically, digital banks are looking to partner with other fintechs to deliver superior user experiences while also improving on cost-to-income ratios.
During some of these events, various groups of panelists—which include experts from neobanks, hyperscalers, and Temenos—discussed how Covid-19 has accelerated digital banking in the region and how it has emerged to constitute a critical segment in the banking sector. The need for digital banking to be integrated to the small and medium enterprises (SMEs), and the financially unbanked and underbanked is of utmost importance to unlock the potential and propel nations ahead into a digital economy.
Recipes for success when banking in the cloud
One of the hot topics arising from the regional forums is cloud banking.
In this rapidly changing competitive and regulatory landscape, banks need a robust cloud platform to evolve with strict regulation and new data and security requirements. They also need the scalability and open technology to rapidly evolve with customer demands.
From Temenos’ perspective, there are seven recipes for success if financial institutions want to take full advantage of the cloud.
Security: Security is a critical theme for the financial services industry, with key themes coming to the fore such as Bring Your Own Security (BYOS). Banks are working on advanced cloud requirements to combine open technology with solid security frameworks.
Data: The regulatory and obligatory requirements for banks are constantly evolving. It’s vital for banks to be in full control of their data, as to where its stored, as well as understand how their data is being handled and lives up to regulatory requirements through its lifecycle.
Migration: For banks it is all about choosing the right journey to bring on-premise technology to the cloud. Determining the right Go-Live process, the right approach and methodology with the right partners to execute.
Resilience: Resilience is foundational to operating in the cloud, with end-to-end supply chain resilience becoming even more critical today as well as cloud supplier resilience.
Hyper-scalability: Banks need the ability to scale for right size, at the right time and for the right cost. Participating in new distribution models like embedded finance and BaaS requires a whole new level of scalability to leverage momentum in the market when needed, and scale back, when possible, for optimal efficiency.
Multi-cloud: Multi-cloud and cloud-agnostic strategies are becoming increasingly key to enhance performance, portability, and getting access to the best capabilities to provide competitive financial services.
Regulation: Banks cannot outsource their regulatory responsibilities, but regulatory supply chains must cater to ongoing change and new demands. Data regulation, reporting and Governance, Risk & Compliance (GRC) frameworks need robust support to be successful.
For over a decade Temenos has provided SaaS software to customers on the Temenos Banking Cloud, with over 700 SaaS clients around the globe and more than $1 billion in R&D investment.
Reimagining wealth management in the region
There is a significant increase of mobile native and tech savvy people in Asia-Pacific, and smartphone penetration is rising. At the same time most of the wealth in the region is tied up in family-owned enterprises or property – which in the next few years, will change hands. This greatly impacts generational transfer of wealth to younger investors who will want to engage with their advisors in completely different ways.
How would banks and wealth management firms structure a service that will appeal to these younger, mobile native and digitally savvy clients without alienating those that hold the wealth right now (i.e. the older generation)?
These issues were addressed during the forums. And with the rapid onset of Covid-19 related challenges, banks and wealth management companies sought to speed up the transformation of their wealth business, in order to enhance the customer experience. The following trends may be seen in the wealth management and advisory sector:
- Digitalization and hybrid models
- Cloud migration and SaaS
- Hyper-personalization
- Generational wealth transfer
- Environmental, social, and governance (ESG) and sustainability
- Digital assets
- Cross-segment platforms and streamlining
And in countries where thousands of workers were furloughed in the early stages of the pandemic, it became clear that many people were woefully unprepared to endure short term cash crunches or interruptions to their earnings capability. Take for example, in Australia, the challenges being addressed are:
- Increased compliance costs
- Higher educational and qualification standards
- An exodus of advisers from the market
- A concentration at the wealthier end of the addressable market
- A significantly widened advice gap – addressing the growing segment of neglected customers that chose not to or cannot afford financial advice
It is clear that technology plays an important role in tackling these trends and challenges. Temenos has a strong client base, including some of the largest global private banks. Our wealth solution is unique in its breadth and depth, with digital customer experience, hyper-personalized services, and highly automated processes that enable banks and wealth management firms to service Ultra High Net Worth Individuals and Mass Affluent clients.
Buy-Now-Pay-Later as a hinge towards digital lending
One key innovation that paves the way forward by both providing needed leverage as well as enabling rapid digital financing is the trend of Buy-Now-Pay-Later (BNPL).
The growth of BNPL is slowing in many markets, but is still expected to grow significantly in the long term. Australia saw a 43% increase on BNPL transaction during the first year of the pandemic, largely attributed to the simultaneous boost in e-commerce and digital finance at that time. In terms of region wide penetration, Indonesia, India, Japan, and Singapore are projected to be the next emerging markets with each holding 3% of the BNPL market share across payment methods.
Just as the BNPL model is continuing to grow and evolve, it’s still an unregulated market in most countries. This means despite how convenient BNPL financing can be for consumers, there are potential risks and downsides to consider – which has quickly led to increasing regulatory scrutiny across the globe. And therefore, a comprehensive BNPL system will benefit key parties along the way. For example, because BNPL arrangements typically do not charge interest or fees, instead of relying on a fixed repayment schedule, the cost of loan origination is much lower than other financial models, such as credit cards. Banks and non-BNPL fintechs now stand to be the main beneficiaries of this switch in the financial environment as the market grows – such as faster time to market, improved customer experience, and greater scalability. Along with digital adoption and an increased demand for BNPL solutions, the Asia-Pacific region as a whole is projected to attract more investment in the short to medium term perspective than more developed regions.
Temenos for BNPL offers a comprehensive, SaaS, AI-powered solution that empowers banks and fintechs to create amazing BNPL experiences for customers and merchants. This thoughtful and comprehensive approach to the BNPL space was designed to cover the entire BNPL lifecycle – from merchant BNPL setup to customer servicing.
Banking experience transformation
Temenos and event sponsors Microsoft and Red Hat have partnered with IDC to share the Asia-Pacific Trends to Watch in Retail Banking, Corporate Banking, and FinTech disruption. Read more here.
Making banking better for everyone
The Temenos Regional Forum 2022 aimed to reshape the perspectives of the Asia-Pacific banking community on what’s possible as they continue to become the banks of the future. As the financial sector navigates the emergence of new banking models, stiff competition, and next-generation technology, they need a dependable partner along the way and Temenos can help.
The Temenos banking capabilities and ecosystem are designed to help organizations engage and support banking customers, grow market share and scale banking operations efficiently and effortlessly – empowering everyone to build tomorrow’s banks, today. To learn more about everyone’s banking platform, click here.