Banks and insurers to unveil new trends in fintech-related activities

• Return of risk management is cited as a key driver for technology investments and business decisions, particularly in what seems to be a point of entry for a crisis – credit risk.
• Banks and financial institutions are looking to build capabilities to orchestrate various components of lending value chain effectively through collaboration.
• 50% of lending decisions in retail banking will be supported by fintech propositions, underscoring accelerating bank–fintech collaboration by the middle of this year.

This year will see the introduction of new trends in fintech-related activities by banks and insurers.

Although fintech companies have seen challenges at the outset of 2021, there is a greater willingness by incumbent financial services institutions to collaborate. This is seen even in the most traditional business activities like lending and deposit-taking.

“This year, one imperative stands out, which is lending? Lending serves as an indicator for the eventual income growth and profitability of banks, and the ability to lend well in crisis conditions has received a lot of attention especially among the Asia/Pacific region’s largest institutions,” Michael Araneta, Associate Vice President at IDC Financial Insights Asia/Pacific, said.

Moreover, he said that financial institutions must ensure that they can withstand the pressures of slow growth, high delinquency period, and investments will be forthcoming into credit decisioning systems, collections and recovery, asset-liability management, and stress testing.

The predictions highlight the return of risk management as a key driver for technology investments and business decisions, particularly in what seems to be a point of entry for a crisis: credit risk.

“The lending ecosystem is witnessing a radical transformation. From owning the entire value chain of lending from origination to servicing, the focus is shifting to specialisation in parts of the overall digital lending value chain. Banks and financial institutions are looking to build capabilities to orchestrate various components of lending value chain effectively through collaboration,” Araneta said.

Digital transformation

Furthermore, Ganesh Vasudevan, Research Director at IDC Financial Insights Asia/Pacific, said that other priorities in ensuring the quality of customer services have come to the fore.

”The experience of 2020 has made banks and insurers more confident in their ability to deal with digital transactions. With investments into the cloud, virtualised infrastructure, and real-time payments systems, they can cope with the sheer growth in the use of digital channels among customers and staff,” he said.

The effort around operational risk management and business continuity has sustained them amid lockdowns and remote work phenomenon, he said and added that financial institutions are also much more able to support the emergence of new modalities of customer interactions, which enhance face-to-face interactions or replace them altogether.

Some of the key financial services predictions that will impact IT industry:

• By the middle of 2021, 50 per cent of lending decisions in retail banking will be supported by fintech propositions, underscoring accelerating bank–fintech collaboration.
• By 2024, 50 per cent of in-branch transactions will be initiated as pre-staged transactions or appointments for specialists that start on digital platforms and fulfilled on bank-owned technology and locations.
• By 2024, 75 per cent of all consumer and small business loans will be originated through AI-enabled and automated processes.