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1 The Hunt for Growth Across Asia Pacific Are you ready to rise? THE FIS™ READINESS REPORT
1
The Hunt for Growth Across Asia Pacific
Are you ready to rise?
THE FIS™ READINESS REPORT
2 The FIS™ Readiness Report: The Hunt for Growth | Contents2
Contents
3 Introduction
4 Regional growth outlook
6 FIS Readiness Index
9 Strengthening automation
10 Mastering data management
12 Embracing emerging technologies
14 Expediting digital innovation
15 Redefining the customer experience
16 Rethinking the talent mix
18 Six steps to becoming growth ready
20 Appendix
3
Automation Data management Emerging technology Digital innovation Customer experience Talent
The research includes the FIS Readiness Index, which rates firms’ performance on each of these key growth enablers. Its message is clear: firms that are closest to achieving operational excellence are reaping the rewards, growing more rapidly than their rivals.
Introduction
Amid an uncertain economic climate, with prolonged low interest rates in regional powerhouses such as Australia and Japan and continued cooling of the Chinese economy, many financial services institutions across Asia Pacific are wary about committing themselves to growth targets. Nevertheless, firms in the region do see opportunities to exploit over the next few years, though they recognize they must strengthen their operational and technological capabilities to capture growth in a hyper-competitive environment.
Our research, based on a survey of 1,042 senior-level decision-makers (see About the research), reveals key insights about how financial services firms must now rethink their operating models to position themselves for growth – and what the industry’s leaders are doing to set themselves apart. We assess and score their capabilities across six key operational enablers of growth:
What are the Readiness Leaders doing differently, and how can others follow their lead?
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1. Asia Pacific institutions are more pessimistic about the outlook for growth than their European and North American counterparts.
Less than half (41 percent) of Asia Pacific institutions are confident about hitting their growth targets for the next 12 months, while one-third are pessimistic about their prospects.
Asia Pacific firms are less bullish in this regard than their peers in Europe and North America, where more than half of the institutions surveyed are optimistic.
2. Asia Pacific institutions are highly focused on customer acquisition and improving operating margins.
Acquiring new customers is the most important focus for Asia Pacific institutions, with 49 percent citing this as one of their top three growth objectives for the next 12 months. This reflects the drive for top-line growth.
In addition, Asia Pacific institutions cite improving their operating margins as a key priority for the next 12 months, with 47 percent of firms selecting it as one of their top three growth objectives.
Firms in Asia Pacific are also the most likely to be considering M&A activity, with 29 percent citing this as a growth objective for the year ahead, versus 24 percent and 23 percent in North America and Europe, respectively.
Figure 1. Growth objectives for the year ahead
Improve operating margins
Acquire new
customers
Merger/acquisition
47%
35%
27%
The FIS™ Readiness Report: The Hunt for Growth | Regional Growth Outlook
Regional growth outlook
28%
35%36%
49%
29%
Improve customer retention
rates
Improve investment
performance
Enter newbusiness linesof products
Expand into new
emergingmarkets
Expand into new
developed markets
5
3. Asia Pacific firms must show resilience and agility as they pursue growth ambitions amid concerns over monetary policy and continued regulatory pressure.
More than half (51 percent) of firms in Asia Pacific say the economic outlook in their key markets represents a growth opportunity over the next three to five years. Firms in the region are more likely than those in North America and Europe to view government spending (cited by 36 percent of respondents) as a growth opportunity.
However, as they pursue these opportunities, 63 percent say regulation will remain a significant hindrance, compared to just 53 percent of North American firms that say this. In addition, firms in the region are more concerned about the threat posed by monetary policy: 33 percent say that interest rates pose a threat, versus just 17 percent in North America and Europe that say the same.
51% of Asia Pacific firms say the economic outlook in their key markets represents a growth opportunity over the next three to five years.
Figure 2. Opportunities and threats over the next three to five years
Further, 30 percent are concerned by the threat of disruptive new market entrants such as fintech start-ups and Alibaba, underlining the need to pay sufficient attention to digital innovation.
Countries implementingprotectionist
policies
Divergence in central
bank interest rates
Projected economic
growth in mykey market(s)
Brexit – the U.K.leaving theEuropean
Union
Politicaloutlook
in my keymarket(s)
Governmentspending
policy in my keymarket(s)
Tax policy in my keymarket(s)
Disruptive new
marketentrants
Emerging technologies
Cybersecurity Feepressure
ThreatOpportunity
22%
30%
51%
26%31% 32%
37% 36%
23%27%
22%
30%
21% 19%
9%13%
7%11%
24%23%
33%33%
The FIS Readiness IndexThe FIS Readiness Index reveals how Asia Pacific institutions outside of the top 20 percent (Asia Pacific non-Leaders) rate against the global Readiness Leaders today on six key operational enablers of growth. It indicates where capability gaps remain as institutions prepare their operating models to support growth.
6 The FIS™ Readiness Report: The Hunt for Growth | FIS Readiness Index
Emerging Technology
Customer ExperienceDigital Innovation
Talent
Data ManagementAutomation
Asia Paci�c non-LeadersReadiness Leaders (global)
2 4 6 8 10
Six operational principles are critical levers of growth in the years ahead:
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Automation: The level of process automation across the transaction lifecycle; artificial intelligence (AI) in combination with exception-based workflow is the highest parameter
Data management: Data management capability, including integration of data across the organization, predictive analytics and visualization
Emerging technology: Maturity of emerging technology adoption across mobile, AI and distributed ledger solutions
Digital innovation: Level of activity directed at strengthening digital innovation and propensity of organizational culture for innovation
Customer experience: Performance across customer service metrics, including customization of products and services, mobile delivery, responsiveness and transparency
Talent: Level of digital competencies in data analytics, software development, digital distribution and digital transformation
Accelerating growth readiness: Rise to meet the future faster
As in other regions, large numbers of Asia Pacific firms fear they lack the capabilities to fully realize their growth ambitions. Some 50 percent say their current technological capabilities are not strong enough to fully support their growth plans, while 55 percent say the same about their operational capabilities.
8 The FIS™ Readiness Report: The Hunt for Growth | Accelerating Growth Readiness
Asia Pacific firms are less advanced than those in North America when it comes to the automation of trading: just 35 percent of buy-side firms have reached near-full or full automation, compared to 52 percent in North America. And only 32 percent of sell-side firms believe they have reached this level, compared to 64 percent in North America.
In three to five years’ time, however, 62 percent of Asia Pacific firms expect to have highly automated trade execution, putting them on a par with North American firms (61 percent).
Asia Pacific firms also anticipate significant leaps forward in automation over the next three to five years in areas such as risk management, where 67 percent of firms expect to be near-fully or fully automated, versus 38 percent today, and reconciliation, where 45 percent have reached high levels today but 66 percent expect to do so in three to five years’ time.
Strengthening automation
Asia Pacific firms fear they lack the capabilities to fully realize their growth ambitions.
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Figure 3. Near-full or full middle-office automation
Post-trade processing
Derivatives lifecycle
management
Collateral management
Asset pricing
Compliance Risk management
Integrated Investment
Book of Record (IBOR)
Current3 – 5 years
33%44%
16%
31%20%
42%
22%
49%40%
64%
38%
67%
22%
40%
1010 The FIS™ Readiness Report: The Hunt for Growth | Mastering Data Management
Figure 4. Data management capability
Highly effective
Ineffective
Highly ineffective
Don’t know
Effective
Neither effective nor ineffective
Unifying data sources across the organization
Combining external data with internal data to better inform our decision-making
Ability to visualize and simplify complex organizational data for decision-making
Advanced analytics for predictive identification of risk and opportunities
3%
1%
1%
2%
1%
1%
3%
3%12% 26% 44% 11%
13%
12%
16%
30%
30%
22%
45%
43%
47%
9%
13%
11%
Mastering data management
Asia Pacific firms have begun to put their data to work.
Asia Pacific firms are lagging behind European and North American counterparts in data management.
Just over half (55 percent) of Asia Pacific firms say they are effective at unifying data across their organizations, compared to 59 percent and 69 percent in Europe and North America, respectively.
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There is also some catching up to do on big data capabilities: 54 percent say they are effective at using external, unstructured data to help drive decision-making, but 56 percent in Europe and 67 percent in North America say the same.
Asia Pacific firms have begun to put their data to work: 56 percent can visualize and simplify complex data for decision-making purposes, while 57 percent are employing predictive analytics tools. In both cases, however, Asia Pacific firms lag behind those in Europe and, particularly, North America.
As they seek to develop their capabilities, we may see talent gravitating from the more developed regions toward Asia Pacific.
As they seek to develop their capabilities, we may see talent gravitating from the more developed regions toward Asia Pacific.
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While Asia Pacific firms slightly lag behind those in North America and Europe when it comes to deploying live AI and blockchain solutions, there are a substantial number of firms now developing these technologies.
In our survey, 30 percent of Asia Pacific firms say they are piloting AI solutions. Performance analytics (44 percent), market data management (40 percent) and risk management (37 percent) are the main applications being explored.
When it comes to blockchain, 25 percent are now piloting solutions, with collateral management (45 percent) and clearing and settlement (36 percent) the major areas of focus.
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Firms that can marry enabling technologies with new business models can create a compelling new value proposition.
Embracing emerging technology
The FIS™ Readiness Report: The Hunt for Growth | Embracing Emerging Technology
Mobile customer services
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Figure 5. Progress on implementing emerging technology
Distributed ledger technology
Artificial intelligence/ machine learning
Advanced customer relationship management software
eDelivery/online customer services
Mobile customer services
5%
1%
2%
2%
1%
2%
3%
4%
11% 21% 28% 25% 9%
17%17%
15%
12%
17%
26%
34%
34%
26%
30%
29%
24%
27%
10%
19%
25%
25%
Some live implementation
Considering its potential application
No plans to implement
Don’t know
Piloting/testing
Researching/developing
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141414
Like their peers in other regions, Asia Pacific businesses are attempting various approaches to kick-start digital innovation: 31 percent say they have tried to encourage a more open innovation culture over the past 12 months, while 30 percent have recruited digital technology expertise.
Many firms are looking beyond their businesses: 28 percent have collaborated with third parties they consider innovative, though this is fewer than in North America, where the fintech sector is more mature.
Asia Pacific firms intend to pursue this drive in earnest over the next 12 months, but barriers to innovation persist. Cybersecurity risk (cited by 28 percent) is the most commonly cited barrier in the region, followed by complex legacy IT systems (26 percent). These are similar to the problems seen in other regions, but lack of available investment capital is a particular issue in Asia Pacific; it’s cited by 21 percent of firms there, but by only one in 10 firms in Europe and North America.
Asia Pacific businesses are attempting various approaches to kick-start digital innovation.
Figure 6. Strategies to expedite digital innovation
Outsourcing non-core
services to free up resources
Acquiring innovative
firms
Setting up incubator or accelerator
programs
Recruiting digital
technology expertise
28% 29% 28%
22%
14%17% 18% 19%
30% 28%24%
28% 28% 27%30%31%
Appointing board-level
roles with responsibility
for digital innovation
Encouraging a more open
innovation culture across
functions
Purchasing third-party technology
Collaborating with innovative
third parties
Past 12 months Next 12 months
Expediting digital innovation
The FIS™ Readiness Report: The Hunt for Growth | Expediting Digital Innovation
15The FIS™ Readiness Report: The Hunt for Growth | Redefining the Customer Experience
Redefining the customer experience
Asia Pacific firms are relatively satisfied with the customer experience they are delivering. Some 71 percent believe they are effectively delivering transparency on cost, while 72 percent say the same of their speed of response. Digital services are improving, with 68 percent seeing their provision as effective.
However, Asia Pacific firms lag their European and, particularly, their North American counterparts when it comes to delivering a personalized service: just 66 percent say they are effective today, versus 71 percent in Europe and 79 percent in North America. And while 77 percent of North American firms cite effectiveness at customizing products to customer needs, only 70 percent of firms in Asia Pacific can say the same.
Among the firms that see themselves as ineffective, 48 percent blame a reactive rather than proactive customer management approach, while 39 percent cite problems with outdated technology. Compared to firms in other regions, Asia Pacific institutions are particularly likely to cite an inability to analyze customer needs (an issue for 31 percent of firms) as a cause of ineffective customer servicing.
Figure 7. Reasons why your organization is ineffective at meeting customer expectations
70% of firms say they are highly effective at delivering customized products.
Product or service limitations
13%
Outdated/ inadequate technology
39%
Inability to understand/
analyze customer needs
31%
Organizational talent gaps
30%
Internal/ structural
issues (e.g., organizational
silos)
26%
Reactive instead of proactive in customer
management
48%
16 The FIS™ Readiness Report: The Hunt for Growth | Rethinking the Talent Mix16
Asia Pacific firms consider themselves less forward-looking when it comes to disruptive technologies and new business models than their counterparts in other regions: only 56 percent say they are strong at this, compared to 65 percent of North American firms.
Firms in the region are acutely aware of the digital skills they must recruit to drive growth in an increasingly competitive and data-driven marketplace in the years ahead. Digital transformation skills (cited by 64 percent of institutions), alongside digital distribution expertise (62 percent), are perceived as important or very important enablers of growth.
However, only 55 percent of Asia Pacific firms see their in-house talent as good or quite good in these key areas, while the figure falls to 43 percent for big data skills.
Our survey respondents also expressed a strong demand for algorithmic and automated trading developers, with 58 percent saying they will be important in supporting growth over the next 12 months.
Rethinking the talent mix
Figure 8. Importance of digital skills for growth (next 12 months)
Algorithmic and
automated trading
developers
58%
Artificial intelligence/
robotics expertise
46%
Distributed ledger
technology expertise
44%
Digital distribution/
delivery expertise
62%
Digital change/ transformation
expertise
64%
Software development/programming
expertise
56%
Big data analytics/
data science expertise
56%
17The FIS™ Readiness Report: The Hunt for Growth | Rethinking the Talent Mix
Firms in the region are acutely aware of the digital skills they must recruit to drive growth.
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Six steps to becoming growth ready
Facing macroeconomic changes in Australia, Japan and China, institutions in Asia Pacific are more pessimistic than their peers elsewhere in the world about their ability to achieve their growth targets. They are also concerned about the regulatory environment, monetary policy and competition from disruptive new market entrants.
But as they seek to acquire new customers, improve operating margins and engage in merger and acquisition activity, our research shows that firms in this region can increase their growth readiness by addressing six key areas of their operating model.
18 The FIS™ Readiness Report: The Hunt for Growth | Recommendations
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WHAT’S YOUR GROWTH READINESS?ARE YOU READY TO RISE?
Benchmark your growth readiness FISReadinessReport.com
1. DEEPEN AUTOMATION Institutions must respond to efficiency and data needs by increasing automation across more areas of trading and back-office operations – but also areas of low automation such as middle-office activities. They need to overlay workflow onto exception management before they can implement AI and machine learning solutions.
2. EXCEL WITH DATAAt a minimum, firms need to draw a line under fragmented systems, moving to a single source of truth on data across the organization. But this is just the first step of a multi-tiered approach. Customized real-time data must be available to business users, while advanced AI solutions should be layered on top to create better predictive insights.
3. ADD VALUE WITH EMERGING TECHNOLOGYSenior leaders must take a longer-term outlook on embracing enabling technologies such as AI, blockchain and mobile to create a compelling new value proposition for customers. Our Readiness Leaders are adopting AI to drive automation, performance and risk analytics, but an even more transformative approach may be necessary: players that redefine how they service customers will differentiate themselves the most and capture new opportunities.
4. ACCELERATE INNOVATIONResponding to regulatory requirements, cyber risk and complex legacy IT is stifling progress on digital innovation. Institutions must find ways to overcome these issues to expedite the process. Teaming up with innovative third parties – and finding ways to make these collaborations more effective – will be an increasingly important part of the solution.
5. REIMAGINE THE CUSTOMER EXPERIENCEFinding new digitally-driven mechanisms for engaging customers will be a critical driver of growth in the years ahead. Digital and mobile access to services are the industry’s weakest area of customer servicing. New offerings will need to provide not only greater access to real-time information via online and mobile but through direct market access too, such as enabling trading activity.
6. RECRUIT THE SPECIALIST TALENTThe new operating model for growth will be ineffective unless the financial services workforce is rethought. In particular, this means putting new skills such as data science specialists in place, enabling them to work in close collaboration with the front office to drive more value and better outcomes for customers.
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Appendix
The FIS™ Readiness Report: The Hunt for Growth | Appendix
Commercial and investment banks
Broker-dealers
Asset managers
Pension funds
Insurers
Fund administrators 25%
23%16%
15%
14%
6%
C-suite26%
74%
Head of business unit/director-level
Trading and investment
Risk and compliance
Operations
SalesOther
Finance and treasury
IT 15%
18%
18%
18%
4%
7%20%Europe
30%
30%
16%
25%
North America
LAMEA
APAC
Survey Between March and May 2017, FIS and Longitude Research conducted a survey of 1,042 senior-level respondents across the buy and sell sides of the institutional and wholesale financial services market.
Interviews We also conducted more than 20 in-depth qualitative interviews with industry leaders.
About the research
SECTORS
REGIONS
SENIORITY
FUNCTIONS
CHARTS MAY NOT ADD UP TO 100 PERCENT DUE TO ROUNDING.
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AboutThe Readiness Index collates and measures 1,042 executives’ self-assessment of their institutions’ performance in six operational areas that are representative of how firms achieve growth:
QuestionsFor each category, executives were asked to respond to a series of self-assessment questions about their company’s performance within each area (for example, how well their company performs in unifying data sources across the organization or the extent to which it offers customers a tailored service). The questions were tailored to different types of business across the buy and sell sides.
ScoringThe majority of questions included in the index asked executives to rank their businesses on a scale of 1 to 5, where 5 = highly effective/active, etc., and 1 = highly ineffective (respondents who chose “Don’t know” were given a neutral score of 3).
Several questions, such as those related to innovation, asked respondents to choose from a range of activities or strategies that their companies may be involved in, such as M&A, third-party collaborations or incubator programs). For these questions, companies undertaking at least five activities were awarded a top score, with the remaining responses scaled accordingly.
Building the FIS Readiness Index The question scores were aggregated for each individual respondent, first to a category score and then overall. To allow for more refined insights, both category and overall scores were placed on a scale of 1 to 10, where 10 is best. As shown above, as we believe each area accords equal merit, the categories each receive an equal weighting in the index.
FIS Readiness Leaders Based on those scores, the top 20 percent of all respondents were deemed Readiness Leaders. The industry breakdown of the Readiness Leaders versus the total survey responses is as follows:
The FIS™ Readiness Report: The Hunt for Growth | Methodology
Automation
Insurers
Assetmanagers
Broker-dealers
Fundadministrators
Asset managers
Pension funds
Fundadministrators
Commerical and investment Banks
Commerical and investment Banks
Broker-dealer
17%
17%
17%17%
17%
17%
Data management
Emerging technology
Talent
Customer experience
Digital innovation
29%
13%
25%
15%
22%
16%
12%
18%
14%
23%
6%
Pension funds
6%
Insurers
Broker-dealers
12%
15%
ReadinessLeaders
Responsesby industry
Fund administrators
13%
14%
ReadinessLeaders
Responsesby industry
Asset managers
22%
23%
ReadinessLeaders
Responsesby industry
Pension funds
6%
6%
ReadinessLeaders
Responsesby industry
Commercial and investment banks
29%
25%
ReadinessLeaders
Responsesby industry
Insurers
18%
16%
ReadinessLeaders
Responsesby industry
Automation
Insurers
Assetmanagers
Broker-dealers
Fundadministrators
Asset managers
Pension funds
Fundadministrators
Commerical and investment Banks
Commerical and investment Banks
Broker-dealer
17%
17%
17%17%
17%
17%
Data management
Emerging technology
Talent
Customer experience
Digital innovation
29%
13%
25%
15%
22%
16%
12%
18%
14%
23%
6%
Pension funds
6%
Insurers
Broker-dealers
12%
15%
ReadinessLeaders
Responsesby industry
Fund administrators
13%
14%
ReadinessLeaders
Responsesby industry
Asset managers
22%
23%
ReadinessLeaders
Responsesby industry
Pension funds
6%
6%
ReadinessLeaders
Responsesby industry
Commercial and investment banks
29%
25%
ReadinessLeaders
Responsesby industry
Insurers
18%
16%
ReadinessLeaders
Responsesby industry
Methodology – The FIS Readiness Index
©2017 FISFIS and the FIS logo are trademarks or registered trademarks of FIS or its subsidiaries in the U.S. and/or other countries. Other parties’ marks are the property of their respective owners.
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About FISFIS is a global leader in financial services technology, with a focus on retail and institutional banking, payments, asset and wealth management, risk and compliance, consulting and outsourcing solutions. Through the depth and breadth of our solutions portfolio, global capabilities and domain expertise, FIS serves more than 20,000 clients in over 100 countries. Headquartered in Jacksonville, Florida, FIS employs more than 57,000 people worldwide and holds leadership positions in payment processing, financial software and banking solutions. Providing software, services and outsourcing of the technology that empowers the financial world, FIS is a Fortune 500 company and is a member of Standard & Poor’s 500® Index. For more information about FIS, visit www.fisglobal.com
