How, why, and to what level of risk exposure and cost-benefits expectations in 2024? Find out here…

Amid the current tug of war between AI pioneers and giants over the unprecedented advantages and existential risks of unfettered AI development, the fact remains that the global money flow has to go on while both sides settle on some form of risk-and-benefits control doctrines.

So in the meantime, banks, financial services institutions and fintechs will just have to keep on harnessing digital transformation, automation, data science, operational AI, and — with careful treading, generative AI — to improve business competitiveness and resilience and keep the money supply lines well-oiled. had an opportunity to get a feel of the 2024 ground situation from Kanv Pandit, Group Managing Director (APAC), Banking Solutions, FIS … 

 DigiconAsia: What, in your experience, are the indigenous risk landscapes for the financial services firms in the Asia Pacific region?

Kanv Pandit, Group Managing Director (APAC), Banking Solutions, FIS

Kanv Pandit (KP): The business environment is becoming increasingly challenging, with a fast-changing macro-economic environment, growing pressure around climate change and sustainability, market volatility and supply chain disruptions — to name just a few challenges. 

In our own research, financial risks top the list of concerns for financial services leaders globally, and this sentiment is echoed across APAC markets surveyed including Hong Kong, Singapore and Australia. 

Operating costs are still high, markets remain volatile, and financial services firms are tightening their belt as inflation and rising rates continue to shape the industry.

The industry is also becoming increasingly aware of the risk posed by climate change and shifting consumer sentiment around ESG strategies, impacts of environmental and transition risk, and concerns of being affected in the next 12 months.

DigiconAsia: How will AI shape smart banking capabilities in the eyes of consumers and banks/FSIs? Do you foresee any major risks from cybercriminals and fraudsters also using AI?

KP: Our own intelligence indicates that about half (53%) of financial institutions have adopted AI. In addition to driving efficiencies, AI tools can help banks build a fuller, more in-depth, and more dynamic picture of their customers. 

AI will give banks better capabilities to draw on a wider, richer set of data: not only historic financials, but also covenant, transaction and market data, news feeds and social media. It is these more current data sources that can show how things are for customers, and predict where they could be heading.

AI tools are already proving their ability to make day-to-day working lives easier: however, in a matter of months, generative AI will have gone several steps further. Rather than simply replicating manual processes and human decisions, generative AI tools will help users dig even deeper into available data to create their own textual or visual content. This can simultaneously also introduce more sophisticated opportunities for fraud, and will also raise concerns about data privacy, cybersecurity, and access to systems.

 DigiconAsia: In your view, what types of innovation are firms in the region prioritizing beyond just AI?

KP: Although events last year and a volatile economic climate have forced startups and incumbents alike to review their existing investments in Web3 projects, innovation in this space has continued. From blockchain and digital assets to digital wallets and smart contracts, Web3 offers tremendous opportunities around the customer experience.

Fintech firms in the region have led the market in adopting blockchain-based capabilities and augmenting their offerings to include Web3 features and functions. Banks are also exploring Web3 technologies to offer more digitalized services to their clients.

Another innovation that is gaining momentum in APAC is embedded finance, which blurs the lines between financial and non-financial firms. Research from EY suggests that APAC could be the most promising region for embedded finance by 2025.

DigiconAsia: Much confusion, distrust and doubt is now hovering over the potential for GenAI to be abused or to go horribly wrong. How should financial institutions strike a fine balance between adopting cutting edge technology and protecting customer trust?

KP: AI can be a double-edged sword. Financial institutions are assessing the risks internally; however it is also worth noting that the same technology can also be used for fraud detection, by translating unstructured data into meaningful insights and picking up on warning signs.

Some governments in the region are already using ML and advanced data analytics to detect fraud and other suspicious activities, and they keenly exploring how AI can be used in the fight against money laundering.

In terms of building consumer trust, data transparency and education will be crucial. Tight regulation and human oversight would also be reassuring factors for consumers. 

What all AI tools lack is the human ability to read between the lines. That is why, side by side with AI tools, human experience and human judgment will still have a major part to play in business.

DigiconAsia thanks Kanv for sharing his business tech and AI insights with our readers.