In an era where data is everything, financial institutions, banks and investors in Southeast Asia are increasingly leveraging artificial intelligence (AI) to improve decision-making processes. The proliferation of advanced technologies, such as machine learning (ML), natural language processing (NLP), and generative models, has revolutionized the financial industry, enabling businesses to extract deeper insights from large sets of data.
As algorithmic trading becomes more prevalent and big data analysis informs investment strategies, the competitive landscape focuses on those who use data effectively.
A Deloitte Report predicts that AI will likely determine winners and losers in banking and capital markets over the next five years. The journey has already begun.
Drivers of increased data usage
In his book Banking 4.0author Brett King argues that traditional banking structures are becoming obsolete due to emerging technologies and changing consumer behaviors. It posits that banking services of the future will be integrated into customers’ daily lives through technology.
Kelvin CenHead of South East Asia at Bloombergcomments that data is the lifeblood of the financial sector and that there are many ways to apply different forms of AI in the sector, including machine learning (ML), natural language processing (NLP), information retrieval (IR), time series analysis. and generative models.
“We have seen the rise of algorithmic trading in stock markets and the exploitation of Big Data to inform investment decisions. Artificial intelligence is now being further applied to gain even deeper insights that can aid financial decision-making,” he continues.
According to Cen, machine learning algorithms are tasked with identifying patterns and predicting market trends, while generative AI can analyze news, social media and other unstructured data sources , which can give analysts an advantage in quickly uncovering deeper market insights. “The financial world is more data-driven than ever and those who use it intelligently have a significant advantage in the market,” he concluded.
Sharp rise in data investment in Southeast Asia
Cen believes the use of AI is growing rapidly as businesses in Southeast Asia seek the productivity gains the technology can offer. AI-related investments will likely continue to accelerate in the future.
“One trend we can already see is the move towards Multi-model AIlike text-to-programming conversion and even voice presentation. This capability is gaining traction as organizations seek to scale AI applications across their operations. Kelvin Cen
Cen suggests that the key to all of this is having high-quality, holistic and timely data as a basis. “As AI experimentation rapidly advances, many companies in the region are prioritizing their data infrastructure. They are investing to ensure their data is state-of-the-art, with a strong focus on privacy and security,” he continues.
Cen posits that many market participants view AI as a medium-term play. “While technology itself evolves, the data businesses invest in today will ultimately provide them with a competitive advantage, allowing them to access future tools and applications – AI or otherwise – that may not are not yet available,” he notes.
Areas of Growth in SEA Financial Services
Cen says Southeast Asia’s financial services sector is experiencing robust growth, driven by factors such as strong economic performance, diversification into new sectors and improved accessibility to investment.
Emerging markets such as Indonesia, the Philippines and Vietnam are experiencing increased demand for retail banking and consumer finance products. Beyond consumer credit, areas such as impact investing and active wealth management are also gaining traction.
“We see that technology and access to quality data together create a more favorable investment environment, attracting businesses and investors to the region,” explains Cen. He says Indonesia, Thailand, Vietnam and the Philippines are increasingly attractive to investors because of their relatively robust economies, growing middle classes and growing consumer demand.
“Southeast Asia’s attractive investment landscape, coupled with public infrastructure spending and data-driven investment strategies, offers promising opportunities for companies and investors,” he continues.
Unique but similar: notable distinction between competitors
When asked if he sees a notable distinction between banks, financial services and insurance companies, Cen said that traditionally, banks, financial services companies and insurance companies operate in separate sectors .
He explains that banks have mainly focused on deposits, loans and payments, while financial services companies have specialized in wealth management and investment advice. Insurance companies are traditionally more risk averse and adopt new technologies at a slower pace.
“The financial services industry is undergoing significant transformation driven by factors such as technological advancements, regulatory complexity, increased competition and evolving customer expectations. Asia is a hotbed of innovation and consumer expectations reflect this,” he continues.
Cen notes that e-commerce and digitalization are becoming essential for businesses to remain competitive and meet customer demands. He further adds that financial institutions are also investing heavily in technology to automate their processes and improve efficiency. “This change is expected to continue in the coming years, as technology continues to advance and regulatory frameworks evolve,” he adds.
Regulatory catch-up
According to the Cen, many Southeast Asian countries are strengthening their anti-money laundering frameworks and regulations. He cites as an example Singapore, which continues to consolidate its position as a financial center by focusing on safeguards against financial crime, including money laundering and terrorist financing.
The Cen highlights a growing trend toward increased cooperation among Southeast Asian countries, given the interconnectivity of their economies. He adds that cybersecurity laws are also being strengthened.
“Progress is being made on this front and it is important that policymakers and industry continue to work together on cybersecurity regulations, given the cross-border nature of cybercrime and the need for interoperability to prevent conflicts between regulations between jurisdictions,” he adds.
Role of technology in the FSI sector in Asia
“We see all forms of AI contributing to digital transformation in the financial sector. This includes streamlining workflows (i.e. maximizing efficiency), surfacing meaningful business insights (i.e. generating alpha and opportunities revenue) and reduction of operational errors,” explains Cen.
He observes that some companies prefer to develop smaller models rather than build their own large language model (LLM). “This is a more cost-effective approach to investing in AI and gives them the flexibility to pursue valuable use cases.” AI will enable new business models in financial services and help strengthen fraud detection and security,” he continues.
Cen believes it is still early to know how AI applications and the sector will develop, but the rise in AI adoption in recent years shows that it is something in which the most sophisticated market players are investing in in the future.
