APAC Investment Providers Predict Fintech Boom; Japan At Forefront Of Digital Revolution - SSGA Data

Josh O'Neill

28 February 2017

Investment providers in Asia-Pacific believe new technology will redefine the marketplace in the next five years, according to new data from , signalling a potential surge in financial technology development in the near future.

SSGA's global survey of 2,000 investors and 500 investment providers suggests that investment providers – including universal banks, mutual funds and alternative investment firms – across the world recognise the importance of technology, but the majority are slow to adopt innovative measures.

Overall, SSGA finds that Japan-based investment providers are further along the road to digital transformation than their other APAC counterparts. Some 72 per cent of respondents in Japan claim to have developed an “innovative culture”, compared with 40 per cent in Australia and 26 per cent in China/Hong Kong.

The survey's results also shine a light on how evolved firms' cybersecurity measures are, and Japan appears to be setting the standard for APAC. Some 58 per cent of Japan-based investment providers say they are at an “advanced stage” of employing “robust” cybersecurity infrastructures that aim to ensure data integrity. Australian respondents are slightly behind (56 per cent), whereas only 14 per cent of China/Hong Kong providers claim to be at the same stage.

SSGA also questioned investment providers on emerging technologies such as blockchain.

Across APAC, respondents are “relatively unprepared” when it comes to establishing systems to identify emerging technologies and artificial intelligence, SSGA finds.

Blockchain technology, a virtual distributed ledger of transactions shared peer-to-peer, can record ownership across a public network of computers rendered tamper-proof by advanced cryptography. It is already known as the platform for the controversial digital currency bitcoin, even though bitcoin is only one of several hundred applications that use blockchain technology. The nascent technology is causing a stir within the financial services sector as its supporters believe it could reduce hidden expenses in the financial system by ousting inefficiencies across areas such as payments, syndicated loans and equity clearing.

Astonishingly, only 9 per cent of providers in the APAC region claim to be at an advanced stage of implementing such systems. This surprising result comes as financial services firms and big banks across the world continue to invest in blockchain-based technology and rally together through consortiums with the aim of innovating what some may consider an outdated industry.

Meanwhile, 82 per cent of investors say their providers will need to stay at the forefront of technology in the next five years in order to maintain business.

Around 63 per cent are seeking personalised advice in the future, and 59 per cent expect technology-based tools to allow them to self-manage their investments – a nod to the burgeoning market of robo-advisors.

However, more than a third, or 40 per cent, of investors say they would avoid fintech businesses because of the increased risk of data breaches associated with such business models.

“New digital technologies will enable firms to provide a more fluid, dynamic and interactive investment experience for clients,” said Antoine Shagoury, chief information officer at State Street.

He added: “Moreover, they will help the industry to deliver the type of personalisation investors are increasingly demanding, at scale. Firms that neglect to understand and embrace emerging technologies, from blockchain to artificial intelligence, will also fail to remain competitive in this new era of finance, while those who live and breathe the digital revolution will be those who define the future of the sector.”