Malaysian banks set to out-innovate competition in 2014

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Malaysian banks are expected to set best practices in the use of technology in the current year, predicts IDC Financial Insights (photo credit: Maybank, ranked by Bloomberg Markets as the world’s 13th strongest bank).

Malaysian banks are expected to set best practices in the use of technology in the current year, predicts IDC Financial Insights (photo credit: Maybank, ranked by Bloomberg Markets as the world’s 13th strongest bank).

By Sharmila Ganapathy

In 2014, Malaysian banks will set best practices in the use of technology, alongside other more developed nations in the Asia-Pacific region. This was revealed in a recent report by IDC Financial Insights Asia-Pacific which presents the top 10 trends expected to impact business and technology decisions this year.

According to Michael Araneta, research director for IDC Financial Insights Asia-Pacific, when it comes to planned IT investments, the Asia-Pacific banking markets will split into two segments: the ultra-high growth markets on one hand, and then the laggards.

“Countries like Hong Kong, Malaysia, Singapore, and Australia will set best practices in the use of technology, ensuring that they lead the agenda for innovation in financial services in the next few years,” he said.

According to the report, while some of the upcoming innovations are aimed at improving efficiencies of the technology infrastructure of the institution, a lot more of these innovations address the evolving needs of the customer. IDC Financial Insights believes this will lead to the highest-ever spending on “customer centricity” within the Asia-Pacific banking industry.

The top ten predictions for 2014 by the report are:

1)      In terms of IT spending growth, the 12 key banking markets will split into ultra-high-growth and low-growth groups.

2)      “Over-regulation” will be proven effective as new or enhanced regulations for Asia-Pacific banks attain their intended effects.

3)      IT spending on the customer will be the highest on record as the scope of customer centricity projects broaden.

4)      Fighting the threat of obsolescence, bank branches will evolve to be the focus of Internet of Things (IoT) experiments.

5)      The mobile form factor will entrench mobile devices at the heart of the bank’s omni-channel strategy.

6)      Global banks that retreated from the region at the height of the crisis will muscle their way back in to Asia-Pacific markets.

7)      Analytics will find low-hanging fruits in Asia-Pacific wealth management.

8)      Cloud adoption for Asia-Pacific banks will no longer be a binary choice between Private Cloud and Public Cloud.

9)      Asia-Pacific vendors will push their own propositions for corporate treasury and cash management.

10)  Core banking players will innovate faster than the ability of Asia-Pacific banks to sign new core deals.

In addition, the IDC Financial Insights report revealed changing perceptions of banking leaders concerning regulations. “Banks have come to realize that regulatory compliance and the costs associated with it are a part of the equation now. A significant part of the IT budget each year is out of one’s control,” said Araneta.

Furthermore, the report said that regulation has proven to be effective in ensuring the risk discipline within Asia-Pacific banks. Araneta said: “Particularly in the area of IT risk management, regulations have encouraged IT optimisation and IT performance management projects that might not have been priorities initially.”

Meanwhile, Moody’s Investors Service in a recent research note gave a stable outlook on Malaysia’s banking system for 2014. It said that the industry’s operating environment has been rated stable despite concerns about rising household borrowings, citing banks in the country faced little liquidity pressure as they largely funded their books from deposits.

The ratings agency also said that profitability will remain stable for banks as loan growth and fee income will be strong enough to offset margin pressure in the system.

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