Figures from APAC in one global innovation report suggest that respondents are taking refuge in fintech-driven transformation to buffer recession fears
With a prolonged recession believed to be imminent, firms are treading careful on their spending, while finding ways to stay competitive and capture growth opportunities. Would it therefore make sense to invest in areas such as the metaverse, ESG, embedded finance and Decentralized Finance (DeFi) during these uncertain times, or are these merely hot topics full of hot air?
This is just one of the questions that FIS has tried to address in its first-ever report on global innovation for 2023, which includes data from 160 respondents each from Australia, Hong Kong and Singapore, comprising executives from the financial services sectors (banks, insurers, capital markets firms and fintechs) as well as those from non-financial services (merchants, corporates and technology providers).
The key takeaways are as follows:
- 41% of financial services firms polled indicated they were planning to significantly invest in developing embedded finance products within the next 12 months in the hope of enabling easy consumption of those products through third-party digital and social channels.
- 56% believed decentralized finance (DeFi) will be a major growth opportunity for their organization.
- 53% of financial services professionals surveyed were actively researching potential opportunities in the metaverse, while 39% of non-financial businesses indicated that it will be strategically important to have a presence in the metaverse in the next 12 months.
- 89% of Australia respondents indicated that developments in embedded finance will affected their business in the next 12 months: for the longer term (the next three years) the number rose to 92%. For ESG, 88% of respondents felt the same, and this rose to 91% for the longer term. Similarly, for the 12 months to three year period, cryptocurrency developments (86% rising to 88%), the metaverse (84% rising to 90%) and DeFi (83% rising to 87%) also had similar high anticipated impacts.
- 76% of Hong Kong respondents indicated that developments in embedded finance will affected their business in the next 12 months: for the longer term (the next three years) the number dropped to 72%. For DeFi, 76% of respondents felt the same, and this dropped to 73% for the longer term. Similarly, for the 12 months to three year period, ESG developments (75% rising to 79%), crypto (73% rising to 79%) and the metaverse (73% rising to 79%) also had similar levels of anticipated impacts.
- 73% of financial services firms in Singapore, versus 66% globally, indicated that ESG offers an opportunity to improve their competitiveness in the market. Also 81% of Singapore respondents expected a major or moderate impact from embedded finance and also ESG in the next 12 months (rising to 89% and 84% respectively for the longer term of three years). The numbers for cryptocurrencies, DeFi and the metaverse for the next 12 months were 69%, 76% and 82% respectively (73%, 83%, 84% for the longer term respectively).
According to the firm’s Executive Vice President and Head of Strategy and Solutions Management, Tony Warren: “While these technologies will require industry participation and regulatory clarity to move to the mainstream, the seeds of innovation have already been sown. So, you need to understand the implications of these technologies now to avoid being left behind… Customers will expect transparency into their portfolio, with ESG scores provided at the asset and segment levels as well as an aggregate score at the portfolio level. On top of that, climate change risk is going to be one of the hot topics for 2023 and 2024 as all firms will need to assess their long-term exposure to climate risk – and the related impact on their business.”
