Financial services for the future: What to expect in this fast-paced and uncertain world?

Jakarta, 4 May 2023 - In today's business environment, strategic competition between the world’s largest economies and geopolitical risks have slowed global trade. We have entered a period of 'slowbalisation', a new phase of globalisation during which integration and trade flows are still growing, but at a slower rate. Trade tensions continue to create challenges for global supply chains and further integration of the global economy. Companies are in turn faced with the problem of treading more carefully, while also continuing to transform their businesses to meet the demands of an increasingly digital world.

Companies are then faced with the problem of stepping more carefully while also continuing to transform their companies to meet the demands of an increasingly digital world.

David Wake, PwC Indonesia Financial Services Advisor said, “To date, the financial services (FS) industry’s ambition for digital transformation has been mostly unaffected by the global economy's slowdown. Continued rapid advancements in digital and analytics capabilities, from inside and outside the industry, have put many players under pressure.”

“Similar to the insurance sector, we’ve seen a sharp increase in digital efforts and adoption in areas like distribution, operations and insurance claims. The race for digital and data-driven technology and a buoyant capital market have also led to a dramatic increase in mergers and acquisitions over the past couple of years. We anticipate that many insurers will continue to take advantage of market conditions to optimise their portfolio, acquire new digital capabilities, and create strategic partnerships after a 40% increase in global financial services deal volume and valuations in 2021.”

John Dovaston, PwC Indonesia Consulting Advisor, stated, “Customers are changing the way they buy financial services. That means that firms can’t afford to sit on the sidelines when it comes to their digital capabilities. But the players shouldn’t think of a digital transformation as only a way to stay ahead of the competition. While it’s important to keep up with competitors, your digital transformation should be tailored to your bank’s particular needs. An organisation should make sure its transformation fits its strategy, because transformation is really all about strategy.”

“Banks are aware that providing more advanced digital engagements is essential if they want to compete for new customers. The adoption of mobile and online banking solutions is accelerating due to a fast-developing business called cloud banking.” 

According to PwC’s 26th Global CEO Survey, over the next five years FS CEOs feel exposed to a diverse set of risks, with economic volatility (34%) cyber risks (33%) and inflation (30%) being considered the biggest threats, whilst geopolitical conflict (25%) and climate change (22%) are of only slightly lower concern. In the case of cybersecurity, it is easy for important business technology investments to inadvertently create cyber vulnerabilities.

John Garvey, PwC Global Financial Services Leader, added, “Banking and capital markets CEOs are far more likely than peers in other sectors to worry about cyber risks. They also see acute threats to profitability from changing consumer behaviour (cited by 68% of bank CEOs, well above the overall average). To respond to the latter threat, bank CEOs say they will invest significantly in technology like AI and cloud solutions in 2023, along with automating processes and systems, with the goal of improving the customer experience.”

Citing from the survey, FS companies are investing in automation (81%), upskilling (74%), and deploying the cloud, AI, and other advanced tech (74%). ~60% of FS investments are focused on reinventing the business for the future, and 40% on preserving the current business.