Banks and brokers in Asia-Pacific are navigating a transformative environment driven by shorter settlement cycles, artificial intelligence (AI) integration, and increasing environmental, social and governance (ESG) regulations.

After North America moved to theT+1 settlement regime, Asia-Pacific firms followed suit in late May with minimal disruption. Meanwhile, AI's role has expanded rapidly, enhancing workflows, decision-making, and client interactions. Generative AI tools are now firmly embedded in front, middle, and back offices.

Across Asia-Pacific, ESG, green finance, and sustainable investing continue to gain traction, leading to stricter regulations, particularly in the financial hubs of Singapore, Hong Kong, and Japan, where regulators are pushing firms to align with global standards.

In Southeast Asia and India, there's a rising demand for securities finance and advanced order management systems to stay competitive. As the regulatory environment tightens, especially around derivatives reporting, financial institutions in Asia-Pacific are adapting to maintain their edge in this increasingly complex market.

For example, the Monetary Authority of Singapore (MAS) plans to update reporting requirements for over-the-counter (OTC) derivatives in October 2024, harmonizing Singapore’s derivatives reporting regime.

To keep pace with these rapid and persistent changes, industry participants are relying heavily on technology.

Transition winners

Despite initial concerns, the transition to T+1 in the region turned out to be a non-event, though it required significant behind-the-scenes effort. “Large financial institutions and high-frequency traders who could quickly adapt to the T+1 settlement cycle probably benefited the most [from the transition], leveraging their scale and advanced technological infrastructure,” Francois Denimal, managing director, APAC, capital markets, at global fintech firm FIS, tells The Asset in an interview.

“In contrast, smaller firms or those with less advanced technology faced challenges, potentially losing competitiveness and struggling with the transition.”

While Denimal refrains from specifying which countries have shown the most demand for FIS’s offerings, he notes that Singapore, Malaysia, and the Philippines have been consistently active, citing their expansion of digital banking licences and ongoing financial technology developments. India, however, is making a significant impact both as a source and user of financial technology.

“India’s capital markets have seen robust growth over the last two to three years, leading to strong demand for advanced, algorithm-driven trading technologies. There’s a lot of excitement about the Indian capital markets, although there are concerns about whether this growth might be too rapid,” he says.

“Financial technology is also playing a crucial role in managing capital for infrastructure upgrades, such as building roads, bridges, and airports, facilitating this process in infrastructure and project finance.”

Denimal also highlights India’s importance to FIS’s business continuity planning and cost-efficiency strategy, due to its strong connectivity and cost-effectiveness. The company has significant back-office operations in India, which it uses for development outsourcing.

“India provides access to a large, well-educated, and cost-effective talent pool, which we leverage for professional services and operations.”

Still in its infancy

Denimal acknowledges that AI integration has significantly enhanced FIS’s ability to process and utilize data, but he believes the industry has only scratched the surface of the new technology’s potential. He suggests that AI's impact will continue to grow over time.

“AI has been a massive boost to the industry, as a tool that not only aids current operations but also has the potential for further growth and improvement over time.”

However, integrating AI into business processes is a complex undertaking and requires careful management, especially when dealing with sensitive client data.

“AI is actually not just a technology play. It requires careful management, so we have established an AI board to ensure responsible use of the technology. This approach also considers the impact of AI on employees, legal concerns, and client data,” Denimal says.

AI has a direct, significant, and growing impact on customer service, enabling quicker responses to client issues and improving service quality. “This can lead to cost savings for clients by providing solutions faster and more efficiently,” he explains.

The traditional distinctions between buyside and sellside are becoming less clear, particularly as buyside entities like hedge funds adopt sell-side technologies, such as ultra-low latency trading, and bolster back-office operations with clearing memberships. “This trend is accelerating, especially in the US, and it is starting to emerge in the Asia-Pacific region,” he says.

Denimal attributes this shift partly to the reduced cost of technology, particularly with the advent of cloud computing, which makes it more feasible for buyside firms to invest in and manage their own technology infrastructure.

Looking ahead

While there has been a surge in new family offices in both Singapore and Hong Kong, their growth has had a limited impact on FIS’s business.

“Their investment in technology is generally low, as they focus on relationship-based client service rather than advanced technological solutions. However, some forward-looking family offices are investing in more complex combinations of private and public market technologies,” he says.

He acknowledges that multi-family offices, which manage a broader range of assets including art, private equity, equities, and real estate, are increasingly using technology to provide a consolidated view to their clients. This technological integration has become more effective over the past few years and can require significant investment due to the diverse nature of the assets being managed.

Looking forward, Denimal expects to see continued digitization in areas such as digital lending and infrastructure financing through the remainder of this year and into 2025. He also anticipates increased use of AI in trading, risk management, customer service, anti-money laundering, and fraud detection.

Furthermore, he expects further growth in algorithm-driven trading systems, the adoption of advanced digital infrastructure, and a continued shift towards buyside adoption of sellside technology in Asia.