Nearly half of global financial institutions have swiftly embraced banking-as-a-service (BaaS) and generative AI, marking 2023 as a pivotal year of action and innovation, according to Finastra‘s latest report.

The ‘Financial Services: State of the Nation Survey 2023’ reveals that decision-makers in financial institutions worldwide express excitement about the opportunities presented by rapid technological and cultural changes within the industry today.

The survey, conducted from August to September 2023, canvassed the opinions of 956 professionals at financial institutions and banks across nine countries: France, Germany, Hong Kong, Singapore, Saudi Arabia, the UAE, UK, US and Vietnam. It uncovers a series of insights that shed light on the industry’s direction and priorities in the coming years.

Globally, 37 per cent of respondents stated that their financial institution had improved or deployed AI technology in the last 12 months, rising from 30 per cent in 2022. The growing importance of generative AI also stands out. More than four fifths (83 per cent) of decision-makers say their institution is interested in the technology, with 26 per cent having already incorporated generative AI in some form. Only six per cent of respondents globally say that their financial institution is not interested in adopting the technology.

“Despite the challenging economic climate, it’s clear from our research that investment in AI, BaaS, and embedded finance remain key priorities for financial services organisations over the next 12 months, particularly as they seek to further enhance and personalise the customer experience,” said Simon Paris, CEO at Finastra. “We share the industry’s ongoing commitment to ESG initiatives, to collaboration around Open Finance, and excitement in using  advanced technologies like AI to help deliver on the opportunities ahead.”

BaaS gains traction

Financial institutions are driving the rise of banking as a service (BaaS), with 48 per cent of surveyed institutions actively implementing or also enhancing their capabilities in this domain over the past year. This marks a notable increase from the 35 per cent reported in 2022. Globally, BaaS is finding utility in various key applications, including facilitating buy-now-pay-later programs, embedding lending services, and enabling cross-border payments seamlessly.

Tech investment optimism prevails

While 78 per cent of financial institutions acknowledge that the current economic climate has imposed limitations on their technology investment endeavours, there is an overwhelming sense of optimism. Sixty-nine per cent of these institutions anticipate a full resumption of their tech investments by the conclusion of H1, 2024.

Open finance fuels collaboration

The concept of open finance is gaining traction and fostering greater collaboration within the financial industry. Eighty-five per cent of financial institutions believe that open finance is yielding positive outcomes for the sector. Moreover, 85 per cent also  report that at least one-quarter of their customer base is actively engaging with open banking-enabled services, while 46 per cent observe that over half of their customers are embracing these offerings.

Community commitment endures

Even in the face of challenging economic conditions, financial institutions remain steadfast in their commitment to the broader community. An overwhelming 86 per cent of decision-makers within these institutions recognise that the financial services and banking sector extend beyond mere finance – they have a responsibility to support the communities they serve. This unwavering dedication underscores the industry’s commitment to its societal role and positive impact.

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