Asia financial services is being shaped by three big trends at the start of 2020. In his Chinese New Year message, Refinitiv Asia Pacific managing director, Alfred Lee, highlights the fintech response to financial crime, responsible investing and trade tensions. This is part of our ‘Views on 2020’ series of blogs.
- With the future of finance increasingly data and technology driven, AI-led strategies will gain more prominence in Asia financial services in 2020.
- China captured the majority of the global green bond market in 2019, but there are still a number of challenges in advancing the progress of sustainable finance in Asia.
- Forward-thinking fintech players will have a significant role to play in defining industry standards and enhancing measures to fight financial crime.
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With Chinese New Year upon us, it’s always a great time for reflection as well as to take heed of what the new lunar year might hold. As we celebrate the Year of the Rat, the global spotlight will no doubt continue to be on the huge growth potential our dynamic region has to offer.
In 2019, digitalization and fintech innovation played an integral role in transforming the Asia financial services industry, as I discussed in a column in the Business Times in January 2020. This is offering new avenues to drive workflow efficiencies, generate alpha, mitigate risk and foster a more sustainable financial ecosystem.
At the start of 2020, responsible investing, technology disruption and the explosive growth in data and artificial intelligence will continue to create new opportunities and challenges for investors.
Sustainable finance in Asia
With Australia’s bush fires and severe flooding in Jakarta, the impact of climate change is hitting the Asia Pacific region hard. The world can no longer deny the toll it is taking on our planet.
We saw a heightened focus on responsible investing in Asia last year, with the Monetary Authority of Singapore announcing the launch of a US$2 billion programme to support the growth of green finance in Singapore at the Singapore Fintech Festival.
Green bond issuance by region, 2015-19
The Asia Pacific region (including Japan) also saw record green bond issuances, worth nearly USD48 billion in 2019, as a growing number of investors embrace environmental, social and governance (ESG) considerations.
Interestingly, China took the lead in global green blonds in 2019, capturing the majority of the global green bond market. However, there are a number of challenges in advancing the progress of sustainable finance in Asia.
Using AI to meet sustainable goals
Our inaugural report on Financing a Sustainable Future in Asia identified a considerable gap between intent and actions of Asia’s largest companies. More than 60 percent of Asian companies have a policy to reduce emissions, but only one-third have specific reduction targets to back up their intentions.
Advancements in AI and machine learning can help to mitigate this challenge of consistently quantifying and measuring success in meeting sustainability goals. They help to generate the data for the framing of targets, and provide the tools to analyze and measure the impact of action over time to drive real change.
Responsible investing will continue to impact Asia’s financial markets in the year ahead, and we will also see renewed focus on the social and governance aspects of ESG (in addition to environmental considerations), to develop a more inclusive and sustainable financial ecosystem in Asia.
And of course, we are putting our own house in order. Refinitiv is proud to announce that we are now carbon neutral and 100 percent powered by renewable energy!
Navigating the trade dispute
U.S.-China trade tensions were a key macroeconomic theme for markets in 2019, and this will likely remain as we move through 2020, despite the first phase of a deal being signed in early January.
China is the second-largest economy in the world, and global financial market participants are increasingly keen to navigate the sentiments emerging out of China amid the hot and cold rhetoric around the trade negotiations.
Nevertheless, innovative AI-enabled solutions can be deployed to address such challenges.
To help clients know when the companies they track are mentioned in the Chinese-language press, our Refinitiv Labs team have developed a new tool, Marco Polo, which tags company names written in simplified Chinese with the help of an algorithm that addresses the linguistic complexities of the script, such as the lack of spacing between entities.
As the future of finance becomes increasingly data and technology driven, we believe that this trend towards AI-led strategies will gain more prominence for Asia financial services in 2020.
Asia’s battle against financial crime
With Asia’s emerging markets racing to grow its digital economy and infrastructure in recent years, navigating the new digital era effectively is one of the biggest challenges for the region’s financial services industry in 2020.
Last year, the region’s financial landscape saw exciting developments such as the introduction of digital banking licences in Hong Kong and Singapore, but such transformations also bring about new risk.
The cyber domain is becoming increasingly populated with hostile, organized and sophisticated cyber criminals, and if left unchecked, vulnerabilities can propagate through the backbone of the banking ecosystem.
In fact, Refinitiv’s annual financial crime report 2019 found that 75 percent of organizations in the Asia Pacific region have been affected by financial crime over the past 12 months. A lax approach to due diligence checks when onboarding new customers, suppliers and partners was cited as creating an environment in which criminal activity can thrive.
This wake-up call has led to 60 percent of Asia Pacific companies adopting new technologies to combat financial crime, and we have seen greater strides in this area.
Future proofing Asia financial services
Last July, Indonesia’s leading digital payments platform, OVO, adopted Refinitiv’s World-Check to support its Know Your Customer and Anti Money Laundering procedures, and minimize its exposure to financial crime risks.
With Indonesia’s push to build an inclusive digital economy, such moves demonstrate how forward-thinking fintech players can have a significant role in defining industry standards and enhancing measures to fight financial crime.
We anticipate that this trend will continue well into 2020, underpinned by better data and analysis tools to build more robust and future-proof digital economies in Asia.
With the proliferation of data and emerging technologies in 2020, it is crucial for companies in Asia to stay tech-ready with access to the right data in order to make the most of the business opportunities in this rapidly transforming financial services sector.
On behalf of the company, I would like to say thank you to all our customers for your continuous support and our employees for your invaluable contributions. I wish you and your family a happy and prosperous Year of the Rat ahead.
World-Check Risk Intelligence can help you meet regulatory obligations, make informed decisions, and prevent your business being used to launder the proceeds of financial crime or associated with corrupt practices