At the Temenos Regional Forum North Asia 2024 in Hong Kong on 11 September, a panel of senior banking and technology leaders came together to discuss the future of banking in the region. Among the participants were Guillaume Huet, Director of Accenture Financial Services and co-chair of the Data/AI sub-committee of the FinTech Association of Hong Kong; Victor Pang, Head of Operations for Asia Pacific at Japan’s largest mega bank, MUFG Bank; Faraaz Ali, Global Head of Digital Engagement and Commercialisation at global bank, Standard Chartered; and Ramki Ramakrishnan, Managing Director for Asia Pacific at Temenos. Together, they explored how their organisations are addressing key challenges, including demographic shifts, regulatory pressures, and the rapid advancement of digital technologies.

Transforming banking with AI and cloud computing

Artificial intelligence (AI) and cloud computing emerged as central themes during the discussion, with the panellists unanimously recognising these technologies as transformative forces in the banking industry. AI is driving automation and improving decision-making processes across various banking functions. Banks are increasingly deploying AI solutions to enhance customer service, streamline operations, and bolster security efforts.

A critical point made during the discussion was AI's role in fraud detection. AI is now essential for real-time fraud detection, analysing vast datasets to identify anomalies that could indicate fraudulent activities. This is becoming increasingly important as digital transactions grow and criminals adopt more sophisticated tactics. However, AI is not just a defensive tool—voice generation technology, for example, is already being used by fraudsters to mimic bank executives, presenting new challenges to banks’ security teams. AI is helping banks counter such threats by enabling advanced monitoring systems.

Cloud computing was also seen as a game-changer. By moving services and data to the cloud, banks can rapidly scale their operations, reduce operational costs, and ensure business continuity during times of high demand. Cloud solutions allow banks to operate more flexibly, adapting to changes in the market while avoiding the high costs of maintaining physical infrastructure. Although regulatory hurdles were noted as a challenge to broader cloud adoption, the benefits, particularly in terms of scalability and cost-efficiency, are driving more institutions toward cloud-based systems.

Building resilient and future-ready banks

The need for operational resilience in the face of disruption was a key focus of the panel. Modernising legacy systems, which are often composed of outdated and incompatible technologies, was identified as a priority especially for banks in North Asia, covering Greater China, Japan and South Korea, with increasingly global businesses and operations. The discussion highlighted MUFG’s recent upgrading of its core banking systems, where inefficiencies were reduced, and data analytics capabilities improved, allowing the bank to better handle disruptions and enhance decision-making.

Beyond upgrading technology, resilience also involves preparing for future risks. Quantum computing was flagged as an emerging threat to data security. Some cybercriminals are already storing encrypted data, waiting for quantum technology to evolve to the point where it can break today's encryption methods. The panel stressed that banks must anticipate such risks by investing in stronger encryption techniques and fostering a culture of organisational awareness regarding new threats.

Cybersecurity was another area of focus. As banks shift more operations online, the number of cyberattacks has increased significantly. Participants underscored the need for next-generation cybersecurity solutions to counter these threats and meet evolving regulatory requirements. The introduction of Europe’s Digital Operational Resilience Act (DORA) was cited as an example of how regulators are stepping in to ensure banks can handle the growing digital risks. North Asia is likely to adopt similar measures, as institutions prepare to modernise not only their systems but also their security infrastructures.

Collaborating for innovation and customer-centric solutions

The panel also emphasised the importance of strategic partnerships with fintech companies in driving innovation. Banks are increasingly collaborating with fintechs to integrate cutting-edge technologies into their operations, particularly in areas like AI-driven customer service and liquidity management. Standard Chartered, for instance, has used fintech partnerships to enhance its digital engagement platforms, delivering more personalised services to customers.

Open banking, where third-party providers can access bank customers’ data (with their consent), was highlighted as an enabler of more tailored financial services. This model allows fintechs to create innovative applications that help customers better manage their finances. However, the panellists also pointed out that the lack of standardisation across regulatory frameworks creates challenges in ensuring seamless interoperability of open banking systems.

Customer retention was another major point. As competition grows, banks must ensure they are delivering value through personalised and seamless digital experiences. AI and cloud technologies are enabling institutions to offer real-time, customised solutions to their clients, improving both satisfaction and loyalty. The panellists noted that customer loyalty is now more transient than ever, with clients quick to switch banks if they find better products or services elsewhere. This makes customer-centric innovation essential for long-term success.

The insights shared during the Temenos Regional Forum North Asia 2024 highlight the importance of embracing AI, cloud computing, and operational resilience to secure a competitive edge in the banking sector. As North Asian banks modernise their systems and strengthen their resilience, they are also deepening their collaborations with fintechs to meet evolving customer expectations and navigate a rapidly changing financial landscape.

By adopting these technologies and fostering strategic partnerships, North Asian banks are positioning themselves for long-term success in an increasingly digital and competitive environment. The collective efforts of these institutions underline the significance of agility, innovation, and customer-centric strategies in shaping the future of banking in the region.