Australian financial institutions planning to invest in business innovation have given top priority to embedded finance and ESG, according to new research.
Financial technology company FIS surveyed 2000 executives from banks, insurers, capital markets firms, fintechs, tech companies and merchants in nine countries for its 2023 Global Innovation Report.
According to an Australian version of the report, 89 per cent of respondents said embedded finance would affect their businesses in the year ahead and 92 per cent said it will have an impact over the next three years.
Thirty-nine per cent of financial services firms said they will invest “significantly” in the development of embedded finance products over the coming year.
Eighty-eight per cent said ESG will have an impact on their businesses this year (91 per cent over the next three years) and 86 per cent said cryptocurrencies will have an impact this year (88 per cent over the next three years).
Fifty-seven per cent of financial services firm said they are developing ESG products and services.
Plans for using cryptocurrencies are less advanced but only 6 per cent of financial services firms said they won’t be offering crypto services in three years. Around one-third said a lack of clear regulation is a hurdle, as is a lack of internal technical skills.
FIS vice president for capital markets in Asia Pacific, Nick Aronson, said it is no surprise that embedded finance tops the list of investment priorities.
Aronson said: “For financial services firms, embedded finance will enable new distribution channels and is seen as a key to staying competitive. We think it is likely to be an essential piece in every strategic playbook in 2023 and beyond.”
Embedded finance is the placing of a financial product within a non-financial consumer platform. White label services have been around for decades but what is new is the integration of financial products into digital interfaces that consumers use daily.
Aronson said the majority of financial services company executives said they see ESG as a competitive advantage and are going ahead with projects to improve the transparency of their data for reporting and disclosure.
He said that it is important to note that the problems facing the crypto market are concentrated in the market structure for cryptocurrency as an asset class and not the broader digital asset technology space.