APAC Predictions 2023: Financial Services Firms Look To New Drivers Of Growth Amidst Uncertainty
There’s barely more than seven weeks left in 2022! So much has happened in such a short span of time that it’s hard to keep up. It was only a few months ago that supply shortages and floods in Australia drove the price of lettuce from AU$3 to AU$12 and we learned to love cabbage instead.
For APAC financial services firms, the good old days of low interest rates driving exponential loan growth, specifically for mortgages, are now long gone. The Reserve Bank of Australia has raised interest rates seven times in 2022; the Monetary Authority of Singapore has tightened monetary policy for the fifth time this year; and Bank Negara Malaysia has raised interest rates for the fourth time in 2022.
In 2023, APAC financial services firms will brace for tougher geopolitical and economic conditions brought on by the ongoing war in Ukraine, record-high inflation, and rising interest rates. How will they respond? By finding new growth drivers and leading with purpose, all while embracing a more pragmatic approach and steering away from unproven experimentation.
In 2023, Forrester predicts the following across APAC:
- Policy lapses will rise by 20% as customers tighten purse strings. High inflation and big weather-related losses are impacting carriers’ loss ratios thanks to more costly materials, litigation, and labor. Insurers will continue to pass these higher costs on to customers through higher premiums, but with everyday necessities costing more, customers will be rate shopping, downsizing coverage, cashing out life insurance, and letting policies lapse due to nonpayment. Smart carriers will launch new products such as month-to-month coverage; usage-based insurance, as one of the only means to get a discount, will finally achieve double-digit market share.
- Cross-border commerce in APAC will be boosted by regional partnerships. In 2023, APAC cross-border commerce will grow rapidly despite the global economic downturn. Forrester predicts that RCEP (the Regional Comprehensive Economic Partnership) and regional payment networks will help to boost cross-border commerce by 20%. Modern cross-border payment networks are poised to play a bigger role than the 50-year-old SWIFT system in processing some of the regional cross-border transactions. QR code-based systems, multi-central bank digital currency pilots across Southeast Asia, China’s Cross-Border Interbank Payment System, and India’s Unified Payments Interface use modern technology like permissioned blockchain and APIs for interoperability.
- Firms will tout their ESG credentials, but some will be penalized for performative efforts. In 2023, many APAC financial services firms will launch new green finance products and experiences such as green loans and CO2 trackers as part of their organization’s broader environmental, social, and governance (ESG) efforts. But at least 50 firms in APAC will be penalized for performative ESG efforts, with the majority being financial services firms. Many will lose brand equity or revenue; five will face severe regulatory fines. Values-based consumers are forcing firms to publicly commit to ESG efforts, but pressure to act quickly will lead some to misrepresent or overstate their actions. Offenders could face penalties of US$10 million or more as APAC regulators follow in the footsteps of their US and European counterparts and clamp down on misleading ESG claims. The Australian Securities and Investments Commission is already investigating firms for greenwashing. Firms also face brand damage from bad press and negative word of mouth: In 2022, companies celebrating International Women’s Day on social media had their own gender pay gaps publicly exposed.
To understand the major dynamics that will impact Asia Pacific organizations next year, download Forrester’s yearly complimentary Predictions guide. For a deeper dive, check out our Predictions 2023 live events for the opportunity to engage directly with the analysts who made these predictions.