With its growing population, burgeoning digital economy and strategic location, Southeast Asia (SEA) has been one of the top growth markets and business hubs for multinational giants across industries. This growth story is likely to continue.
Bloomberg research points out that foreign investors see technology and innovation as key drivers of investment in the region, followed by new consumer markets and lower cost of production. With Southeast Asia projected to become the world’s fourth largest economy by 2030, the rising middle class, rapid urbanisation and young, educated, tech-savvy population are fuelling a thriving digital economy, which is expected to grow to up to US$1 trillion in gross merchandise value (GMV) by 2030.
Emerging technologies such as Generative AI will play a significant role in ramping up Southeast Asia’s financial services sector. As digital and social commerce continues to grow rapidly, industry experts point out that the sector will see an increase in instant cross-border payments, integration of banking and other financial services into non-financial apps, and platforms and core banking modernisation.
Thanit Apipatana, a Bangkok-based entrepreneur, investor, and startup advisor, feels that rising digitalisation and evolving consumer preferences are key drivers for the increased adoption of Generative AI technologies in Southeast Asia’s financial services sector. There is an increasing demand for digital banking services and online payment methods that offer faster, convenient and secure transactions.
With the evolving business landscape in the region, it is estimated that 70% of new economic value created in ASEAN over the next ten years will come from digitally-enabled platforms.
Generative AI and its Impact
In less than two years, generative AI technology has evolved manifold impacting businesses across industries.
Globally, the finance sector has one of the highest adoption rates for generative AI. According to Statista, the financial sector worldwide invested an estimated US$35 billion in 2023 in generative AI, a figure expected to jump to US$97 billion by 2027, reflecting a CAGR of 29%.
The artificial intelligence technology is used by financial institutions and banks to enhance customer-facing chatbots, prevent fraud, and speed up time-consuming tasks like developing codes, preparing pitch book drafts, and summarising regulatory reports.
McKinsey & Company points out that industries like banking, high tech, and life sciences could see the biggest impact as a percentage of their revenues from generative AI. McKinsey Global Institute estimates that across the global banking sector, generative AI could add between US$200 billion and US$340 billion in value annually, or 2.8 to 4.7% of total industry revenues, largely through increased productivity.
The banking sector in Southeast Asia is undergoing a major shift towards digital banking services focusing on seamless online transactions and personalised customer offerings led by the region’s higher smartphone penetration rates and digital-native population.
Consumers too are responding enthusiastically to innovations that streamline and smoothen what can often be a complicated and tedious banking process. Statista points out that a survey conducted in 2022 shows that approximately 81% of respondents in Southeast Asia were keen to digitalise the process for account opening, loan approval, and other services from digital banks.
This digital transformation is fuelling innovation, where generative AI technology is experiencing a high adoption rate among banks and financial service providers in the region. The technology helps in analysing vast amounts of data, allowing financial institutions to offer targeted products and services based on customer needs. In Southeast Asia, the generative AI market size is projected to reach US$1.32 billion in 2024.
How AI is Boosting Digital Financial Services in SEA
With evolving business dynamics in the banking sector, generative AI takes centrestage. From customer engagement and retention to delivering services, this technology is transforming customer service in the region. For example, generative AI technology can analyse consumer data across formats such as audio, video, text, and photos to extract deep insights that enhance marketing, sales, and product innovation.
According to Forrester’s 2024 data, AI adoption in Southeast Asia’s corporate banking sector is booming. Six in ten business and technology professionals at corporate banks in Indonesia, Malaysia, and Vietnam point out that their organisations have already started implementing conversational or generative AI products on a limited scale for department-level use.
Advanced AI technology also makes it easier for the unbanked and underbanked in the region to become part of the formal banking and financial system. By using generative AI, financial institutions can offer targeted services to enhance financial education, expand credit access, and serve marginalised communities more cost effectively, according to Asian Development Bank (ADB).
Generative AI can improve the customer verification process, which is the first key step in accessing financial services, using technologies like facial recognition, voice verification, and document scanning, notes ADB. The AI technology can further remove entry barriers by providing multilingual text or voice support, making onboarding easier for non-native speakers and individuals with disabilities.
Data shows that more than 70% of adults today in Southeast Asia lack sufficient access to financial services, which provides immense potential for the digital financial services industry to cater to that segment and meet their banking needs through advanced technology.
“As the banking and financial services sector in Southeast Asia moves towards hyper personalisation in terms of financial product and service offerings, generative AI will play an essential role in shaping the future of these services in the coming years,” adds Apipatana, who has advised and invested in companies across the region, including Singapore-based proptech startup Mogul.sg and Thailand-based Life Below Labs.
As financial institutions continue to embrace generative AI technologies, they must address key areas such as governance, data integrity, and security. It is essential to establish clear guidelines and compliance measures to prevent data misuse and fraudulent activities. Industry experts emphasise the importance of regular monitoring and auditing of AI tools to detect inaccuracies and mitigate risks. Implementing robust security protocols is vital to protect sensitive information and maintain customer trust.
Even as industry professionals and consumers across the SEA region learn and unlearn new banking methods and means, shifting practices and mindsets, the AI juggernaut seems virtually unstoppable. This signals a seismic reshaping of the financial sector.
About the Author:
Thanit Apipatana is a Bangkok-based entrepreneur, investor, and advisor with a keen interest in venture building, real estate, F&B, education, sports, and philanthropy. Thanit Apipatana has advised companies in the region including Singapore-based proptech company Mogul.sg and Thai-based Life Below Labs, a project that is looking to catapult the Thai beer market to a new level with liquid yeast.
