Australian business embracing next gen financial tech

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Aus­tralian busi­ness­es are embrac­ing the next gen­er­a­tion in finan­cial tech­nol­o­gy to help fuel new growth in dig­i­tal chan­nels despite cur­rent eco­nom­ic uncer­tain­ty, accord­ing to new research from finan­cial ser­vices tech­nol­o­gy firm FIS.

The inau­gur­al 2023 Glob­al Inno­va­tion Report asked busi­ness lead­ers in finan­cial ser­vices (banks, insur­ers, cap­i­tal mar­kets firms and fin­techs) and non-finan­cial busi­ness­es (retail, restau­rants, trav­el, gam­ing, dig­i­tal con­tent, and enter­prise tech­nol­o­gy providers) in Aus­tralia about their busi­ness strate­gies and expe­ri­ence with embed­ded finance and Web3 min­clud­ing decen­tralised finance (DeFi), cryp­tocur­ren­cies, and the meta­verseas well as envi­ron­men­tal, social and gov­er­nance (ESG) frameworks.

Accord­ing to the study, a broad major­i­ty of Aus­tralian busi­ness­es say they expect a major or mod­er­ate impact from each of these trends in the next 12 months: embed­ded finance (89%), ESG (88%), cryp­tocur­ren­cies (86%), the meta­verse (84%) and DeFi (83%). These key areas of fin­tech will con­tin­ue to attract invest­ment from firms in the com­ing year.

“As the uncer­tain­ty of the cur­rent eco­nom­ic land­scape looms, it is all the more impor­tant for busi­ness­es to invest in inno­va­tion focused on short term strength and resilience, and longer-term growth. Our research shows that key fin­tech areas such as ESG, embed­ded finance, DeFi, and to a less­er extent cryp­to remain a top pri­or­i­ty for Aus­tralian busi­ness­es across finance and com­merce as they look to posi­tion them­selves for a fast-approach­ing dig­i­tal future,” says Nick Aron­son, VP Cap­i­tal Mar­kets, APAC Coun­try Man­age­ment, FIS. 

“Aus­tralian busi­ness­es and con­sumers have always been ear­ly adopters when it comes to advanced tech­nolo­gies, but pri­ori­ti­sa­tion is fun­da­men­tal. FIS looks to be a key part­ner in pro­vid­ing crit­i­cal­ly impor­tant finan­cial tech­nol­o­gy solu­tions to busi­ness­es aspir­ing for long term suc­cess through any down­turn and beyond,” he says.

Embed­ded Finance Presents a Com­pet­i­tive Advan­tage for Aus­tralian Busi­ness­es in 2023

Embed­ded finance is when con­sumers have unique, tai­lored finan­cial ser­vices deliv­ered to them at the point of need by non-finan­cial com­pa­nies. Embed­ded pay­ments are most famil­iar to con­sumers, enabling the speed and con­ve­nience of pay­ing for goods and ser­vices in an app, with just a sin­gle click. New use cas­es across bank­ing, lend­ing and invest­ing are emerg­ing and the dri­ve to deliv­er embed­ded finan­cial ser­vices is rapid­ly accel­er­at­ing in Australia.

Accord­ing to the study, 39% of finan­cial ser­vices firms say they will sig­nif­i­cant­ly invest in devel­op­ing embed­ded finance prod­ucts with­in the next 12 months. Fur­ther­more, 31% of finan­cial ser­vices firms that are invest­ing in this space believe it will increase their com­pet­i­tive advan­tage, help them expand into new sec­tors and attract invest­ment cap­i­tal, and 46% of non-finan­cial busi­ness­es told FIS they are already offer­ing or devel­op­ing embed­ded finance services.

Firms to Bet Big on Web3, but Con­cerns Remain for the Year Ahead

Despite 2022 hav­ing been a chal­leng­ing year for cryp­to, the study shows that growth and invest­ment in dig­i­tal assets and the under­ly­ing tech­nolo­gies is primed to con­tin­ue at a strong pace.

Half of Aus­trali­a’s finan­cial ser­vices firms recog­nise decen­tralised finance (DeFi), which uses blockchain and dig­i­tal asset tech­nol­o­gy to man­age finan­cial trans­ac­tions, to be a major growth oppor­tu­ni­ty for their organisation.

How­ev­er, 59% cite poor user expe­ri­ence as a bar­ri­er to DeFi adop­tion, and 57% say they need to bet­ter under­stand the risks involved before they participate.

Lack of clar­i­ty around cryp­to reg­u­la­tions (flagged by 29% of finan­cial ser­vices firms) and lack of ecosys­tem ser­vices to sup­port cryp­tos (34% of non-finan­cial busi­ness­es) are the biggest bar­ri­ers to greater cryp­to adoption.

The study found 57% of finan­cial ser­vices firms are active­ly research­ing poten­tial oppor­tu­ni­ties in the meta­verse, while 31% of non-finan­cial busi­ness­es say it will be strate­gi­cal­ly impor­tant to have a pres­ence in the meta­verse in the next 12 months.

Tech­nol­o­gy to Address Data Chal­lenges and Shape ESG 2.0

As firms look to cap­i­talise on oppor­tu­ni­ties in ESG, inno­v­a­tive tech­nol­o­gy that help to report ESG met­rics will play an essen­tial role to fur­ther ele­vate this mar­ket-mov­ing segment.

The study found 53% of finan­cial ser­vices firms in Aus­tralia say ESG offers an oppor­tu­ni­ty to improve their com­pet­i­tive­ness in the market.

Respon­dents say the biggest chal­lenge around ESG is insuf­fi­cient inter­nal data or tools (46%).

To address the gaps relat­ing to data, 59% say they are invest­ing in tech­nol­o­gy to improve their ESG report­ing and disclosures.

66% of finan­cial ser­vices firms also say they are giv­ing their end clients more trans­paren­cy into their ESG scores.

 

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