For years, AI has been key in transforming the way businesses operate and deliver financial services to their customers. Diminishing the need for human intervention and interaction would mean that these services can be made available to anyone, anywhere, around the clock, for a fraction of the cost – much like what was predicted when robo-advisors were first introduced into the mix in 2008.

Justin Tan - Partner and regional head of Financial Services, Arthur D. Little

The initial purpose of the first wave of robo-advisors was to rebalance assets within target-date funds, something that was typically time-consuming and came with transactional fees. With a low-fee robo-advisor, this could be done automatically. These robo-advisors were also used to manage passive, buy-and-hold investments through a simple online interface. Today, robo-advisors are capable of performing much more, such as comprehensive financial planning and active portfolio management.

While the robo-advisory market continues to grow rapidly, with the projected total number of assets under management expected to reach $4.66 trillion by 2027, more recently, the explosive growth of generative AI has also seen many in the financial services sector adapt to the new and upcoming technology.

The future could entail the development of more advanced financial AI applications that support a wide spectrum of investment research and analysis tasks, ranging from market data search and analysis, to earning report analysis and fundamental company research, to name a few.

In the ASEAN region, the surge in digital acceptance in the finance sector is undeniable, especially among the younger generation. Furthermore, Southeast Asia is also witnessing burgeoning demographics, with the middle-class and affluent households projected to grow by 5 per cent or more annually until 2030, coupled with rapid adoption of cross border payment apps across the region.

Vietnam, in particular, is on the road to becoming more tech-savvy than ever and can capitalise on these emerging trends. With an internet penetration rate of 79.1 per cent and 161.6 million cellular mobile connections active in early 2023, according to DataReportal, there are strong applications of digital regulations in businesses and the government is determined to promote digital payments. Vietnam’s fintech industry is already making progress with the market expected to grow to $18 billion by 2024, according to Robocash Group.

In order to successfully implement AI, financial institutions in Vietnam, first of all, would have to make sure that they fully comply with regulatory requirements, such as regulations that relate to data privacy, anti-money laundering, and customer protection. A major delaying factor could be that many financial institutions in Vietnam have legacy systems that may not be compatible with the new AI technologies.

Upgrading or replacing these systems can be expensive and time-consuming, leading to a protracted implementation process. Also, these legacy systems come with an existing workforce which is not necessarily skilled in AI, and therefore needs to be re-trained, which will take time.

Likewise, it could also prove to be a challenge for consumers that have yet to learn and adapt to the product changes, especially older customers or those living in remote areas. To compound matters, cybersecurity threats such phishing attacks, hacking, identity theft, and data breaches are some common threats in the increasingly used AI financial environment, which may result in significant losses of customers’ data and trust in the financial institutions.

As the banking and finance space undergoes rapid and significant technological disruption, it is also expected to fundamentally reshape the industry in the coming years. Despite the significant potential challenges, these technological advancements also offer unprecedented opportunities for leading edge players and clients who embrace the new tech.

AI, and machine learning in particular, is expected to develop and proliferate exponentially, with applications in numerous diverse key areas such as fraud detection, risk management, customer service, and wealth and investment advisory. The merging of big data analysis with advanced AI analytics also allows financial institutions to offer tailored services to their clients, ranging from time-specific financing offers and personalised investment advice to tailored wealth product recommendations that fit the customer’s risk-return objectives.

With such AI-powered customer engagement and offer personalisation, it is now possible for financial institutions to not only effectively target and serve a broader set of customers, but also deepen their relationship and share-of-wallet with these hitherto underserved customer segments.

Convenience also plays a vital role in enhancing the overall customer experience. Integrating finance chatbots with other financial apps and services, such as banking apps, investment platforms and budgeting tools, can effectively streamline a customer’s financial management process by enabling them to access a wide range of financial services from a de facto single interface.

Customers in Vietnam and across the region expect convenience, accessibility, and intuitive service when engaging in financial interactions. The financial sector has a crucial role to play in promoting financial inclusion to drive towards a digital economy and inspire innovations that drive economic growth not only for Vietnam, but for the whole of ASEAN.