Why banks need more tech experts in their boardrooms

TECHNOLOGY Why banks need more tech experts in their boardrooms

Massive adoption of banking technology without critical tech advice from experts could spell doom for lenders.

Artificial intelligence, machine learning, data analytics, online apps – the finance world is all about the tech and the digital now, with banks noted to be massively adopting digital technologies over the past five years, according to a recent survey by professional services company Accenture of 2,000 directors from the world’s largest banking institutions.

But even with the rapid adoption of tech, banks’ board rooms still feature a severe lack of experts in this field. Only 10% of boards of directors have tech expertise in 2021. Less than one in ten of board members from China (4%) and Japan (7%) have a tech background; Australia, just a little above that, at 12%.

Having board members with tech expertise is important as the board can often be critical in advising on how to minimise the risks and maximise the benefits of technology investments, according to Fergus Gordon, Managing Director and Banking Industry Lead, Accenture.

“In general, we recommend that banks strive to fill 25% of their board of directors with technology experience – so there is still work to be done,” Gordon told The Asian Business Review in an intervew.

In 2015, only 6% of boards of directors had tech expertise – that number increased to 10% globally in 2021

A study by Accenture found that only 6% of board directors for banks have any technological expertise. What does this tell us about the nature of tech leadership and direction of financial institutions?

When we conducted this research for the first time in 2015, only 6% of boards of directors had technology expertise – that number increased to 10% globally in 2021. The pandemic showed just one reason why technology experience at the board level is so important. The pandemic forced many banks to quickly shift to digital touchpoints and accommodate employees working from home, which required immediate additional technology investments, like accelerating cloud adoption. The perspective of the board, which has a high-level view of the organisation, can help advise which investments are compatible across various business units – and boards with technology experience can provide invaluable guidance.

Banks are also facing complex decisions regarding how best to transform their core systems – whether to build or buy and at what scale – and those choices will have long-term implications. Whilst banks spend huge sums on financial technology, a lack of tech experience at the boardroom level could ultimately undermine these investments.

Why do you think banks have been quite slow to appoint tech experts in their board? What challenges are banks facing in building up their board’s tech proficiency?

Banks haven’t made much progress in appointing tech experts to their board since the last time Accenture carried out this survey in 2015. Back then, only 6% of bank board directors had technology expertise – this was an era when cloud was gaining traction and emerging technologies like blockchain and AI were attracting interest from the financial services sector. The inertia is likely the consequence of a sector steeped in tradition. This is not necessarily a bad quality when that tradition encourages trust from customers who place their money with you, but it can be an obstacle when the pace of change accelerates and demands further innovation.

The importance of technology expertise within banks goes well beyond just the board level; banks need to elevate the skills and knowledge of key technologies that are essential to growth, like cloud, AI and cybersecurity, throughout the entire organisation. But a board with a high level of technology expertise can help drive and navigate complex operating model transformation, monitor progress and help steer the ship if it appears to veer off course.

Percentage of all bank board members who have technology expertise in 2015 vs 2020

Source: Accenture

What can financial firms do to build their bank board’s tech proficiency?

Banks should make technology credentials a consideration in new appointments. Other ways to bolster expertise can also be explored, such as coaching members on the latest technology, dipping into the knowledge pool of third-party suppliers, and setting aside dedicated time to discuss technology during committee meetings. Some big banks have even established an advisory council to keep executive management up to speed with the latest innovations.

It’s all about finding ways to keep the corporate finger on the technology pulse; to be aware of key developments around cloud, AI, and the Internet of Things. These are technologies that will pose questions around security, compliance, and governance – issues that ultimately intersect with business fundamentals. websites at least once a week.

This shift didn’t only impact consumers; with banks having to pivot to remote work, employees at every level have been forced to sharpen their technology skills.

The banks that pivoted successfully did so largely with the help of cloud technology, which enabled remote work and collaboration, quick upgrades of customer-facing applications, and helped banks deal with a flood of fraudulent transactions. However, for many banks, cloud adoption is in its infancy; many of the industry’s important innovations – like mobile banking, data analytics for risk assessment, and personalised experiences would be impractical without cloud.

As banks try to keep up with the accelerated pace of change, broader adoption of cloud will be critical to modernise outdated legacy banking systems and adopt new business strategy models.

What are some good practices you have observed that banks in the APAC region have done to bridge the gap and build up tech expertise in their boards?

Some banks have introduced structured learning sessions to help boost tech expertise amongst board members. As part of these sessions, these banks bring in experts – both internal and external – to educate members on a broad range of technology topics and trends. Where possible, these sessions also leverage actual case studies as examples to showcase the real-life impact that technology expertise can have in boosting business in the banking and finance industry.

Taking this one step further, banks can also explore “digital safaris”. These are interactive showcases that show, rather than tell, what the future could look like with technology. Here at Accenture, we offer our clients the chance to experience our Accenture Digital Safari, where we showcase advanced technologies and how these are helping our clients create a competitive edge in their business. The live demos of AI, Blockchain, Advanced Analytics, Industry 4.0 and Extended Reality present executives the unique opportunity to fully immerse themselves in a technology-driven future, offering them a glimpse into the potential it can bring to their banks.

Seeing and experiencing these opportunities through their own eyes may be the difference needed to motivate more board members to embrace technology.

Fergus Gordon

Could you give us examples of how the lack of tech expertise in boards or tech leadership in general have impacted banks, particularly in Asia, especially in the past year?

One of the many elements of our lives that may have changed forever over the past year, is the way we spend money and interact with banks. In addition to a surge in contactless payments, we have seen a rapid shift towards digital touchpoints – half of retail bank customers now interact with their bank through mobile apps or

Broader adoption of cloud will be critical to modernise outdated legacy banking systems (Photo by Dylan Gillis)

REAL ESTATE APAC to sustain growth in commercial real estate investment in 2022: CBRE

CBRE sees a 5% to 10% growth in total transaction volumes this year.

The forecasted growth will largely be driven by real estate investments in Japan, Australia, and Singapore

After a grueling year, the real estate industry in the Asia Pacific was surprised by the rebound it saw, especially in the commercial investment market. This momentum is even projected to be sustained well into 2022 with a 5% to 10% forecasted growth, which the CBRE calls a “historical high.”

This growth will largely be driven by investments in Japan, Australia, and Singapore, amongst others, according to the real estate firm.

In an exclusive interview with The Asian Business Review Editor-in-Chief Tim Charlton, Greg Hyland, Head of Capital Markets, Asia Pacific, CBRE, spoke more about CBRE’s outlook on commercial property investments that remain largely “optimistic.”

Can you describe to us the year 2021 for the real estate industry?

We were pleasantly surprised with the rebound we saw in the commercial market across Asia Pacific in 2021. In fact, we’re just finalising transaction volumes. We see that total volumes approached US$150 billion, which is an absolute record for Asia Pacific. We’re going into 2022 with a lot of momentum across a lot of markets in Asia Pacific.

What factors do you see playing out in 2022? Any fearless forecast of transaction values in the APAC market?

We’re forecasting a 5% to 10% increase in total volumes in 2022. You did mention interest rates, and it is a concern for investors on the horizon. There are some markets like South Korea where the Bank of Korea has raised rates a couple of times, and the Bank of New Zealand, as well, has raised rates. So the spectre of increase in borrowing costs against cap rates that have been compressing for five years is really playing on investors’ attitudes at the moment, but I think that outweighs the capital that’s available and looking to place into the Asia Pacific markets. The credit markets remain extremely liquid. So we’re very optimistic, despite the interest rate cycle that we appear to be entering now.

We see that total volumes approached US$150b, which is an absolute record for Asia Pacific

With rates rising higher for some funders in their currency, do you expect capital values to come under a bit of pressure in certain markets or for certain funders looking to invest?

In the near term, we don’t expect that to happen. I think what we are experiencing in the Asia Pacific, is most markets are in a rental upward cycle. So that’s offsetting, I suppose, some of the impact of interest rates. So investors are really now being quite specific and laser-focused around the resilience of cash flows, and how those cash flows will grow over the next three to five years in that increasing interest rate environment.

Logistics still remains the favoured asset class for investors in Asia Pacific

Greg Hyland, Head of Capital Markets, Asia Pacific, CBRE

We’ve seen the office space come back and logistics has had a huge boom. Do you see a weight of capital going from one type of investment to another or is it going to be the same as it has been?

Logistics still remains the favoured asset class for investors in the Asia Pacific. But interestingly, we just completed our 2022 investor intentions survey and we’ve started to see a swing back towards the office. I think when we went into the pandemic, there was a lot of concern around the future of office and how that would play out for demand from corporations. I think the resounding sort of answer is yes, the office is going to stay.

We’re starting to see that investor confidence returning to the sector and look, there’s a slight rotation back towards that space. Interestingly, retail had a very difficult time over the last four or five years, and investors have rotated out. We’re starting to see it gradually at the edges, a return of investors’ appetite towards retail as well.

Can you share with us any other interesting recent transactions or anecdotes that you think best illustrate what’s happening in the real estate market at the moment?

Our client base are very large global investors, and I think the two markets that kind of bookend AsiaPacific is Japan, and that’s the biggest market by transaction volumes. The continued low funding costs and spread that Japan offers will remain in 2022 and beyond. It will be the market that, from our perspective, will have the most transaction volume in the market.

I think in the South, in Australia, in particular, we saw a significant rebound in transaction activity in 2021. And look, I’m sitting here in Singapore at the moment and Singapore is, I suppose, a beneficiary of the explosion of tech demand in Southeast Asia. We’ve seen the office markets in Singapore really sort of rebound quite robustly. In fact, the Singapore office market is in our forecast expected to be the best performing market across any market in Asia-Pacific going forward.

I think, broadly speaking, a lot of our investors are focusing on the gateway city markets–Tokyo, Seoul, Singapore, Sydney, Melbourne. But you know, increasingly as borders open and people can travel, the emerging markets will start to regather interest.

Hong Kong is the city that I don’t think you ever write off. It’s gone through challenges, historically, and it’s always bounced back. You know, the issues, I suppose with COVID and the policies that are in place at the moment, make it difficult for people to travel in and out but you know, Hong Kong is an amazing place and I’m sure it’ll bounce back once we get through COVID.

Looking into CBRE, what initiatives are you working on this year that might be interesting for the market to know about and understand?

We continue to invest in our business broadly, we aim to be the service provider of choice. I think one area where we have made significant investments has been in the debt space. We’ve expanded our team substantially in the Asia-Pacific region, particularly in New Zealand and also Australia. We continue to add capability in our Capital Advisors space, and we want to position our firm so that we can help our clients across the capital stack. Thirdly, we have made investments in our hospitality space and that’s bearing fruit. And we think that hospitality is positioned to show significant outperformance as travel returns.

We’re very optimistic about 2022. We’ve entered into a period where it’s been challenging and companies have adapted to COVID, the new normal. Our businesses globally are performing extremely well. There’s a lot of money that’s looking to be placed into real estate. So we’re very, very optimistic about 2022.

Hospitality is positioned to show significant outperformance as travel returns