Kam Shing Kwang, CEO of J.P. Morgan Private Bank in Asia, aptly captures the pace and scale of the accelerated digital transformation during her welcome speech at the sixth annual J.P. Morgan Tech Exchange that was concluded in early June 2021. Global spending on digital transformation will reach US$6.8 trillion between 2020 to 2023, with 65% of global GDP expected to be digitalized by 2022, Kwang said.1
The three key areas of technological transformation are artificial intelligence (AI), big data, and cloud computing. Emerging digital trends, such as e-commerce, IoT and smart cities are converging, thought leaders, chief executives, entrepreneurs and investors said at this year’s Morgan Tech Exchange conference that was attended by more than 650 J.P. Morgan Private Bank clients.
Whilst convergence of different areas of digital transformation is underway, facilitating resilience and enabling efficiencies, there’s also a shift of value creation around the world. The Morgan Tech Exchange also reflected on the increase in innovation and the tilt to value creation in Asia, underscored by the value raised in Asia capital markets.
Unlocking the Full Potential of AI, Big Data and Cloud Computing
AI, big data and cloud computing are already heavily used but each will see continued convergence, unlocking further impact and efficiencies. Kwang expects AI to contribute US$15.7 trillion to the economy by 2030,2 driven by the numerous innovative applications from self-driving cars, virtual travel booking agents, autonomous customer service chatbots and robots as well as AI-driven social analytics. The potential is huge in Asia as digital transformation is being widely embraced in this region. The market for AI in the region is forecasted to rise at a CAGR of 41.6% from 2019 to 2027.3 Asia is leading the way on how these technologies will be ingrained in many facets of people’s lives around the world.
Earlier this year, a Tokyo-headquartered multinational automotive maker started to build a prototype “city of the future” at the foothills of Mount Fuji. This will be a testing ground—transformed with AI, autonomous cars and IoT homes—for building a smart city that can then be replicated around the world.
For big data, the global market is forecasted to more than double to US$103 billion by 2027 from 2018 levels.4 A more recent example of big data being leveraged successfully in the region is the “Big Data Migration Map,” which Kwang described as a popular cutting-edge app that utilizes mass data aggregation. The app’s popularity is due to its ability to predict changes in the epidemic situation in China.5
Cloud computing is no doubt an area that saw an exponential increase in adoption due to the pandemic as businesses were forced to embrace remote working capabilities. During a time that the world needs to operate remotely, it has propelled cloud infrastructure and cybersecurity to become the foundation of running businesses with minimal disruption even during the pandemic.
“Global spending on digital transformation will reach US$6.8 trillion between 2020 to 2023, with 65% of global GDP expected to be digitalized by 2022.”
– Kam Shin Kwang, CEO of J.P. Morgan Private Bank in Asia
Asia Drives Digital-First Economy
Asia is leading the world’s digital transformation journey and a prime mover in the worldwide e-commerce boom. Asia Pacific will account for 42.3% of retail and e-commerce sales worldwide.6 China’s dominance in e-commerce means that 62.6% of all digital sales will take place in Asia Pacific.6 The growth is driven by the region’s growing middle class, young population and increasing Internet penetration. Asia’s e-commerce revenues will continue to grow, reaching US$1.9 trillion by 2024.7
The Morgan Tech Exchange this year revealed many insightful takeaways in the world’s digital transformation, particularly the emergence of new tech titans from Asia. In recent years, many of the world’s biggest companies are from the region, with a number of Chinese e-commerce firms competing head on with U.S. tech giants.
In Southeast Asia, homegrown e-commerce firms are beating U.S. and international rivals, Patrick Grove, founder and CEO of Malaysian Internet group Catcha Group, said at the conference. A similar trend is happening in ride-hailing and food delivery, he added.
This trend suggests that the global technology landscape has evolved and will continue to evolve, with more Asian tech giants spreading their wings around the world. “If you look at the valuations of the top 15 or 20 tech companies, the top ones are probably two-thirds in the United States, and the other one-third in China,” Eric Schmidt, co-founder of Schmidt Futures and former chairman and CEO of Google, said at the Global China Summit hosted by J.P. Morgan this year.
These technology companies in Asia have also helped lead stock exchanges in Hong Kong and Shanghai to become two of the three largest stock exchanges globally in 2020, respectively raising US$51.28 billion and US$49.42 billion.8
Technology Builds Resilience and Enables Efficiencies
What do these trends mean for companies, investors and consumers?
One of the greatest impacts of technology is it has allowed companies to be resilient even as the pandemic disrupted industries and societies. The robust Internet infrastructure in many countries allowed companies to shift to remote work during lockdowns, helping curb the spread of Covid-19.
E-commerce is one of the technology trends that has directly affected most consumers, including the older generation who used to be typically averse to technology. Around the world, consumers stuck at home due to government-enforced lockdowns and travel restrictions turned to online shopping and food deliveries, boosting the usage of digital payments such as e-wallets.
With the growth of e-commerce, AI-driven innovations followed. For instance, businesses developed new applications such as AI-empowered customer relationship management solutions that enable online stores to tailor their sales recommendations to customer preferences based on their purchase history. Such innovations helped e-tailers boost their online sales even more.
For investors, AI is one of the key technologies that has been transforming the investment process. In finance, AI can be used to identify trends by leveraging high volumes of data (big data) in order to discover repeatable patterns and predict the direction and trajectory of asset prices. The use of AI and big data has also fueled the growth of fintech, with the global AI fintech market predicted to increase at a CAGR of 23.4% in the next five years to reach US$22.6 billion by 2025.9
For veteran investors, technology trends combined with other global trends has transformed the investment landscape. The trends that come with globalization and economic growth woven together also make for a complex world of investing. Thankfully, AI, big data, and cloud computing infrastructure is something technology can help decode and simplify.
The pandemic has certainly accelerated the move toward a digital-first economy and this momentum isn’t slowing anytime soon. Investing with experienced managers who have expertise in digital disruption and innovation offers potential returns.
1. Source: https://www.idc.com/getdoc.jsp?containerId=prUS46967420. Data as of Oct 29, 2020.
2. Source: https://www.pwc.com/gx/en/issues/data-and-analytics/publications/artificial-intelligence-study.html. Data as of 2017.
4. Source: https://www.statista.com/statistics/254266/global-big-data-market-forecast/. Data as of March 2018.
5. Source: https://www.weforum.org/agenda/2020/04/how-next-generation-information-technologies-tackled-covid-19-in-china/. Data as of April 8, 2020.
6. Source: https://www.emarketer.com/content/global-ecommerce-2020. Data as of June 22, 2020.
7. Source: https://www.statista.com/forecasts/1117851/worldwide-e-commerce-revenue-by-region. Data as of July 7, 2021.
8. Source: https://www.hkex.com.hk/-/media/HKEX-Market/Market-Data/Statistics/Consolidated-Reports/Annual-Market-Statistics/2020-Market-Statistics.pdf. Data as of January 2021.
9. Source: https://www.forbes.com/sites/louiscolumbus/2020/10/31/the-state-of-ai-adoption-in-financial-services/?sh=34e2b0362aac. Data as of October 31, 2020.
How J.P. Morgan Digitalized Financial Services In A Transformative Way
One of the companies that has been using innovative technology to digitalize its services is J.P. Morgan. To stay at the forefront of the digital revolution, the bank has made substantial investments in technology to benefit its customers, including entrepreneurs and other clients.
JPMorgan Chase is the first major U.S. bank to roll out an AI-powered virtual assistant that makes it easier for corporate clients to seamlessly move money around the world, whether it’s for routine payroll or multi-million-dollar mergers and acquisitions. This technological innovation enables the bank to offer a multi-channel, and consistent customer service. The virtual assistant provides clients instant information, such as balances, on demand. Machine learning also enables the app to adapt to the clients’ behavior over time to make useful recommendations.
The bank also serves entrepreneurs, whether they’re running a trendsetting consumer goods startup or a tech disruptor. The bank focuses on solutions for high-growth, disruptive companies at every stage of their life cycle, from day one to IPO and beyond. One of the innovative technology tools that J.P. Morgan offers clients is Chase Cashflow360, which enables entrepreneurs to connect digitally with suppliers and customers to automate invoicing, payments, approvals and reconciliation.
While J.P. Morgan Private Bank aspired to continue to connect and engage with its clients via their existing channels of choice at the height of the pandemic last year, the disruption brought about by Covid-19 called for new modes of communication, and rapidly accelerated the Private Bank’s digital transformation agenda.
In February 2021, J.P. Morgan Private Bank launched the WhatsApp Business Account in Asia, in order to communicate their latest insights via the popular instant messaging platform. They were the first private bank to leverage a Business Account to broadcast insights to clients. They also deployed a chatbot on their official WeChat account, which further engaged a subset of clients and followers on this platform preferred by clients in China. In doing so, J.P. Morgan has been leveraging the best communications technology that suits their clients’ needs.
Since the onset of Covid-19, J.P. Morgan Private Bank has also launched a Virtual Events Hub, allowing clients to access live events and replays with the most influential thought leaders from across J.P. Morgan and renowned guest speakers from various sectors. The bank has hosted over 160 virtual events, in webcast, Zoom meetings and conference call formats, covering ideas and insights across macro economy, investment, wealth planning, cybersecurity and philanthropy.
People’s needs and behaviors are changing and J.P. Morgan is changing with them.
J.P. MORGAN: SERVING ASIA FOR OVER A HUNDRED YEARS
J.P. Morgan is one of the world’s oldest, largest and best-known financial institutions. With a history dating back over 200 years, the bank has US$2.6 trillion in client assets under management, a net worth of US$476 billion and 250,000 employees to date.
J.P. Morgan is no stranger to technological innovation, having been the banker to Thomas Edison’s Edison Electric Company in 1878. The group continues to innovate. The company recently invested in partnerships with high-profile startups, including OnDeck and Roostify to the tune of $600 million. In June 2021, it acquired OpenInvest, a San Francisco-based startup backed by Andreessen Horowitz. Through the platform, clients globally can create highly personalized, dynamic and value-based portfolios.
J.P. Morgan also has a rich history in Asia. This year, it is celebrating its centennial in China, where the bank’s roots began in 1921 when predecessor Equitable Eastern Banking Corporation opened its China branch. Equitable Eastern Banking later merged with Chase National Bank in 1930. In 2007, J.P. Morgan received approval to establish JPMorgan Chase Bank (China) Co. Ltd., becoming the country’s first locally-incorporated foreign bank, with its head office set up in Beijing.
The bank also has a strong private banking arm in Asia. The bank has been named Best Private Bank—UHNWIs by the Asset Triple A Private Capital Awards for Private Bank for the sixth year running. Globally, full-year revenues at its wealth management arm rose 4% to a record of US$6.6 billion in 2020 from the previous year. The number of wealth management client advisers rose 2% to 2,462, giving the bank a 12:1 ratio of clients per adviser.
J.P. Morgan continues to raise the standard in private banking, delivering a uniquely elevated experience shaped around its clients.