With only 1.61 million of individual investors registered by 2018, capital market is one of the idlest sectors of Indonesian financial service industry. Indonesian assets under management is valued at only US$37 billion, remarkably low as compared to Malaysian and Thai, with value of US$106 billion and US$156 billion respectively. Since the situation was mainly caused by the resident’s illiteracy toward capital market instruments, the government eventually tries to push for further investment in order to motivate residents investing notably.
As rapid digitalization supports the advancement of financially related innovations, financial players have huge opportunities to utilize technology for better optimization and service to customers. Over the past few years, the financial services industry has seen drastic technology-led changes, with some technologies that potentially transform capital markets in the upcoming years such as artificial intelligence (AI) and distributed ledger technology (DLT). One of the examples including passively managed mutual funds and exchange-traded funds (ETFs) that depends on statistical calculation to earn a more long-term profit. This operation has some benefits as compared with conventional method; it provides more stable, slower growth deposits for its customers.
While technological changes can positively impact capital market instruments, it can also be seen as a disruptor in how people may interact with financial institutions. Big questions lie ahead; What will happen to conventional banks and brokerage firms if the next financial crisis hits? Things are fundamentally different now from how they were before, has an environment of volatility made these institutions more or less prepared? Can large firms keep up with their younger competitors and both live in synergy? These questions represent the background of our grand theme; Market Transformation: Finding Synergy In an Ever-changing Financial Landscape.
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