Panama was the first Latin American country to join in 2017 China’s Belt and Road Initiative (BRI). Last month, it also became the first one to leave it. Since its inception in 2013, more than 150 countries have participated in the infrastructure program aimed at increasing Chinese trade, with over 20 in Latin America. After Panama’s withdrawal, a regional domino effect cannot be ruled out.
Since taking office in January, US President Donald Trump has repeatedly accused the country of relinquishing control of the Panama Canal to China. Panamanian President José Raúl Mulino and Beijing officials deny the claims. However, following a diplomatic trip by Secretary of State Marco Rubio, Panama announced that it would renege on its agreement with China.
Tensions remain. While a 1977 treaty signed by the US transferred full authority over the waterway to Panama in 2000, Trump has not shied away from reasserting control over it.
Panama’s departure from the BRI is the first visible result of the Trump administration’s foreign policy, says Evodio Kaltenecker, associate professor of International Business and Strategy at the D’Amore-McKim School of Business of Northeastern University. “The BRI-xit, pun intended, can to be seen through different lenses. First, the geopolitical issue: Western countries have been concerned about China’s decades-long rising influence around the world. Panama and its Canal clearly signal the US plans to counter Beijing and deepen regional economic partnerships. There are no empty spaces in geopolitics. If Chinese influence decreases, Washington-led influence will regain relevance.”
Second, Kaltenecker continues, there is what he likes to call a “geoeconomic effect” that impacts international trade: “The Panama Canal is not only a key component of the U.S. freight transportation system but also a critical route of global trade. For instance, approximately 5% of global trade passes through the Panama Canal each year, highlighting the canal’s importance as a maritime pathway.”
Finally, Kaltenecker argues, there is a “signaling effect.” “Not by chance, Panama’s withdrawal came days after Rubio’s visit to Panama City,” Kaltenecker adds. “US pressure in the Panamanian case will probably set the pattern for further Washington moves.”
“Today, history is made,” EU chief Ursula von der Leyen declared during a ceremony held in the Lithuanian capital, Vilnius, last month: “This is freedom, freedom from threats, freedom from blackmail.”
On Feb. 9, the Baltic states of Estonia, Latvia and Lithuania officially disconnected from the Russian-controlled Brell power grid. The following day, they successfully connected to the European Union’s electricity network.
The synchronization process with Europe also marked a crucial moment for continental integration. The transition, in the works since 2007, was accelerated by Russia’s full-scale invasion of Ukraine.
“This is truly something that has been a long time coming,” notes Michael Bradshaw, professor of Global Energy at the University of Warwick. “The switch removes the Baltic states from the Soviet-era electricity grid and from exposure to Russian manipulation, giving them a greater degree of energy independence on the one hand, and closer integration into the wider European electricity grid on the other.”
A relic of the Soviet Union, the Brell—which stands for Belarus, Russia, Estonia, Latvia and Lithuania—is primarily controlled by Moscow. Estonia, Latvia and Lithuania joined the EU and NATO in 2004, and have since invested heavily in infrastructure renovations, including building new mainland and undersea power lines. Still, their energy sectors remained vulnerable and reliant on Russia.
Despite managing to entirely cut energy purchases from Russia, the three countries continued to rely on the Brell grid to control frequencies and maintain a constant power supply, which can be more easily achieved in a large-scale synchronized network than in a smaller one. With a total cost of €1.6 billion ($1.67 billion), including €1.2 billion funded by the EU, Bradshaw says the project also speaks to a growing concern about “electricity security,” a term championed by the International Energy Agency as the electrification push and plans to decarbonize Europe’s energy system gather pace. “Electricity interconnection is important to balancing national grids, but as highlighted by the recent political crisis in Norway, where local electricity prices went up as the country was exporting a growing amount of power, it is also becoming a point of contention,” he argues.
Buy-now-pay-later offers SMEs an alternate credit source.
Although generally available in the consumer market for about a decade, the electronic payment model of buy-now-pay-later (BNPL) is finally bearing fruit for micro, small and midsize enterprises (MSMEs) by avoiding interest payments on corporate credit cards, reducing paperwork, facilitating quicker transactions, and improving liquidity management.
The business-to-business (B2B) BNPL transaction works similarly to the business-to-consumer (B2C) BNPL transaction. After a third party runs a credit check and assumes the credit risk of non-payment, a purchaser can delay payment for a fixed period or pay in whole or installments.
Using B2B BNPL, MSMEs avoid tapping their credit lines to pay invoices and avoid trade credit negotiations. For suppliers, it works like reverse factoring, where the buyer uses a third party to pay the invoice immediately and reimburses the financing third party later.
Many MSMEs in sectors like retail, manufacturing and technology have become early adopters of B2B BNPL, according to Arjun Singh, partner and global head of fintech, financial services practice at Arthur D. Little (ADL). “Additionally, marketplaces are increasingly incorporating B2B BNPL as part of their embedded finance and financial innovation strategies, helping businesses address liquidity challenges and streamline payment processes.”
Arjun Singh, Arthur D. Little: B2B BNPL has become a must-have not only in retail but across various sectors.
The travel and hospitality industry also has dipped its toe into the new payment model driven by their short-term and seasonal needs, adds Nilesh Vaidya, global head of market development for financial services at Capgemini. “Restaurants have had a challenging run in the last couple of years, and they’re looking for that credit. So they are into that. They want to get that kind of loan quicker, and it is an interesting business for the banks.”
The areas where B2C and B2B BNPL diverge are maturity, market size, and client base. The B2B BNPL sector is in its infancy compared to the B2C BNPL sector, which has benefited from e-commerce’s hyper-growth and a growing base of young users with little or no credit history.
“It has become a must-have not only in retail but across various sectors,” says Singh. “According to some estimates, B2C BNPL accounts for approximately 5% of global e-commerce spending.”
On the other hand, B2B BNPL is a sleeping giant that is ready to awaken. It is driven by larger and often more complex transactions. The authors of a viewpoint published by ADL estimated that B2B BNPL would capture 15% to 20% of all B2B payments by the decade’s end.
“This would equal approximately $25-$30 trillion BNPL volume and, assuming average BNPL fees of 3%-4% per transaction, a total addressable market between $700 billion and $1.3 trillion,” they wrote.
Geographically, BNPL is a global phenomenon available in approximately 80 markets, with the Asia-Pacific markets leading adoption in China and South Asia, such as Malaysia, Indonesia and Singapore, according to Vaidya. “After that, we have seen a lot more applicability in Europe because the immediate payment access is better. In the US, there have been many new BNPL providers.”
Where Credit Is Due
The BNPL model would not function without third parties taking on the non-payment credit risk. Fintechs—such as Sweden’s Klarna, Australia’s Afterpay, and America’s Affirm—blazed a path for the B2C BNPL space, capturing considerable market share while expanding their offerings.
Nonetheless, Capgemini’s Vaidya notes that banks will likely dominate the B2B BNPL market.
“Klarna and Afterpay have a lot of retail customers, individuals who are buying in malls and big box retailers or on an e-commerce online shop,” he says. “Banks are doing better in the small and midsize enterprise segment.”
While fintechs continue to crack into the B2B market, banks already have existing financial relationships with MSMEs and their suppliers and offer them another way to provide credit to their commercial customers. This is especially true for businesses with revenues in the $20-$50 million range and had difficulty obtaining small-ticket loans historically.
However, financial institutions’ results are not all rosy. The B2B BNPL business comes at the cost of commercial credit card fees and those generated by a bank’s factoring and reverse factoring business lines.
“In the past, a business would go and buy something on its commercial credit card, and a bank would generate a fee on the transaction,” explains Vaidya. “When an immediate account-to-account payment option is possible, they can pay their suppliers directly where they didn’t need credit. So the banks need to do something.”
The banks have gone big with their B2B BNPL offerings. Global banking giants Banco Santander and BNP Paribas began offering their respective BNPL services to their large multinational clients in 2023 via partnerships with payment platforms and trade insurance providers. Banco Santander Corporate Investment Bank launched its turnkey service, which incorporates the payment platform from net-terms infrastructure provider Two and the services of insurance broker Marsh Spain and credit-insurance provider Allianz Trade.
“The fact that buyers have to use personal or corporate credit cards is still hindering B2B transactions. Enabling businesses to maintain their payment habits within 30 or 60 days of their invoices in an e-commerce environment will be a big differentiator for sellers while adding a major game changer: all concerns about non-payment risk are now removed, and their cash flow is preserved at all times,” said Ignacio Frutos Lopez, global head receivables at Banco Santander CIB at the time of the launch.
Three months later, BNP Paribas launched its service in partnership with Hokodo, a B2B payment platform provider that can integrate with existing checkout platforms via an API. The service provides real-time credit decisions, transaction financing, credit and fraud insurance, and collection capabilities.
Moving Forward
Despite its potential remarkable growth, B2B BNPL still has a few hurdles to overcome. According to the authors of the ADL viewpoint, customer awareness and regulation are the leading concerns, followed by risk assessment, product structures, cross-border trade issues, technology integration, costs and competition.
“A significant portion of the target market needs to be educated about the benefits and risks of the proposition,” says ADL’s Singh.
According to research by Capgemini, BNPL’s expected adoption rate will remain flat for the next couple of years. In a study of e-commerce shares by checkout method, BNPL garnered a 5% share in 2023 and is forecasted to have a 5% share in 2027. Meanwhile, credit cards, which had a 22% share in 2023, are predicted to shrink to a 15% share over the same period.
As the size of the entire BNPL market increases, regulators are investing more effort in addressing BNPL offerings as separate from typical longer-term interest-bearing loans. However, according to Eric Mitzenmacher, a partner at the law firm Mayer Brown, BNPL-specific regulation remains nascent in many jurisdictions.
“The US—despite being a fertile market for BNPL offerings due to the size of its economy and certain helpful regulatory factors—has one of the more complex and rapidly evolving regulatory environments for BNPLs,” he says. “Many other jurisdictions currently have more permissive environments for BNPL, particularly for BNPLs offered to SMEs versus consumers, with the potential exception of BNPLs offered by banks and similarly regulated financial institutions.”
Singh agrees, saying, “Unlike consumer credit, which has a relatively uniform regulation across jurisdictions, business lending and credit regulations are diverse and fragmented, lacking the same clarity—especially in cross-border scenarios.”
Even with these hurdles, Singh expects B2B BNPL to have a similar adoption curve as its consumer counterpart and gain traction across multiple sectors and transaction types. “As commerce continues to unify across channels and customers demand greater personalization, the reach and impact of B2B BNPL will expand significantly, offering businesses increased flexibility and financial options.”
President Recep Tayyip Erdogan’s ambitious dreams include building Turkey from “regional economic centre into global economic powerhouse” and boosting it from the world’s sixteenth largest economy into the top 10.
In the shorter term, the bi-continental country’s much-vaunted Twelfth Development Plan (2024 to 2028) aims to improve its “international stature, fostering prosperity and combating inflation whilst maintaining strong and sustainable public finances.” That goal will depend partly on the success of an associated Foreign Direct Investment Strategy aimed at significantly boosting FDI across the board. The goal is for Turkey to account for 1.5% of global FDI and 12% of regional FDI by 2028.
As 2025 gets underway, how well is it all going?
If FDI is the main yardstick, not so well.
Full-year figures for 2024 have yet to be released, but will probably be close to the previous year’s level of $10.6 billion, down from $13.7 billion in 2022, a far cry from the 2007 peak of $22 billion, and shy of the $14 billion hoped for earlier. That’s less than 1% of GDP, against 3% in 2007 and well below both potential and policymakers’ hopes.
“Foreign investors don’t like inflation at 85%,” the rate in October 2022, “and they don’t much like it at 47%,” the rate in November 2024, says Charlie Robertson, head of macro strategy at FIM Partners, an investment fund based in the United Arab Emirates. “Persistent inflation has held back FDI in Turkey.”
Inflation And Fiscal Challenges
Turkish policymakers succeeded in restoring some stability to the nation’s economy by driving down inflation with restrictive monetary and fiscal policies, albeit with a hit to the government’s popularity.
Local elections last March gave the ruling Justice and Development Party (AK) just 35% of the vote against 52% in national elections the previous year; Erdogan’s party now trails the opposition Republican People’s Party (CHP) in current polls.
Selim, EBRD: Many factors that underlie Turkey’s potential also put it at risk.
“In the months since June 2023, when a new policy team led by Finance Minister Mehmet Simsek, Vice President Cevdet Yilmaz, and the Central Bank of Turkey (CBT) performed a sharp turnaround from unorthodox policies, there have been many positive steps toward rational policymaking,” says Rafik Selim, lead economist for Turkey at the European Bank for Reconstruction and Development (EBRD). “However, challenges have appeared along the way.”
The EBRD expects Turkey to post a GDP gain for 2024 of 2.7%, rising to 3% in 2025. Private consumption will be the biggest loser as policymakers focus on raising export-led growth above the current low ratio of 20% of GDP.
Reducing spending remains difficult, however. The 2023 fiscal deficit was 5.2%, and the 2024 level is expected to be similar despite services cuts and tax rises. The main culprit is earthquake spending. Ankara committed some $30 billion a year to help communities recover from the February 2023 quake that left several million homeless in southern and central Turkey.
That said, an unprecedented rebuilding of homes and infrastructure should lead to growth.
“Without the quake, the deficit would be 1.1%, which really isn’t bad,” Selim says, adding that 2024’s estimated deficit of 5% will likely fall to 3.1% this year.
Rebalancing The Economy
The latest inflation figures are moderately encouraging; 2024 ended with a year-on-year rate of 44%, well below what was expected, thanks mainly to falling food prices.
“Disinflation will likely continue this year, given the CBT’s signal that it will maintain its tight stance despite the start of interest rate cuts, the ongoing real TRY [Turkish lira] appreciation, and improvement in services inflation,” says ING Bank analyst Muhammet Mercan. “We expect inflation to fall below 30% by the end of 2025.”
The current account deficit has narrowed to around $10 billion from 2023’s high of $60 billion, enabling a rebuilding of foreign exchange reserves that has made Turkey less dependent on external flows.
“Capital flows have been good; every recent bond and sukkuk issue has been three or four times oversubscribed whilst yields have been going down, showing perceptions of risk are falling,” Selim observes.
Ratings agencies approve. Last year, Fitch Ratings upgraded Turkey’s sovereign debt—alongside a clutch of Turkish banks—twice, from B- to B+ in March then to BB- in September, when it became the only country in 2024 up until that point to receive an upgrade from all three ratings agencies.
“In a sense, we’ve gone back to where we were in 2021, before those unconventional policy methods that led to a dramatic deterioration in the country’s macroeconomy and financial stability prospects,” notes Erich Arispe, senior director and head of Emerging Europe Sovereigns at Fitch Ratings.
Turkey’s slower short-term growth outlook reflects the ongoing rebalancing of the economy, which will take time given sticky inflation, Arispe argues. With no elections this year, falling dollarization, rising forex reserves, and an expected drop in the fiscal deficit as earthquake spending winds down are all encouraging signs.
“Turkey has the capacity to grow,” Arispe says. “We expect 2.6% in 2025 and 3.5% in 2026, without creating other economic distortions. But this is a multi-year story, with the economy being recalibrated to produce a sustainable higher growth environment” and realize the country’s export and FDI potential.
Renewable Energy And EV Growth
A new FDI strategy will prioritize less-developed regions, infrastructure, and renewables, says Ahmet Burak Dagliogku, president of the Republic Investment Office of Turkey.
“The aim is to attract investments that contribute meaningfully to Turkey’s development goals,” he adds, including “green transformation, digitalization, high-value services, and deeper integration into global supply chains.” These priorities “will help Turkey stay ahead in a competitive global market.”
Chinese electric vehicle manufacturer BYD’s plans to build a $1 billion plant in Turkey is just the sort of encouraging development the government wants since the EV sector is one of the fastest growing in the country. Turkish auto producer TOG has now turned out more than 50,000 vehicles. EVs are expected to account for 30% of total auto sales by the end of this year.
Also worth noting, considering its energy security has always been a concern, is the government’s commitment to renewables. “Turkey will invest more than $100 billion by 2035 to increase its renewable capacity and modernize its infrastructure,” says Dagliogku. “This extensive investment plan highlights Turkey’s unwavering dedication to achieving its net-zero target while ensuring energy security and economic growth.”
Meanwhile, Turkey has been working closely with the EBRD and other multilateral development lenders. Last year, the EBRD committed about $22 billion, invested across almost 500 projects and trade facilitation lines.
“No, this isn’t an accident,” says the EBRD’s Selim. “We and Turkey have big green, digital, inclusion ambitions which are linked and where projects have been growing, to the extent that almost half our portfolio is in sustainable infrastructure. We want to further scale up Turkey’s green energy capacity, and five cities here are now part of our Green Cities program.” The EBRD has also been working with other banks on issues related to green bond issuance and encouraging private-sector Turkish companies to move to a low-carbon pathway.
Prospects For 2025
A further promotion to investment grade status by the ratings agencies would be a big step toward realizing Erdogan’s wider 2028 ambitions.
“If you look back over the last eight or so years, there’s always been something to scare investors and throw things off track,” notes Selim: “a coup attempt, elections, COVID, Russia’s invasion of Ukraine, more elections. Investors are looking for certainty and policy tightness for at least, say, a three-year period. This is key if Turkey is to realize its potential of 4% to 5% annual growth.”
Longer term, that potential is huge, and Turkey’s private sector has a remarkable ability to adapt, Fitch’s Arispe says. However, “it takes time to re-establish macro credibility and for this to sink in with investors,” he warns. Many of the factors that underlie Turkey’s potential also put it at risk, including its geographical location, the possibility of taking an indirect hit from higher US tariffs, and exposure to changes in investor sentiment.
“Many factors are beyond Turkey’s control—and not least the current, highly fluid international outlook,” he notes.
Traditionally dependent on hydrocarbons and minerals, Indonesia’s digital economy is now booming thanks to high internet penetration and a tech-savvy population. The country’s tropical climate and enormous geothermal resources also offer compelling opportunities for early investors in carbon-free energy.
Monopolies ‘Diminished’
Indonesia endured decades of miliary dictatorship following independence from Dutch colonists. And since the fall of strongman President Suharto’s regime in 1998, the country became a democracy. This was “unthinkable in the Suharto era,” Richard Borsuk, co-author of “Liem Sioe Liong’s Salim Group: The Business Pillar of Suharto’s Indonesia,” says.
“There’s also good fiscal management, a plus for investors,” he adds. “Overall business competition has increased and monopoly power has diminished.”
The downside? Investors used to Singapore’s “benign smoothness” should be patient with the long time it can take to get things done in Indonesia.
“The bureaucracy can be daunting,” Borsuk adds, also explaining that—in Indonesia, as in much of Asia—relationships are key. His solution? Choose partners carefully, and build connections with them.
Recent Election
Subianto campaigned by pledging “continuity” with the policies of his predecessor, Joko (Jokowi) Widodo. One of Subianto’s programs is to give children from poorer families good nutrition to help them grow up healthy. “This will be very expensive to provide nationwide, but Prabowo is going to push it hard,” Borsuk says.
Indonesia’s previous regime also initiated an ambitious and costly plan to move the capital from Jakarta to a new site on Borneo. It remains uncertain whether Prabowo will prioritize this project.
Shalini Kamal Sharma has been doing business in Indonesia since 2004. “Through our company Formula One Furniche, we supply customized [furniture, fixtures, and equipment] to hotels, resorts, and service apartments worldwide, with a strong focus on sustainability,” she explains. “Indonesia is a substantial and growing market for us.”
Indonesia’s hospitality real estate sector is currently $2.1 billion. It’ll get to $3.65 billion by 2030, with a compound annual growth rate exceeding 12%, analysts say.
Sharma points to the active role of Jakarta in encouraging inward investment. “The government—through BKPM [the Ministry of Investment’s investment coordinating board]—is highly responsive to the business community. We have been invited by BKPM to look at specific opportunities, which is a major change and very encouraging.”
BKPM is the primary agency that supports foreign investors and acts as a bridge between investors and the government. “They engage with foreign investors and, as we have learned, are quite proactive in assisting potential investors,” she says.
In a country once lambasted for its challenging bureaucracy, she points to major changes here too. “Getting products through customs has become far easier of late,” she notes.
A Country Of Superlatives
Joel Shen, a lawyer based in Jakarta and Singapore, who heads Withersworldwide’s technology practice in Asia, boasts that “Indonesia is a country of superlatives and is an attractive investment destination with a number of very clear advantages.”
Indonesia, notwithstanding a contraction in its middle class, “is expected to be the third-largest contributor to the global middle class over the next decade, after only India and China,” he says.
Besides being the largest economy in Southeast Asia, it’s the region’s only country in the G20, making it hard to ignore.
In 2023, Indonesia joined the Regional Comprehensive Economic Partnership, which includes all 10 ASEAN countries, plus Australia, China, Japan, New Zealand, and South Korea. “RCEP is the world’s largest free trade agreement (FTA), covering about 30% of global GDP and nearly one-third of the global population,” Shen says.
Indonesia also produces home-grown commodities: from palm oil, an ingredient in many fast-moving consumer goods (i.e., foods, cosmetics, soaps, and biofuels); to nickel, which is essential in the production of electric-vehicle batteries.
Coupled with its ongoing infrastructure development and reforms to improve business, “Indonesia presents numerous opportunities for investors,” Shen says.
The Digital Upside
Beyond demographics and natural resources, Indonesia’s economy is rapidly transforming digitally, fueled by mobile-first consumers, according to Shen.
Google, Temasek, and Bain & Company, in their 2024 e-Conomy Southeast Asia report, named Indonesia the fastest-growing large internet market.
“Investing in Indonesia has indeed become more accessible due to a combination of regulatory reforms and digitalization,” says Shen. The Omnibus Law on Job Creation, for example, simplifies business licensing, reduces restrictions on foreign ownership, and improves what had been onerous tax and labor regulations.
There’s also the Risk-Based Online Single Submission system, an online platform that makes it easier for low-risk foreign investors to incorporate Indonesian companies and obtain business licenses.
Tax holidays, tax allowances, and other benefits are also available to encourage investment in sectors and regions prioritized by the government.
The changing dynamics of the asset management industry
The asset and wealth management industry is facing a transformative moment. Despite an 12% increase in global assets under management (AUM) to $120 trillion, the profitability and revenue gains have not kept pace. The revenue needle barely moved in 2023, while profits fell 8.1%. Asset managers are feeling a financial squeeze, facing downward pressure on fees. Retail investors, in particular, pay an average of 50% higher fees than institutional investors, sparking a push towards cost-effectiveness. But cutting costs isn’t enough: they must also expand their client base and prepare for an unprecedented generational wealth transfer as baby boomers pass down wealth to millennials and gen Z, whose collective wealth could reach nearly $84 trillion over the coming decades.
This transfer presents a significant opportunity but also a challenge. Millennials and gen Z, often digital-first and values-driven, expect a modern, mobile-friendly approach to managing wealth. They value transparency, ease of use, and personalization, putting pressure on asset managers to adopt new technologies and pivot from traditional relationship models. Technology has become the cornerstone of any strategy to attract and retain these younger generations, enabling firms to provide the digital experiences, data-driven personalization, and socially responsible investment options they expect. Without a tech-enabled approach, firms risk losing relevance and market share as these emerging generations assume greater financial power.
A demanding customer base
Capturing the attention and loyalty of Millennials and Gen Z is no easy feat. This generation of investors seeks control, transparency, and flexibility — characteristics that often require a more agile digital infrastructure than what many legacy asset management firms currently offer.
1.Mobile-first preferences
Younger generations value access to their finances anytime, anywhere. A recent study showed that over 90% of millennials prefer mobile apps for banking and financial services, and expect similar accessibility from their asset managers. This generation wants a seamless, digital experience that allows them to monitor and manage their wealth at their convenience.
2. Demand for transparency and convenience
Millennials and Gen Z are discerning clients who expect transparency around fees, investment risks, and overall performance. In fact, over half would switch financial institutions if they felt their current provider lacked transparency. They want real-time information and insights to make informed financial decisions, a service traditional models often struggle to deliver.
3. Personalized and ethical investment
Socially responsible investing is a priority for younger generations. Research from Morgan Stanley shows that 96% of millennials are interested in sustainable investing, a demand that’s only been amplified by environmental, social, and governance (ESG) concerns. These clients want tailored, socially responsible portfolios, and asset managers that can’t deliver may struggle to gain their trust.
Millennials and gen Z clients have high expectations for immediacy in financial information. Real-time access to financial data, performance metrics, and market insights not only improves transparency but also empowers clients to make informed decisions. Firms that provide real- time, up-to-date data reinforce a sense of trust and reliability — key factors in building long-term relationships with digitally savvy clients.
Tech creates sticky customers for asset managers
To address these challenges, asset and wealth managers are leaning heavily on technology. They are building tech stacks with advanced analytics, predictive tools, and digital customer relationship management (CRM) systems that enhance the client experience from onboarding to daily portfolio management. Here’s how these tools are reshaping the industry:
1.Digital onboarding and CRM systems
Investing in digital onboarding and CRM platforms allows asset managers to provide personalized, efficient service from the first point of contact. Digital onboarding speeds up client acquisition, enables smooth verification, and sets the foundation for a seamless, digital-first relationship. CRM systems also facilitate tailored communication and help identify client needs, leading to stronger client-manager relationships.
2. Advanced analytics and predictive tools
Through advanced analytics, firms can gain deeper insights into client behaviors, preferences, and potential needs, allowing them to create more targeted and effective engagement strategies. Predictive analytics goes a step further by helping managers anticipate life events or changes in risk appetite, enabling proactive outreach and engagement. This is crucial for retaining clients as their financial needs evolve.
3.AI-driven personalization
AI allows asset managers to offer bespoke investment advice and products tailored to individual risk profiles, financial goals, and personal values. Through machine learning algorithms, firms can assess vast amounts of client data to make personalized recommendations. One survey showed that 58% of millennials are likely to switch financial providers for one that offers more personalized services. AI-driven personalization can meet this demand, offering the individualized attention Millennials and Gen Z expect.
4.Engagement on-and off-line
Younger clients expect frequent communication, whether through real-time alerts, personalized notifications, or virtual meetings. Video calls, chatbots, and other virtual engagement tools enable managers to connect with clients instantly, meeting the “always-on” expectation. By making themselves available and responsive through digital channels, asset managers can provide the active engagement younger clients demand.
Robust cybersecurity measures, such as biometric authentication and multi-factor authentication, are becoming increasingly important as cyber threats grow. Over half of millennials consider strong data security a primary factor in their choice of financial provider. With stronger security measures, firms can build the necessary trust to maintain client loyalty.
Younger generations are highly conscious of data privacy, and firms that prioritize it are better positioned to win their trust. Clear, transparent privacy policies and top-notch cybersecurity practices ensure that clients’ data is safe. Offering these safeguards not only meets regulatory requirements but also satisfies the expectations of a privacy-focused clientele.
Asset managers can leverage technology to streamline compliance and improve transparency, particularly in areas like fees and investment risk. This user-centric approach to compliance allows clients to understand exactly where their money is going, further building the trust needed to retain them over the long term.
The time to pivot is now
The asset and wealth management sector remains healthy, with continued growth projected. However, firms must evolve to fully capture the opportunities presented by generational wealth transfer. By embracing technology-led initiatives, asset managers can appeal to younger investors while navigating the constraints of fee pressures and regulatory demands. Firms that adopt a broad, holistic technology strategy — one that spans the client lifecycle, from onboarding to portfolio personalization — are better equipped to meet the expectations of millennials and Gen Z. This will ensure a long-term foundation for growth, relevance, and client loyalty in the age of digital-first wealth management.
About Author
Sachin Sudhir Kamat, Vice President & Head of Capital Markets Financial Services, Infosys
Sachin Kamat heads the Capital Markets division for Infosys Financial Services. He has extensively worked with leading Asset Management firms to transform their organization and deliver impactful solutions. He leads initiatives to enhance client engagement and drive
operational efficiency. Sachin has worked on multiple technology areas across Capital Markets business to drive technology transformation and build scalable Operations teams. He is focused on driving innovation and partnering with clients to deliver them.
The executive order to create America’s first sovereign wealth fund has sparked debate over its governance, transparency, and potential impact on global markets.
US President Donald Trump announced last week the creation of the first American sovereign wealth fund. He had pledged during his campaign to pursue such a policy, but this time, he formalized it with an executive order directing a plan for the fund to be developed within 90 days.
The news about the emerging US Sovereign Wealth Fund should not surprise those who follow trends in sovereign finance. Various developed countries, such as the United Kingdom and France, have explored or executed the idea of a new sovereign fund—despite fiscal challenges—to promote industrial policies, protect national champions from foreign takeovers, or advancing technology-advanced but vulnerable sectors.
The US government’s initiative is also driven by the recognition that federal assets are underutilized, creating an opportunity to “monetize the asset side of the US balance sheet for the American people,” according to the US Treasury Secretary Scott Bessent.
“America is locked out of the US dynamic capital markets and returns because we are not a player,” argues Chris Campbell, former assistant secretary of the US Treasury for Financial Institutions during Trump’s first term, “and the burden is on the taxpayer to fund the government.”
The Trump Administration has not provided specifics on the fund’s risk profile, asset allocation, governance structure, transparency, or reporting requirements—key factors that typically define a sovereign wealth fund. The news immediately raised skepticism among financial commentators, some of whom view the new initiative as a way to allocate part of the Treasury’s general budget to a discretionary fund controlled by a select group of insiders. Similar structures have, in other countries, led to corruption and inefficient investments—as seen in Malaysia and Libya. Whether the details of the new fund will support these concerns remains to be seen.
In any case, Congress must approve the fund’s creation—an uphill battle, given longstanding resistance to privatizing federal assets and services, according to Campbell.
While certain US states have their own sovereign wealth funds—such as the Alaska Permanent Fund, which is financed by the state’s income from natural resources—the United States lacks a national fund at the federal level. Establishing such a fund could position the US as a major player in the international sovereign wealth community—an intriguing shift at a time when Trump’s ‘America First’ agenda has led the country to withdraw from many global organizations and forums.
One such forum is the International Forum on Sovereign Wealth Funds (IFSWF), which operates under the International Monetary Fund umbrella. According to its mandate, the IFSWF aims to strengthen the sovereign wealth fund community through dialogue, research, and self-assessment. This unique forum brings together funds from different countries, both developing and developed economies, with distinctively different transparency and asset-allocation strategies. Yet, considering the new commercial focus of the US Administration, US participation through state and federal funds can support global markets and promote US leadership. A fund’s affiliation with the Federal Reserve will strengthen US participation in such a forum.
In fact, the announcement alone has already triggered broader debate about how the United States can leverage its resources and financial infrastructure for strategic investments—both domestically and internationally. The discussion could help cultivate the investment expertise within the US government, develop a pipeline of institutional investing talent, and position commercial investments as tools for national security and diplomacy.
Lenders across Europe are ramping up M&A efforts to scale operations, strengthen balance sheets, and navigate an evolving financial landscape.
The European banking sector is experiencing a wave of consolidation as institutions seek to bolster their market position, expand their asset base, and improve returns. With interest rates stabilizing and capital reserves at healthy levels, banks are taking advantage of strategic acquisitions to fuel growth and enhance profitability.
UBS completed its landmark acquisition of Credit Suisse in July, marking one of the most significant deals in the sector. In the UK, Nationwide finalized its purchase of Virgin Money, while in December, Italy’s UniCredit increased its stake to 28% of Commerzbank, Germany’s second-largest lender. Dutch lender ING has also signaled its intent to acquire rival banks in major European markets.
Higher interest rates and improved capital buffers have strengthened European banks’ ability to pursue acquisitions. As rates begin to ease, M&A activity could gain further momentum, with banks looking to scale up and boost profitability in an increasingly competitive environment.
“There are a number of possible explanations for the run of European banking deals,” says Russ Mould, investment director at AJ Bell. “They include a drive for further consolidation to boost margins and returns on equity—especially within the EU, where the banking system remains highly fragmented. Strong balance sheets that easily meet regulatory requirements allow room for M&As, even after the distribution of increasingly generous dividends and buyback programs.”
Ultimately the key issue is valuation. The price, or valuation, paid for an asset is the definitive arbiter of investment return and the buyers clearly feel they were able to pay prices that gave them downside protection, and yet leave them with upside potential.
Despite the surge in M&A activity in the European banking sector, challenging the largest banks in the US and China may take some time, as they outpace European competitors in domestic activity, cross-border lending and digitalization.
According to S&P Global Market Intelligence, in 2024, the bank with the most assets in the world was the Industrial and Commercial Bank of China, totaling $6.3 trillion. It was followed by the Agricultural Bank of China, which has amassed $5.6 trillion, and the China Construction Bank Corp. with $5.4 trillion. JPMorgan Chase was the biggest US-based bank with $3.9 trillion in assets. In comparison, the largest European bank was the UK-based HSBC Holdings with $3 trillion.
Change fatigue can strain employees and organizations, and it is getting worse. To reduce the harm, companies are turning to more thoughtful, gradual strategies.
The notion that “change is the only constant” dates all the way back to the pre-Socratic Greek philosopher Heraclitus, some 2,500 years ago. But the pace of change in today’s business world often seems to outdistance the capacity of executives and their teams to adapt.
Hardly a fad pushed by human resources, the phenomenon known as “change fatigue” can affect the bottom line through workforce churn, reduced ability of workers to adapt to further change, and lower productivity.
Executives should “be treating change fatigue as a business risk,” says Hilary Richards, Vice President and analyst in Finance Practice at Stamford, Connecticut-based consultant Gartner.
Whether adopting new technologies or reacting to external change, many if not most companies appear to be in a constant state of flux. Over 75% of corporations revamp their business model every two to five years, according to a study by WalkMe, a San Franciso-based software-as-a-service firm.
Nowhere does change fatigue ring truer than in corporate finance. Finance departments field a myriad of novel strategic roles when a company implements digital transformations, enterprise resource planning, and artificial intelligence (AI).
“CFOs have pretty significant mandates to support growth, manage cash, and process change,” Richards notes. Yet, only one-third of corporate-change projects are deemed successful, according to the WalkMe report. Two-thirds of workers report burnout during transformation drives and workplace stress accounts for 8% of national healthcare spending in the US.
Another recent report from Orgvue, a London-based organizational design and planning platform, found that 38% of CEOs would rather quit than lead a major transformation.
‘Things Are Not Getting Better’
Her clients ability to adapt to change began to wane around 2017, recalls Jenny Magic, founder & CEO of Build Better Change, an Austin, Texas-based consultancy and co-author of “Change Fatigue: Flip Teams From Burnout to Buy-In.”
“Top leadership was interested, but middle managers and the people who do the work were less capable of carrying it out,” she recalls. A recently published report by her firm “validates that things are not getting better.”
Some evidence shows them getting worse.
“The average employee experienced 10 planned enterprise changes in 2022, up from two in 2016,” a Gartner report notes, “and there is no reason to expect the pace to slow. But the workforce has hit the wall; the share of employees willing to support enterprise change collapsed to just 38% in 2022, compared with 74% in 2016.”
In response, some organizations are getting creative; examples can be found among both corporate giants—Danone, Liberty Mutual—and relative upstarts. Companies opt for either change management consultants employed by big name consultancies or specialized emerging competitors. In addition to advising executives, these increasingly high-profile professionals hold conferences, provide training, and draft articles with titles such as “Three Ways to Minimize Change Fatigue Among Financial Teams.”
Large-Scale Transformation, Done Better
The solutions that consultants promote address two distinct kinds of change—large-scale transformation and accumulative change.
Major initiatives tend to favor faster speed and larger scope. Yet there are signs that more gradual solutions might be more effective and less traumatic.
These drives tend to be implemented in reaction to big external events, such as a severe economic downturn, the Covid pandemic and its fallout, or important trends in technology such as artificial intelligence. But this might reflect outdated thinking, argues Oliver Shaw, CEO of Orgvue.
“Change came along a lot less frequently” even a couple of decades ago, he says. Executives “developed impulses [to act]: ‘Change is needed now!’” As a banker who lived through the 2008 financial crisis, “I thought at the end of that, I would never see anything like it again.”
Full-bore transformation, often involving cutbacks, might be too blunt in an ever-changing world, Shaw argues. Risks include high severance pay and other costs related to large-scale layoffs. Companies in the Fortune 500 that underwent significant workforce restructuring in 2023 dished out $32.7 billion in severance pay that year and carried over another $10.9 billion into 2024 as charges or liabilities, according to data compiled by Orgvue.
Additional costs of dumping workers, according to a 2024 Bloomberg study of Securities and Exchange Commission listings, include reduced productivity (about six months); an uptick in voluntary departures; increased unemployment insurance tax; and higher legal fees, mostly to avert lawsuits over alleged discrimination.
Danone took a different path when it was contemplating a large-scale change; it used what an Orgvue case study calls a “continuous design approach to organizational development to remove the need for costly, reactive, high-risk transformation projects.” Instead of slashing jobs, the Paris-based multinational food and beverage company overhauled its human resources processes and shortened its planning period from annual to quarterly to better track labor demand and supply. They were able “to understand how [to make adjustments] through time,” Shaw says.
As with any malady, sometimes the best “remedy” is preventative medicine. When the Swedish payments fintech Klarna wanted to reduce overhead in 2023, it reduced trauma via layoffs by outsourcing about 500 jobs in 10 markets to two partner firms. Internally, it implemented a hiring freeze and embarked on a drive to adopt money-saving AI. “They are leveraging their margins by levering AI,” Shaw notes.
Danone and Klarna are examples of companies where leaders “understand organizations as systems.” If the average firm has a 15% attrition rate, according to Shaw, it should be able to milk that in tandem with internal reassignments to make significant reductions without undue trauma.
‘Slow Down Now, Speed Up Later’
After a merger, San Diego-based broker C3 Risk & Insurance Services jumped into what at first seemed like a very complex and difficult integration process. Employees fretted over their future with the firm. Nobody could agree on which technology to adopt.
Eric Brown, founder and CEO at Florida-based Imperio Consulting, was brought in to help facilitate the process. A veteran of the US Special Forces, Brown draws on that background in his practice. Instead of change fatigue, the American military calls it “operator syndrome.” Constant pressure and uncertainty can wear people down.
“The corporate world mirrors that experience in many ways,” he says, “especially in finance, with its tech overload, unpredictable markets, and ever-changing regulations. It’s like trying to stay steady on shifting sand, and it can be exhausting.”
Brown recalls telling one client, “Let’s slow down now so we can speed up later.” Soldiers think of it as a “crawl, walk, run” sequence. With buy-in from C3’s top brass, Brown was able to help incorporate that approach into the integration plan in large part by using team-building exercises and tools.
“They took it to heart,” he says, investing in training and dialogue with employees. In 2023 and 2024, C3 was tabbed as a top place to work by both Business Insurance and the San Diego Business Journal. “C3 are rock stars,” Brown adds.
C3’s experience also points up the need to address the second of the two types of change fatigue that consultants identify: the accumulation of small changes. Like water that builds up behind the proverbial creaky dam, they can ultimately threaten an organization’s structural integrity.
Employees feel increasingly harried by the nearly non-stop accumulation of relatively minor changes affecting managerial strategies, team composition, and job description, Gartner found. Employees feel disempowered by top-down change that comes without debate or discussion. Old-school burnout and increased turnover result if employees cannot recover and recharge from one disruptive event before the next one comes along.
Hoping to ward off the fatigue cycle-of-death by 1,000 cuts, Liberty Mutual designed a process to identify employees’ fears and assumptions. It started with questions aiming to help workers make peace with change. Tools included change workshops as well as employee engagement and feedback. Such initiatives can help address problems that lurk below the surface.
“Most of the senior C-suite focuses on the tip of the iceberg,” Richards says. “It’s what they’re paid for. But your team will run into that iceberg.”
Investment in AI is soaring, yet its real-world utility is still evolving, with many viewing it as an emerging technology.
While the financial sector has been using artificial intelligence in one form or another for several years, the recent uptick in AI-related activity and investment is sharpening the focus on how far and fast these new technologies can be scaled. According to the latest Infosys Bank Tech Index, global banks allocated 29% of their technology budgets to AI in Q3 2024, up from 20% in Q1—an overall increase of nine percentage points.
A study from IDC forecasts global AI investment in systems, services, and platforms to reach $300 billion by 2026, driving a compound annual growth rate of 26.5% since 2022—with financial services anticipated to account for a significant share.
Among the drivers of this surge, arguably, was the 2022 launch of ChatGPT. Since then, according to Goldman Sachs, $45 billion of inflation-adjusted investment has been committed to AI technology in the US alone as of the third quarter of last year.
In this new era, İşbank is at the forefront. “As a pioneer in financial technology, our mission is to deliver seamless, hyper-personalized experiences through the strategic integration of cutting-edge innovations,” says Sezgin Lüle, deputy CEO of the Istanbul-based bank. “Among these, AI stands out as a cornerstone for reshaping the banking sector and redefining customer experience.”
Today, AI is at the core of İşbank’s plans.
“By enabling predictive analytics, hyper-personalized services, and enhanced operational efficiencies,” Lüle says, “AI is not just a technological advancement. It is a driving force for reshaping the financial ecosystem.”
Another institution leading the charge is São Paulo-based Nubank. CTO Vitor Olivier says predictive AI enables it to gain leverage and deliver value in a competitive landscape.
Olivier, Nubank: From the very beginning, it was all about big data.
“We felt from the very beginning that it was all going to be about big data,” Olivier says, “about the right infrastructure fetching as much data as possible, applying the right algorithms, the right policies and frameworks to allow us to be more precise at a bigger scale and to deliver higher confidence decisions at a larger scale and a lower cost.”
For the past three years, Nubank has been wielding GenAI tools to interact with customers and help them better understand their financial situation.The neobank expects AI to be a growth driver for both its business and its customers—and not just in its home market. While international growth in the banking sector has largely been through M&A, Nubank is betting it can grow organically across borders through new lower-cost platforms, enabling it to approve more customers, bank more people, and offer more competitive products.
“We were born as mobile native,” says Olivier. “We don’t have any branches, so all our over 100 million customers are banked through the app.”
While the smartphone has put a bank branch in everybody’s pocket, AI puts a banker in everybody’s pocket, providing customized insights and nudging customers to think in ways that generate better decisions.
“I think that’s the next wave,” Olivier predicts. “It’s around optimizing people’s lives through technology and giving them greater confidence that they are making the right decisions to manage their finances.”
Hyperscaling
Nubank has several partnerships in place, primarily focused on operations, productivity, and infrastructure, several of these with hyperscalers: cloud service providers that furnish services such as computing and storage at enterprise scale.
Hyperscalers arguably have made themselves critical to any expansive AI strategy. In the US, they spent around $200 billion on AI in 2024, according to Goldman Sachs, a number it expects to increase to $250 billion this year. For Standard Bank Group, that’s where much of the investment is focused.
“Ultimately, you go from on-premises computing power to third-party hyperscaler computing power and that’s most probably where your investment will be,” argues Standard Bank CIO Jörg Fischer. At this stage, the firm measures its primary AI investment in time rather than money.
As technology advances, Fischer expects it to become an integral part of daily operations. That said, it will be some time before AI’s impact can be claimed to be “profound.” In the meantime, Standard Bank is firmly focused on “next-level” productivity enhancement incorporating AI.
“We are really pushing AI now, and are using it on a daily basis,” Fischer says. That means working with multiple technology vendors. He’s also nervous when it comes to client-facing AI. Human oversight must keep AI from running “totally wildly”—bringing with it a range of reputational risks—from errors, to ethical concerns, or even liability, he adds.
As with previous computing innovations, AI’s benefits depend on confidence levels, making pre-adoption testing essential. Following the “initial exuberance,” says Satish Babu, principal engineer at Standard Bank, banks are addressing the practical question of how to make AI the basis of a robust set of products that address genuine customer needs.
“We do viability assessments early in the cycle, to see if an idea will give us a reasonable return,” he says. “There’s an element of unknown until we do the testing, but we do make quick judgments about return on investment.
“We always look at the hype as ‘the art of the possible’ and then work out how that applies to our situation and if it makes sense for us. There’s definitely an exuberant hype on what the technology can provide, and I believe it will live up to that at some point in time. But we are quite some distance from there.”
For some areas of financial services, the horizon is further off. “Although we expect AI technology will help enhance returns, we don’t see fully automated investment funds in the near future,” Hidekazu Ishida, an adviser to Global Financial City Tokyo (FinCity.Tokyo), says. “It is because good investment judgments are highly subjective and unique, and the current AI technology does not come close.”
That said, some investment managers are trying to utilize AI.
“Just as Japanese chess players train themselves with AI players, fund managers will increasingly use AI technology to gather and process information,” says Ishida. “We hear that some fund managers are using AI to replace sell-side research. We also hear that some are trying to use non-financial data to assess the speed of management change.” Quantitative tools tend to lag behind change in management behavior, but AI, combined with fund manager creativity, will eventually help investors achieve higher returns, he adds.
Uneven Progress
Attitudes toward the promise of AI are far from even across global financial markets. Parts of the sector remain fixated on leveraging AI for incremental productivity gains or competitive advantage, rather than focusing on its potential to disrupt and transform, observes Dennis Flynn, AI strategist and senior research fellow at the Centre for Sustainable Business, University College London.
“By significantly enhancing predictive accuracy,” Flynn contends, “AI could narrow or even eliminate arbitrage opportunities, forcing a reevaluation of the risk-reward dynamics that underpin modern markets. Those who embrace this paradigm shift, rather than clinging to outdated models, will emerge as the real winners. AI should empower us to achieve more with the same resources, not simply do the same with less. Letting go of familiar ways of working is difficult, but we are beginning to see a shift in mindset.”
For many banks, however, AI is already central to improving operational efficiency, enhancing decision-making, and expanding product offerings, with strategic partnerships helping them to scale these advantages and speed innovation.
