Publication Month: Sep 2022 | Report Code: TIPRE00017757 | No. of Pages: 195 | Category: Technology, Media and Telecommunications | Status: Published
Liquidity management can be referred to as an institution's act of ensuring the availability of sufficient cash and liquid assets for paying the institution's expenses and satisfying any client's loan or savings withdrawal demand. Asset liability management is the process of planning, organizing, and controlling asset and liability volumes, maturities, rates, and yields to minimize interest rate risk and maintain an acceptable profitability level. Liquidity and asset liability management solutions and services aid enterprises manage liquidity and asset liability effectively.
Growing stringency of regulations and rising attention to interest rate risk have been forcing banking institutions to seek comprehensive liquidity and asset liability management solutions. Interest Rate Risk in Banking Book (IRRBB) and EBA stress test under funding planning are some factors that require banks to assess the possible after-effects of an increase in interest rate, the change in values of interest-sensitive assets, and the resultant decrease in regulatory capital. In addition, the BFSI sector has been witnessing increasing regulations related to risk management. Furthermore, persistent fluctuations in interest rates across the US, the UK, Switzerland, Japan, and other large banking nations have diminished the BFSI sector's margins. Such factors have promoted the global liquidity and asset liability management solutions market growth. These solutions and services can allow financial institutions to undertake decisions based on scenario analysis, provide a better perspective from both risk and finance-based views, and strongly aid enterprises in complying with regulatory requirements. Most modern-day liquidity and asset liability solutions have integrated funds transfer pricing (FTP), allowing users to distinguish between the profitability of one activity with another.
Based on the liquidity and asset liability management solutions market report, the liquidity and asset liability management solutions market is segmented into component and industry. Based on component, the liquidity and asset liability management solutions market is segmented into solutions and services. Based on industry, the liquidity and asset liability management solutions market is segmented into banks, brokers, specialty finance, wealth advisors, and others.
With the social restrictions imposed by various countries in response to the onset of the COVID-19 pandemic, major stakeholders in the BFSI sector—such as banks, brokers, and wealth advisors—turned to digital platforms to meet their everyday needs. Digital wallets, often known as eWallets, became more popular amid these conditions. As a result of this transition, the likelihood of credit loss and nonperforming assets (NPAs) increased, while banks experienced unexpected asset liability management (ALM) model results. The Financial Action Task Force (FATF) has cautioned banks about unlawful money transactions. As a result, demand for liquidity and asset liability management solutions has surged, significantly influencing the liquidity and asset liability management solutions market growth. Moreover, owing to the widespread use of digital platforms, the volume of data on networks is growing, putting much strain on banks and financial institutions to timely maintain their balance sheets. Most regional and international banks have experienced significantly lower loan yields and margins than anticipated due to higher loan refinancing. The COVID-19 pandemic has accelerated developments in digital technologies and digital liquidity. Hence, banks and financial institutions are now using data analytics techniques to improve their asset management processes.
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The progressive buy-now-pay-later (BNPL) industry is also supporting the growth of the liquidity and asset liability management solutions market. Effective credit risk and liability management is the key to success for BNPL players. Based on a report by Apptopia, BNPL app downloads reached 6.8 million in November 2021, up by 54% from November 2020, and monthly active users (MAU) increased by 63% year-over-year. Although the US leads the race, the number of active users in Europe has also grown significantly. Based on a report by PayU, 7.4% of total e-commerce transactions in Europe happened using BNPL services in 2020, and the transaction count is expected to grow by 45% over the next five years. Hence, with the globally proliferating BNPL industry, coupled with the growing focus on liability risk by industry players, the liquidity and asset liability management solutions market growth is anticipated at a good pace during the forecast period.
Based on component, the liquidity and asset liability management solutions market is segmented into solutions and services. The solutions segment is expected to be the fastest-growing segment, primarily promoted by the advent of AI-enabled solutions. The services segment is expected to grow at a moderate pace during the forecast period.
In terms of industry, the global liquidity and asset liability solutions market is segmented into banks, brokers, specialty finance, wealth advisors, and others. The banks segment is anticipated to be the largest segment during the forecast period, owing to the widespread adoption of liquidity and asset liability solutions across the globe.
Liquidity and asset liability management solutions market players are mainly focused on developing advanced and efficient products. A few examples are given below.
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