The way forward for digital banking

Malaysia’s digital economy is expected to be worth around US$21 billion by the end of 2022. And one of the factors enabling this is the rise of digital banking in the country. While many would agree that it is still early days to see the full value of digital banking, the reality is that more and more financial service providers, especially banks, are embracing the cloud to meet consumer demand.

Digital banking in Malaysia is still in its infancy, with the central bank only issuing licenses to operators a few months ago. However, traditional banks and fintech players are already offering digital financial services, especially with Millennials and Gen Z embracing banking in almost entirely different ways.

For Tammy Tan, Country Manager of Red Hat Malaysia, trust and cybersecurity must be paramount as financial service providers seek to increase their reliance on technology, especially for digital banking.

In fact, Tan pointed out that because digital banks are mostly cloud-native, they use a different set of tools than traditional banks. This means their speed of innovation and time to market is much faster, days instead of months. The modern customer also prefers digital banking instead of physically going to traditional banks.

For digital banks, they would like to echo what traditional banks offer but by creating a more personalized experience for the customer by exploiting their data. Therefore, the digital banking ecosystem is essential. For example, digital banks would like to connect all electronic payments via open APIs.

Tammy Tan, Country Manager, Red Hat Malaysia.

“That’s where Red Hat comes in. Red Hat can provide robustness, agility, and resilience in building an ecosystem. Digital banks should capture the market and build trust with consumers, and this is done through data from third-party applications, such as e-commerce. Unlike traditional banks which can rely on commerce, private wealth, etc., digital banks have to generate their revenue as they grow,” Tan explained.

This is where Tan thinks traditional banks have an advantage. In Malaysia, Tan pointed out that most traditional banks are Red Hat customers and have a head start in pivoting their applications to transform. This includes leveraging EKYC (electronic-know-your-customer) as well as improving customer service through containerization.

Earlier this year, Red Hat announced new features and enhancements to its portfolio of open hybrid cloud solutions aimed at accelerating enterprise adoption of edge computing architectures through the Red Hat Edge initiative. This set of new cross-portfolio edge features and capabilities will aim to help customers and partners better adapt to edge computing by reducing complexity, accelerating deployments, improving security capabilities and increasing confidence in the consistent management of systems from the data center to the edge.

The way forward for digital banking

According to Albert Chai, the open hybrid cloud is the future, not only for the bank, but also to allow the company to innovate faster. For Chai, in banking, the future lies in enabling physical services digitally.

Albert Chai, Managing Director, Red Hat RoSEA

“The need for technology to develop this is essential for developers. Whether in the cloud or at the edge, developers want a simplified experience. Operators also want consistency across environments. They want to run all apps on any footprint, depending on regulatory requirements, etc. Simply put, the future will be hybrid and security will be the foundation of the hybrid world,” Chai commented.

Chai explained that most banks are embracing hybrid cloud infrastructure today, especially as they look to run more SaaS. These algorithm-based services reduce the user’s cognitive load and aim to improve bottom line results. Security posture will evolve into a bank’s ability to reduce the time to detect and remediate a breach. This is how Chai thinks the system and platform should be built.

“Linux is the most secure foundation for running applications. Developers keep hardening it. But ultimately, it’s the software supply chain that needs to be secured. We’re just one part of the supply chain,” Chai added.

At the same time, Forrester analysts believe that autonomous finance is the next generation of financial services and define it as “algorithm-based services that make financial decisions or act on behalf of a client”.

That said, autonomous banking will require continued hyper-personalization in the future. And they will leverage customer DNA, a custom curriculum as well as analytical engineering and recursive learning.

A successful transformation

Examples of success in the region include Ascend Money in Thailand. The company needed to create a central application development and deployment platform to standardize application delivery and processes across three countries. Ascend Money has migrated its legacy applications to a new standardized Red Hat OpenShift container platform based on Kubernetes container orchestration technology. It has since implemented a central platform for developer self-service and collaboration, improved time to market and scalability through automation, and enhanced security and compliance.

Another example is Pegadaian in Indonesia, which needed to build innovative applications with faster time to market and a technology platform from which to collaborate with partners and scale services as needed. Using Red Hat solutions, the company modernized its applications to accelerate innovation and deploy new services faster and more reliably.

In Malaysia, AmBank Group needed to maintain a competitive edge in the saturated digital banking space. The bank decided to create an end-to-end application to digitally onboard local small and medium-sized enterprises (SMEs). She hired Red Hat to learn DevOps and agile development processes and after the five-week program, the bank created standard operating procedures to handle upcoming agile application projects. AmBank also used Red Hat OpenShift to create a continuous integration and delivery (CI/CD) pipeline for its applications.

Since then, Ambank’s new app automates compliance processes such as credit, risk and corporate checks. This reduces the complexity of the onboarding process and minimizes the number of physical branch visits and churn for SMB customers. It also provides a greater culture of collaboration between teams, which helps reduce overall defects.

As Chai puts it, “fintech needs to talk about cloud resiliency. It needs to have the right footprint on the right cloud for the right apps. And it’s about running core applications on multi-cloud, which is why the future of banking will be in a hybrid world.