Could you share more about the digital condition and progress of financial services in Asia Pacific (APAC) compared to other regions?
Benjamin: Financial services in APAC is a broad church. It comprises of a mix of traditional, long standing financial institutions and cutting-edge, innovative financial institutions born in the cloud.
In the region, there is a strong growth in net income per capita among citizens and at the same time, people are moving towards digitization and digital banking.
Notes and coins are disappearing as digital banking is now being used for trade, transaction and exchange.
There are varying layers of maturity in the digitization journey seen within the financial service industry in APAC.
As such, there are countries in the region leading the world in many instances – China for example has had an enormous growth in mobile payments.
How is Malaysia’s progress in digital banking?
Benjamin: To become a more proficient digital native bank or financial institution, there are significant structural changes that need to be made within the banking and financial services industry in Malaysia.
This is closely tied to the way Malaysia thinks about banking and digital bank or digitising financial services.
From Red Hat’s perspective, we see an exciting opportunity and growth in Malaysia.
The banks and financial institutions in Malaysia have completed some good implementations and roll-outs however, there is still a lot of room for improvement.
Today, we are seeing a cultural mind shift at the Executive level that is starting to filter down to the departments within the banks and financial institutions.
We need to take note that the rising millennial population places more emphasis on convenience, security and interoperability through mobile devices – they will pursue services irrespective of brands or banks.
Today, one can have a palate for services through elegant interfaces (application) and on the back-end of that application, the service provider might be the commercial banks.
How ready is Malaysia to move to the next step of digital banking?
Benjamin: There some key pillars that are interconnected and needs to be considered when journeying towards being a front foot bank or financial institution.
Malaysian financial institutions have significant areas to address in order to enhance these pillars.
- People – Skills, culture, mentality and the way things are done before needs to be changed significantly, so to ensure such financial service providers are more progressive and attentive in their offerings.
- Technology and Architectures – Technology and architecture is a crucial aspect that has yet to be addressed in the technology arm of financial institutions.
The duration to wait from ideation to roll-out is too long and the systems are being built in a fragile manner as opposed to agile.
- Policies – Policies are outdated and at times, it constraints the flow of work. We need to adapt policies that streamlines the flow of work in the way banks deliver their products and services whilst meeting the same regulatory and security issues.
And since banks are delivering their products and services through software (digitization), the flow of software is a critical function that needs to be improved, accelerated and made more reliable as well as secure so that banks can get new features, products and services to market faster.
Malaysian financial institutions do have good practices and are also recognising the challenges faced.
In overcoming it, right now, it boils down to the execution and most importantly, making the necessary structural and incremental changes.
When it comes to digitisation of financial service institutions, are there different types challenges to tackle in Malaysia as compared to APAC?
Benjamin: Ultimately the challenges are the same. All banks and financial institutions have these same goals when it comes to their digitization journey:
- Trying to get products and services to market faster
- Striving for great customer experience
- Reducing cost per transaction
- Achieving transactional efficiency
- Delivering services securely via mobile and multi-channel
In Malaysia, Red Hat has embarked its journey with financial institutions and key stakeholder to:
Understand the key pillars (people, technology and architecture and policies) and the inter-dependencies between them.
Provide agile procurement at a lower risk and lower upfront capital investment. This is a faster way for financial institutions to implement the necessary changes.
Also, by doing this, Red Hat offers these institutions some level of experimentation and learning that essentially irons out their issues faced.
This allows them to make agile adjustments and changes in their people, technology and architecture and policies.
The changes being made also requires a level of sophisticated education and collaboration with these stakeholders.
Red Hat has now taken a new approach with financial institutions. We need to understand that the in this moment in time, the focus is not solely to help IT departments reduce costs rather, to help banks have an outstanding customer experience through digital means.
Red Hat is providing ways for these institutions to make necessary changes within a shorter timeframe, through agile procurement and with lower capital investment.
Can you share some insights about Red Hat’s approach when it comes to the financial services industry?
Benjamin: Red Hat has been looking at how to effectively apply the right software, approach, and culture to help financial institutions accelerate change, achieve their desired outcomes faster, reduce risks and improve the IT architecture.
There are four addressable areas that financial institutions have in common:
- Customer expectations
- Regulatory landscape
- Decreasing margins
From these four needs, and in certain macro conditions, there are three areas that Red Hat is trying to address on a thematic level:
- Grow customers’ revenue base
- Protecting existing services, systems and brand through cybersecurity
- Simplify how they can remove costs and streamline the process of delivering financial products. By simplifying processes, there can be consistent and highly data-driven situations, which result in better customer experiences for banks
Digital banking is all about having the right software architecture that continuously allows rapid delivery of applications, code, and data. Together, these institutions should be given the ability to have it developed, tested, deployed and scaled.
Would you say that DBS Bank’s approach to open banking can be applied to other banks in the region?
Benjamin: Yes, definitely. It is not just about the technologies that they are applying, but also the way they are applying it within the business, and how it is changing the way they work.
Banks such as DBS in Singapore and Macquarie Bank in Australia are recognising that APIs and mastering these APIs for open banking is a critical part in fostering the open banking ecosystem – these include being agile, deploying the cloud, using modern native technologies from Red Hat to apply technologies that can help their institution be lean.
All this, while thinking ahead about where they need to be in the next 12 months.
Red Hat is helping banks replace internal legacy applications systems that are not productive or are a constraint to their architecture.
With advance solutions, these institutions can utilize powerful technologies that will allow Red Hat to further enhance the digital experience.