The rapidly changing landscape of today’s digital world is making “the next normal” elusive for the banking industry. While COVID-19 has cast a blanket over the global economy, this region continues to offer an opportunity for digitally savvy businesses.
Last year, real-time digital payments climbed to 48% in Singapore reported “2021 Prime-Time for Real Time” by ACI Worldwide. Leading financial institutions across the Asia Pacific (APAC) region saw an increase in monthly active user growth for their mobile banking apps. According to the “e-Conomy SEA 2020” report by Google, Temasek, and Bain & Company, it ranged from 5% in Thailand, 17% in Singapore, to 73% in Vietnam.
Along with this, IDC's Fintech and Digital Banking 2025 Asia Pacific Second Edition report noted new competitors such as neo banks and fintechs had entered the market. In Singapore, four successful applicants to run the country’s inaugural digital banks are expected to turn operational by 2022. This complicates the competitive landscape and strains banking systems built over the last two decades.
Banks must evolve alongside their customers
KPMG’s “2020 Customer Experience Excellence Report” highlighted that consumers now have higher expectations of service and demand frictionless experiences. As they shift between digital and physical products, services, and channels, banks will need to rapidly pivot to keep them happy. This requires spending as much or more time shoring up transactional systems as it does on digital applications.
Banks must modernize operations and adopt more agile technologies such as the cloud to keep up with increasing competitive pressures and customer expectations. Such a platform will enable them to improve operational efficiency, collaborate more effectively, and provide a better customer experience.
DBS Bank is a case in point. The bank started its journey way back in 2009 when the industry suffered from low customer satisfaction and a macroeconomic slump caused by the global financial crisis. Setting sights on becoming the bank of choice to customers and employees, DBS had to devise a business plan to regain customers’ trust in the industry.
Among its strategies was to up investment in technology, including investment in a common application stack since it operated across countries and products. By leveraging cloud-friendly platforms like Red Hat OpenShift, most DBS applications can run on commodity hardware, with open system components, and with a high degree of standardization and automation. This has made it easier to ensure rapid creation, stability, customer responsiveness, and management of applications. Since implementation, DBS has reported that it is much more scalable at a lower cost, with operating costs as a percentage of income falling by 40 percent.
Takeaways for making the change
Like every industry, banking is characterized by nuances across markets based on the customers they serve. However, some lessons are applicable across markets.
1. Define your purpose.
Begin with a clear mission. In banking, the emergence of competition from technology companies has made innovating digital products and services critical to attracting and keeping customers. DBS knew it needed to accelerate the development of digital services to stay relevant and modernize its platforms around that goal. By 2018, roughly 80% of DBS’s open systems were already cloud-enabled, and the bank has since expanded its adoption of cloud-native applications. As a result of this practice, DBS has been able to scale massively, contributing to its success and the title of Euromoney’s ‘World’s Best Bank’ for 2021. With a clear objective in mind, DBS made the investments to realize it.
2. Don't disparage technology heterogeneity — embrace it!
Advancements in cloud platforms have made it possible to run a catalog of application and data services without additional operational complexity and cost. It means teams are free to work with the best technology for the job without the operational constraints of the past. The growing standardization found within the Kubernetes community and the broader Cloud Native Computing Foundation (CNCF) is spurring innovation in artificial intelligence, distributed ledger, data streaming, and other technologies. Whether it is Apache Kafka and Apache Camel or Active MQ and Apache NiFi, teams can choose the tools that make the most sense as they adopt event-driven, microservice-based architectures for their digital services.
3. Embrace the cloud.
This point is closely related to the one above. While it may sound a bit old-fashioned, it has proven effective. A recent IDC report commissioned by Red Hat titled ‘Fast-Moving Clouds’ found that 70% of IT organizations will have implemented a microservices and container strategy as a pillar of their multi-cloud approach by 2023. Microservices and modularization more generally amplify digital flexibility, while public and private cloud provide scalability. Both are essential for keeping pace with changing customer demands.
As digital technologies become an integral part of our lives today, banks need to modernize their applications to keep pace and meet the growing demands of their customers. It is not an easy task, however. Solutions must be quick, cost-effective, and easy to use while also encouraging cross-functional collaboration.
Having a centralized system, such as the cloud, allows businesses to check those boxes to provide an exceptional customer experience and ensure they do not fall behind in the digital race. The first step starts by embracing it.
Guna Chellappan, general manager at Red Hat Singapore, wrote this article.
The views and opinions expressed in this article are those of the author and do not necessarily reflect those of CDOTrends. Image credit: iStockphoto/ipopba