Understanding what digital banking needs

Banks and businesses alike are eagerly awaiting the announcement of the digital banking licences with Bank Negara Malaysia reporting it will announce the decision in the near future.

Malaysia is only the second country in ASEAN to offer them and these licences will enable non-banks to provide consumers with traditional banking services. This accompanies the rise in unconventional banking since 2020. For instance, the proliferation of buy-now-pay-later as a solution to cash flow issues now strongly rivals conventional credit services, with the added bonus of reduced if not zero interest for a specified period of time.

This by no means suggests that traditional banks will be phased out, but instead asserts that banks have to incorporate digital solutions as effectively as possible to remain both competitive and relevant. Although the digital transformation process of the banking industry is well underway, with 46% of banks who embarked on this journey in 2020 believing that they are more than halfway through the process, there is still much work to be done. Digitisation within the banking industry must go beyond merely incorporating technology in order to appeal to consumers who now have a variety of options for financial services and solutions.

Looking ahead with future-proof technology

If the past few years could be summed up in a single word, that word would be ‘unpredictable’.

In an industry as sensitive to uncertainty as banking, stable use of innovative technology is key to reassuring consumers that their finances are in safe hands. That is why it is absolutely essential that as banks begin to incorporate more technology into their operations, they similarly choose future-proof technologies in their journey towards digital transformation.

The COVID-19 environment has created greater consumer demand for accessible, simple, connected (live-time) financial services. Indeed, the increased adoption of cloud and software-as-a-service (SaaS) models in insurance and retail segments prove that digital banking is the future of finance. Transitioning towards cloud banking is consequently crucial to addressing the fast-changing customer needs whilst simultaneously increasing the sustainability and resilience of the banking sector in Malaysia.

Cloud computing technology assists the banks in providing the most appropriate service in a way the customer demands. Banks see huge potential for cloud technology to make their systems faster, more nimble and responsive to the needs of their customers. Consumer banks can develop cloud-based tools to quickly introduce new features in mobile banking apps or detect fraud.

Additionally, lenders could use the cloud to process loan applications and analyse underwriting decisions for everything from mortgages to corporate borrowing.

An example would be Möbius, Silverlake Axis’ flagship cloud and digital native e2e digital banking platform. The technology brings the benefit of cloud native, digital native, operating models and platforms – all of which would help banks improve their productivity and reduce IT operating expenses.

Seamless transition to a disruptive business model

Digital banking transformation does not merely allude to new, innovative technology. After all, putting conventional banking services on an app does not make a transformation. If traditional banks want to remain competitive among non-bank alternatives, then the business as a whole has to undergo a fundamental change in mentality to reap the benefits of new technology.

Banks need to take both internal and externally oriented actions. The introduction of new technology would inevitably require training and upgrading of skills internally. Employees must understand how the technology works and what benefits it brings to the table. Likewise, the bank also needs to collect and analyse data to understand how the technology is best used to benefit its customers. It is only once this cultural reset has been undertaken that the bank can maximise the potential of its investment and claim true transformation.

However, the difficulties of implementing digital banking transformation does not end here. The banking industry is highly regulated and thus rules, and compliance to them, creates significant challenges on the road to digitisation. As a result, the digital banking technology provider a bank chooses to partner with is key to making the transformational process move as smoothly as possible.

Digital banking transformation is by no means a simple process, but it is a necessary one. As the banking industry becomes increasingly competitive amidst the introduction of non-banks with digital banking licences, traditional banks must look to digital solutions to remain relevant among consumers.

The transformation requires innovative and forward-looking uses of technology that will not only enhance customer experience, but also remind their customers why conventional banking services are preferential to their non-bank counterparts.

Written by: Andrew Tan, Group Managing Director, Silverlake Axis

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