Cloud: Transforming Southeast Asia’s financial services industry

This article first appeared in Digital Edge, The Edge Malaysia Weekly, on July 26, 2021 - August 01, 2021.
Cloud: Transforming Southeast Asia’s financial services industry
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In the face of lockdowns and stiff competition from digitally native and agile financial technology (fintech) players, financial services companies across Malaysia have awakened to new opportunities and an urgency for change. 

The race to digitise

With the current volatile market conditions, financial services players are fast realising the need to ramp up their business agility, innovation and resilience, with digitisation as the means against disruption. According to the Nutanix Enterprise Cloud Index (ECI) report, the majority of financial services respondents (78%) are looking to build and scale IT more strategically following the pandemic, with top priorities being increased control over IT resources as well as greater speed and flexibility to meet business requirements.

As financial services institutions (FSIs) look to secure their own futures amid uncertainties, the expectation remains that the sector will need to capitalise on emerging technologies to drive agility, resilience across their operations and innovative new products and services that address consumer demands.

In fact, FSIs are facing increasing pressure from customers to offer a digitised financial service experience, especially in Malaysia and other countries across Southeast Asia. In fact, research indicates that an overwhelming 78% of Malaysian consumers are likely to open a financial account online, and FSIs that do not facilitate a completely digital account opening experience could lose up to 40% of their business.

The case for hybrid cloud

FSIs now find themselves at a crucial inflection point: lead in innovation or lag behind. As organisations look to navigate a highly complex and rapidly evolving landscape while carving out a competitive niche for themselves in the digital economy, many are seeking greater flexibility and speed — and they are turning to the hybrid cloud for their needs. ECI research indicates that more than 86% of FSI respondents have identified hybrid as the cloud architecture of choice, owing to the increased agility, cost savings and scalability it offers.

As cloud adoption matures across the FSI industry, companies are realising that a single cloud infrastructure, be it private or public cloud, may be insufficient for their pricing, location, performance and availability needs. More companies (56%) are thus looking to ramp up their hybrid and multi-cloud mix in the coming months, to maximise the flexibility and benefits that various cloud service providers can offer.

This acceleration of hybrid cloud comes at an opportune time as well, as Malaysia’s digital banking race heats up. All eyes are now on Bank Negara Malaysia to issue five hotly anticipated licences by 2022, with one of the stipulated requirements being that applicants build their technology stack on the cloud.

Beyond the potential digibank applicants, however, the FSIs across the payments, credit and remittance segments also stand to leverage the cloud for innovation and gain a competitive and economic advantage against disruptive fintech firms.

Propelling innovation across Asean’s financial services sector

Hybrid cloud already has a strong track record in enabling innovation across Asean’s FSI sector. In Malaysia, cross-border payments hub Tranglo was able to successfully scale its business and manage a fast-growing consumer base through the use of a hybrid cloud.

As Tranglo’s business grew at an exponential rate, the flexibility and agility of the hybrid cloud platform enabled the company to scale its computing, storage and networking capabilities easily. This positioned the company to optimise productivity, enhance overall resilience and reduce IT costs by 50% — all while charting plans for expansion.

A new player in the local buy now, pay later (BNPL) segment, IOUpay is tapping the speed and agility of multi-cloud to enable instant credit approval services for consumers. The rising demand for BNPL across the region has skyrocketed over the course of the pandemic, and cloud will continue to play a crucial role in enabling providers to deliver these services at speed and scale, while enabling financial access and inclusion for consumers.

InvestKL CEO Muhammad Azmi Zulkifli reaffirms this need. “Technologies such as the cloud will be game changers. We will continue to see cloud adoption transform and upgrade the FSI sector, allowing key players to innovate and build better digital solutions right here in Malaysia. This opens the door to many exciting opportunities, creating a flourishing market and favourable ecosystem to thrive in,” he says.

“The FSI sector will play a significant role in the transformation of many other industries, so we must continue to accelerate. Greater KL (and Malaysia) is well on track to position itself as a leading financial hub and a top investment destination in Asia.”

The simplicity that the hybrid cloud provides enables FSIs to easily navigate and streamline complex data management processes. This ensures that the cloud can be easily run and scaled, with significant time and cost savings for IT teams. Organisations are thus freed from laborious and time-consuming tasks to focus on driving strategic core competencies such as enhancing the overall customer experience.

Utilising the cloud, MaxMoney, a local exchange and remittance service provider, improved customer service with quicker digital service response times that have enabled its service agents to tend to more customers each day.

Similarly, major Indonesian Islamic bank BJB Syariah was able to increase microservice delivery by over 10 times on the cloud, enabling faster time-to-market in addressing customer and business needs. 

Future-proofing the financial services sector 

The way forward is clear — to succeed in the digital era, FSIs will need to be as agile and open-minded as their customers in their use of technology, which is set to drive everything from the creation of new business to accelerating innovation. This will be crucial in granting FSIs a competitive edge over other players.

Regardless of how the business landscape evolves in the future, the financial sector’s upgrade is well underway. Its new-found focus on technology points to an appetite for innovation that is likely to extend well beyond the current pandemic or disruptions we find ourselves in. To ensure the momentum continues, the hybrid and multi-cloud must remain top of mind for any IT strategy in this space, especially as Malaysia’s FSIs look to position themselves for the future.


Avinash Gowda is the Malaysia country manager for Nutanix, a US-based cloud computing company