The use of cloud computing is rapidly increasing across Southeast Asia, and Malaysia is no exception. The country’s cloud computing industry is projected to grow to US$3.7 billion by 2024, and the financial services industry is expected to be a major driver of this growth.
Cloud technology in financial services is becoming increasingly popular for a number of reasons. Firstly, cloud technology can help financial institutions reduce costs, as when data and applications are moved onto the cloud, users can avoid the high costs (and significant resource effort) that result from maintaining their own data centres and IT infrastructure. And these costs are not insignificant, with our customer insights highlighting that a tier-2 bank in Malaysia can expect to see a reduction of up to 60 per cent in core banking infrastructure resource costs by using a cloud core banking platform like Mambu.
Another benefit of adopting cloud technologies is that it can help financial institutions improve their agility and flexibility. By using cloud-native, next-generation technology, financial institutions can quickly and easily scale their operations up or down as needed, which is essential in an industry that is constantly changing and evolving. Our research suggests that neobanks using Mambu’s platform have seen 26 per cent higher revenues over a 3-year period when compared to customers using other solutions in the market.
Cloud can also help financial institutions improve their security, with cloud providers offering a wide range of security features that can help financial institutions to protect their data and applications. The implications also extend beyond data security here; the optimisations offered by a cloud-native solution mean operations become smoother, and unplanned downtimes across cloud-hosted applications are down by up to 70 per cent.
In addition to the benefits mentioned above, cloud technology can also help financial institutions to:
- Improve customer service by providing 24/7 access to banking services.
- Launch new products and services more quickly.
- Expand into new markets rapidly.
- Reduce their environmental impact.
Navigating challenges
Despite the many benefits of cloud technologies, there are still some challenges that financial institutions need to overcome before they can fully adopt this approach. One challenge is the lack of skilled cloud professionals in Malaysia. Another is the need to comply with strict regulatory requirements. However, the potential benefits of cloud are significant, and financial institutions that are able to overcome these challenges will be well-positioned to succeed in the future.
The five new Malaysian digital bank licence winners are likely to drive adoption of cloud in Malaysia in the short term, with at least two of the five winners deploying core banking on cloud (using Mambu). With these new banks being digitally-focused, we expect most others may likely utilise cloud as well. These banks will act as critical ‘experiments’ for next-gen tech and cloud, and may push incumbents to innovate at pace, with cloud becoming an essential component of any digital transformation strategy.
Bank Islam’s Be U is a response to the new digital banks coming to market, and a lot of traditional banks will likely look to revitalise digital services in a similar way, or extend their business models through other offerings such as banking-as-a-service (BaaS) and/or embedded finance, which will also require the agility that cloud provides.
How Can Financial Institutions in Malaysia Leverage Cloud Technology?
There are a number of steps that financial institutions in Malaysia can take as they consider taking a leap into the cloud. These include:
- Conducting a thorough risk assessment to identify the risks and challenges associated with cloud adoption;
- Developing a clear cloud strategy that outlines the goals and objectives of cloud adoption;
- Working collaboratively with the right tech-enabled providers that can meet the specific needs of the financial institution;.
- Implementing a phased approach to cloud adoption to minimise disruption and de-risk migrations; and
- Investing in training and development for employees to ensure that they have the skills and knowledge to use cloud-based technologies.
By taking these steps, financial institutions in Malaysia can successfully leverage the huge potential of the cloud and reap the many benefits that this technology has to offer.
Cloud is a rapidly growing technology that is transforming the financial services industry across the Asia Pacific region. Financial institutions in Malaysia that are able to adopt next-gen cloud technology will be well-positioned to succeed in the future.
Banks that are lagging behind in terms of digital transformation must ensure they have a solid plan in place to transition to next-gen cloud technologies, or risk losing market share as the new generation of digital banks gains greater consumer confidence. Consumers in Malaysia today increasingly expect to be able to manage all aspects of their lives with a few clicks on their phones, so financial institutions need to ensure they’re meeting customers’ expectations if they don’t want to be left behind by the new breed of banks.
The adoption of cloud technology is a strategic imperative for financial institutions in Malaysia, and in doing so they can improve their efficiency, agility, security, and customer service.
By Rohan Tripathi, Regional Director, Customer Value, Mambu APAC
