This article first appeared in Digital Edge, The Edge Malaysia Weekly on July 26, 2021 - August 1, 2021

Although many credit the pandemic with speeding up digitalisation in most sectors, in truth, it has been going on for years, driven by the tech-savvy millennials and Generation Z who prefer doing everything on their phones.

As these generations began making up a more significant portion of the population, the different sectors, especially financial services, had to react accordingly.

A JPMorgan Chase study on digital banking attitudes in 2020 found that 99% of Gen Z and 98% of millennials use their smartphones to view their account balances, check their credit scores and even deposit cheques.

Despite this, the pandemic was still a shock to the systems of most banks as they had to forego the gradual pace of digitalisation for something almost instant. In fact, when Eric Quah — country manager of software company Red Hat Malaysia Sdn Bhd — spoke to the chief technology officers of several banks, he learnt that even with all their prior preparation, most found it tough to overcome the blow caused by the pandemic.

“The first few months hit most bankers really hard because people couldn’t go to work. Initiatives and projects almost came to a standstill,” says Quah.

However, as soon as the banks regrouped, they reflected on their IT capabilities and pivoted to focusing on their digital services. This was crucial — even when they were operating at a limited capacity during the various Movement Control Orders (MCOs), fewer people visited the branches.

Given the circumstances, Quah says banks are thinking of other ways of engaging customers apart from just managing transactions, which they say people can do on their own using their various gadgets. This is why banks have been beefing up their digital channels, especially for sales activity and attending to customer enquiries, he adds.

Many banks have already adopted eKYC (electronic Know-Your-Customer) measures to verify customers remotely, following Bank Negara Malaysia’s e-KYC guidelines that were announced in June last year.

Quah singles out Hong Leong Bank for special mention in terms of a successful digitalisation programme. A few years ago, the bank realised that to ensure a successful digital transformation, it would need to take charge of the process itself rather than relying on external IT vendors, he says.

“They (Hong Leong Bank’s leaders) built an in-house capability to roll out their banking products and services. Instead of just hiring new people, they also trained their existing staff to have an agile mindset,” says Quah.

Hong Leong Bank has managed to shorten its product development from between six and nine months previously to a few weeks, he adds.

This speeding up has contributed to the bank being able to adopt microservices, which breaks a single application into small chunks. Those small chunks may work independently but they can also work together as applications or be deployed into different application use.

Quah says Red Hat had a part to play in this — its open source software, the company’s flagship product, enabled Hong Leong Bank to create products at a much lower cost.

Open-source software is basically software with source code that anyone can inspect, modify and enhance. The code itself is free of charge but organisations often pay for the support, security hardening and interoperability management provided by Red Hat. “Previously, organisations used to spend millions when they embarked on a project. But with technology advances, banks can start their projects without sizing it up to the full capacity,” says Quah.

It is worth mentioning that open source encourages financial institutions to come up with ideas and fail fast. “In the past, when we embarked on a project, failure was a taboo word,” says Quah.

However, in the digital world, institutions can put many ideas to the test and quickly move on to the next project if it does not work well.

“Again, it ties back to agility, cost, reusability of resources and flexibility to tweak their products and services to adapt to customers’ needs,” says Quah.

Working with clients from the banking sector, Quah sees the importance of technology for banks to innovate and compete.

“Perhaps 15 years ago, a lot of banks just saw tech as call centres. Now, there is a huge mindset shift that technology will be at the forefront in how the bank innovates and offers digital services,” he says.

Thus, banks need to ensure that their operations and IT teams change their mindsets to get with the programme.

“In the past, we used to rely much on humans’ physical work to operate the bank’s infrastructure such as the IT system, so that the industry is not disrupted,” he says, adding that now they are grappling with questions on how to continue to run IT when engineers are not physically available at the data centres.

This is when banks started realising the importance of automation.

Would this affect jobs? Quah does not think so. On the contrary, he says when mundane tasks are automated, it frees up staff time to innovate products and services more quickly.

Also, Quah points out that the rising tides of innovation gave birth to fintech — which disrupts the status quo of banks being the only place for people to go to meet their financial needs. Banks used to be traditional places where conservatism reigned and innovation was rarely seen. Now, banks and fintech companies have found a way to complement rather than compete with each other, he says.

How does Red Hat figure in all this? Quah says the company will continue to focus on three key areas, one of which is the hybrid cloud. The company has to ensure that its customers can run their operations on any platform, whether it is a public cloud, private cloud or third-party cloud service.

Red Hat is also looking into cloud-native development that utilises cloud computing to build and run applications, he says.

Last but not least is automation, which will continue to be its focus in the coming year. “In the past year, automation was the fastest growing portfolio in Red Hat. We see triple-digit growth in our automation products, which help organisations process their mundane tasks.

“Innovation happens at a fast pace. We have witnessed new technology [advancement] in the cloud, 5G, containerisation and Kubernetes. This is what powers the modern social media platforms such as Facebook and Google,” says Quah.

Containerisation, for those unfamiliar with the term, is the packaging together of software code with all its necessary components like libraries, frameworks and other dependencies so that they are isolated in their own “container”, he explains.

“In other words, containers act similarly to putting mini applications into a Tupperware, so you can move it around faster and be nimble without compromising the full suite of applications you may already have in the kitchen.”

This means the software or application within the container can be moved and run consistently in any environment and on any infrastructure, independent of that environment or infrastructure’s operating system. “It’s basically a fully functional and portable computing environment,” says Quah.

Kubernetes, on the other hand, controls the deployment and scalability of the containers. “Containers hold all your items (or codes). Kubernetes act as the cranes and the management system that tucks your containers neatly into rows and stacks, so that you’re able to retrieve what’s yours out of the thousands of containers you’ve built,” he continues.

Quah adds that Kubernetes also provides a systematic way of managing and orchestrating all these containers for their owners, so that they are more organised. “If you change something in your Tupperware, the rest of the kitchen will not be affected.”

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