"In the new economy, the earth is flat; but following the pandemic, it has become flatter." The pandemic has accelerated digital transformation. Businesses need maintain normal operations with zero contact, and must maintain their user experience to strengthen customer adhesion. In this new era, the financial industry should consider migrating to the cloud to quickly expand its advantages to overseas markets and create a new international vision.

The rise of the new economy

"We often say that with incorrect cloud deployment, you won’t even make it out of the starting gate."Robert wang, Managing Director, Hong Kong & Taiwan AWS, which has the largest market share among international cloud service providers, has many unique ideas when talking about the cloud. Wang previously served as General Manager, Asia-Pacific for Intel and General Manager of Acer’s self-built cloud application business unit. Having been in the technology industry for over 20 years, he believes that the era of the new cloud economy is imminent, and industry leaders should break away from their old thinking to understand the new opportunities.

Wang explained his view that industry structure has undergone great changes over the past few decades. In the past, the cost of technology investment was very high, creating economies of scale. However, with the more recent emergence of internet and cloud technologies, we are now an era in which “bigger is not necessarily better” and “the fast fish eats the slow one.” New economy companies that can flexibly adapt to new technologies will have the opportunity to target global markets.

One of the characteristics of new economy business models is de-intermediation. Direct use of the internet and social platforms can bring brands closer to the public without layers of agents or distributors. How is this different from the old economy? Wang said that in the past, to operate cross-border services, you had to set up a local branch office and local server, and even different service program designs for local markets. However, successful companies using the new economic model have grown from 0 to 100 almost overnight. The cross-border model, which used to require local computer rooms, is no longer economically beneficial. Most of these companies have chosen to deploy services on the public cloud and can cross borders immediately. This is why Gogoro and Appier, two major startups in Taiwan, have become AWS customers.

Another characteristic of the new economy, Wang said, is that because brands directly interact with the masses, bottom-up demand drives the market, which also means that viral leaps in popularity occur more often than in the past. For example, the system almost always crashes when Taiwan Railways sells tickets during the Spring Festival, and sales volume immediately increases by 10 times during the “Double Eleven” promotion, or when consumers make quintuple voucher reservations in the banking system. IT deployment is often too late to respond to these instantaneous bursts.

Wang said that the key in such cases lies in how to quickly respond to the market. In the old era, managers responded based on their past experience and judgments. Business models usually tended to be fixed and repeated. Therefore, products usually followed monthly, quarterly, and annual cycles of launch, growth, maturity, and fade. Now, however, consumers are pursuing explosive popularity, so companies must have the capacity to respond to such needs in real time.

All of this is already happening. Consumer-facing financial institutions cannot ignore this situation either, but the core technology they use is outdated. Some systems have been used for decades. They lack business agility. Leaders and teams are inefficient in problem resolution and decision making, and customers are also prone to loss. The cost of maintaining outdated IT systems and computer rooms is high, making it difficult for IT teams to satisfy the modern needs of internal stakeholders and customers.

Wang believes that cloud service providers will assist financial companies to migrate their outdated core systems to the cloud. This means that finance companies will no longer need to spend money and manpower to build and maintain data centers. Cloud service providers can also target clients with the pay-as-you-go model. With value-added applications such as big data analysis and AI, like building blocks, you can add as much as you need, which greatly reduces initial IT investment. At the same time, it can improve business agility for quick launch of microservices.

Giving employees the technology gene

Companies aiming for digital transformation must start introducing artificial intelligence, blockchain technology, cloud computing, and big data. But it’s not just the software, but managers’ thinking IT departments, and business departments who need to change, so that “more employees get the technology gene.”

Many financial institutions in Taiwan have already taken actions to accelerate their digitalization. DBS Bank has launched many transformation programs and policies. For example, in order to give employees understanding and appreciation of the importance of digital transformation, promote top-down cultural change, and break through common concepts of transformation, in 2020, it held an internal AWS Deep Racer self-driving race car competition, encouraging employees using educational and entertaining methods to build AI operational logic and thinking, experience machine learning, and embrace cloud innovation. Cathay Financial Holdings also promotes fintech development to enhance its value, and organizes annual fintech events and summits in cooperation with AWS.

In Taiwan, finance has been the first three top industries for fast cloud adoption. It is indeed more rigorous and complex than other industries in terms of regulations and technical requirements, and it still faces many challenges in cloud migration, especially for data security.

Wang said that AWS also includes outposts to handle certain scenarios. He said, “in time, it is true that most enterprise applications will migrate to the cloud – but not all services can do so. Some, such as those that are highly sensitive to latency, or those based localized data, may not be suitable.” For example, high-frequency trading (HFT) in the securities industry is a typical situation unsuited for the cloud. This type of transaction can only accept transmission delays in the milliseconds. The closer the host is to the exchange, the better, so this scenario requires deployment on the ground. In addition, outposts can play a role in real-time monitoring of production lines or process alarms in manufacturing, sending alarms directly from the factory without the delay. “Data location is also a requirement,” he said. Regardless of government or corporate governance requirements, the data must be stored in one's own country. Taking Taiwan as an example, AWS currently does not have an exclusive service geographic region. In this situation, outposts can be provided to institutions needing to store data in Taiwan, while also expanding usage and storage capacity.

Smart multi-channel solutions

AWS has helped HSBC, National Australia Bank, and Standard Chartered Bank migrate to the cloud. Wang said that cloud service providers can help financial institutions build smart multi-channel solutions to meet the needs of personalization in the mobile era. Nowadays, consumers are getting used to real-time access to information through any device anytime, anywhere. Therefore, they also expect the financial industry to provide customized customer service.

Therefore, the bank of the future will move from the ground to the cloud, or even to a hybrid model. AWS uses the breadth and depth of the public cloud to assist physical, online, and mobile banks to interact with customers to establish smart multi-channel solutions, allowing them to collect, store, and analyze data safely and securely. With chatbots and services such as Amazon Alexa, banks can not only expand their customer reach, but also provide a digital experience that meets user expectations. For example, in order to enable financial service institutions to automate the customer service process, AWS provides a variety of AI services to help businesses analyze user sentiment through voice calls, capture data from customer communications, and analyze data to discover what is important to users and meet the specific needs of different customers, and then push communications through customized channels. This also allows them to generate 360-degree customer views, thereby increasing the usefulness of their digital applications.

The Economist has posited that data is the new oil, and it needs to be mined to earn returns. The global financial industry generates more than 2.2 million terabytes of new data every day, but not all companies have the ability to interpret this data. To make good use of the data, financial service providers must discover insights to respond to customer needs, starting from customer interactions, pricing, market positioning, risk, value, performance, security, and compliance. The cloud will help the financial industry make good use of cloud services and tap new business opportunities from this “new oil.”