The Association of Southeast Asian Nations (ASEAN) is ushering in a new era of economic growth. By 2030, the region is forecast to become the world’s fourth-largest economic bloc, with an estimated 70% of new economic value coming from digitally enabled platforms. Driving this market expansion is a rapidly growing middle class and its demands for financial services and other digitally enabled commerce, from travel reservations to food delivery and ride-hailing.
As ASEAN adds 125,000 new users to the internet daily, experts see opportunities for regional banks to forge partnerships to modernize their existing infrastructures and better serve their customers’ evolving needs.
Here, Effendi Azmi Hashim, Managing Director of Kyndryl Malaysia and Indonesia, discusses the secular trends impacting the ASEAN banking sector.
How have banks embraced generative artificial intelligence (AI) in ASEAN?
Though we see varying economic maturity levels across the region, there is a growing investment in generative AI. It is unlike any other disruption the banking industry has seen, and there is an appetite for deploying this technology to help generate maximum business value. Countries like Singapore — global technology hubs and hotbeds for startup incubators — are far more open to experimentation and ahead of the adoption curve. In the coming years, we expect emerging markets such as Malaysia, Indonesia and Thailand to gain momentum in this area.
What should banks keep in mind as they embark on their AI journeys?
AI is no longer a futuristic concept — it is already automating customer service interactions and optimizing complex business processes. But the integration of AI is more than just a technological upgrade — it is a cultural and organizational shift that requires new skills, mindsets and ways of working. As AI adoption accelerates, the complexity of IT estates grows and requires robust management strategies to ensure seamless integration and operation.
Every organization — especially banks — needs to seek greater clarity on why they want to use AI and the expected outcomes. Otherwise, it could simply be a case of a hammer looking for a nail. A clearly defined AI roadmap helps ensure stronger governance and more responsible use. As banks manage huge volumes of sensitive customer data, they will need expert guidance on the security constraints and regulations surrounding their adoption of AI.
How can banks stay on top of their sustainability goals while being profitable?
Banks urgently need to be conscientious of the impact generative AI will have on their carbon footprints and pivot their operational strategies toward sustainability. But this can happen only when banks can collect, measure and report the energy consumption patterns tied to generative AI across their facilities, buildings and datacenters. To achieve their sustainability goals, all companies should begin integrating sustainability data into their business decisions and invest in technologies that provide greater visibility into sustainability metrics.
What is driving the resurgence of cross-border remittances in ASEAN?
Money is traveling across borders more than ever before. Southeast Asia is a cultural melting pot as there is a constant flow of migrant workforces across the region and beyond. Workers sending money to their families back home has been a long-standing practice. But today, banks are heavily focused on analyzing cross-border remittances to crack down on money laundering and other financial crimes. In the face of heightened scrutiny, banks rely on technologies like AI and Machine Learning (ML) to detect, manage and prevent cyber breaches to provide their customers a smooth cross-border payment experience.
What are the most significant growth opportunities for banks in ASEAN?
As cyber threats become more prevalent and sophisticated, banks are increasingly required to operate in a highly regulated environment that directly impacts productivity, capital and growth. Penalties for non-compliance or customer data breaches through digital banking are exceptionally high in countries like Malaysia. However, these challenges also present opportunities for technology companies to build trust and confidence as they help financial services customers design and build modern IT systems and manage their risks.
And while Kyndryl’s latest State of the Mainframe Modernization Survey shows that banks and financial institutions that traditionally rely on mainframes are unlikely to move off the platform entirely, they are transitioning to hybrid IT environments to get the added benefits of cloud architecture. With the onshoring of regional datacenters, there are potent opportunities for IT services providers to help banks scale their resources dynamically — not only to comply with emerging data security regulations but also to handle peak transaction volumes and reduce the costs associated with legacy applications.
¹ Google, Temasek, Bain, Fulfilling Its Promise | The future of Southeast Asia’s digital financial services, 2019
² World Economic Forum, Digital ASEAN
