What is a digital ecosystem?
A digital ecosystem is where firms collaborate with one another to create new products and services for their target customers via modern technology. Some of the well-known businesses that have orchestrated their own digital ecosystems are Amazon, Apple, and Microsoft. From this, we can see that digital ecosystems are usually led by market leaders, who are bringing fast-paced changes in their respective industries.
These changes include the finance industry, where financial institutions are now required to participate in digital ecosystems to remain relevant in the market. Banks and financial institutions that fail to evolve and position themselves in the digital ecosystem will risk losing competitive advantage and becoming irrelevant in the market. Some examples of banks and financial institutions that have orchestrated digital ecosystems are DBS Bank and Westpac.
Core functionalities of digital ecosystems
As digital ecosystems continuously grow, there are many driving factors behind this development. The financial and Fintech industry must identify these factors and carefully leverage on them to either be involved or build their own digital ecosystem.
Here are some of the main components that allow digital ecosystems to constantly evolve, and how the financial, as well as the Fintech industry, can benefit from them:
- Application Programming Interfaces (APIs)
Let’s learn about the basics first. The foundation of digital ecosystems is built on Application Programming Interfaces (APIs), which acts as the connector of networks. It allows for different programs to work together in various ways through data access, extended functionality, simplifying complex processes, and even security.
With APIs being one of the best ways to obtain and exchange data, they allow multiple apps and services to work together, making APIs the key structure of digital ecosystems. Financial institutions can even choose APIs that are programmed specifically for financial operations. . Financial institutions that seek to successfully participate in the digital ecosystem will have to integrate the use of APIs into their existing technology stacks. This will also enable them to actively interact with other participants in the digital ecosystem, building strong value propositions and competitive advantages.
- Open Banking
Powered by APIs, open banking is also one of the main technologies that enables digital ecosystems. It is not only about sharing data, but it is also about absorbing data from other service providers. In open banking, banks will allow third-party financial service providers (TPPs), like Fintechs and non-bank financial companies, to gain access to customers’ personal and financial data. Of course, this will be consented by the customers themselves. Third-party financial service providers will then analyse this data to provide more personalised services to their customers.
For consumers, open banking and sharing data creates competition among banks and financial institutions, leading to improved products and services. It also empowers them by giving them greater control over their own data, which increases their awareness of how banks and financial institutions are handling their private information. For businesses, open banking allows them to better understand their customers’ preferences and spending habits, building a customer-centric approach. Businesses will adapt and change the way they operate to seize opportunities and gain a competitive advantage over those who do not have similar data. With Bank Negara Malaysia’s efforts to advance the development of an open data ecosystem, we foresee that it will play a significant role in the future of Fintech and the overall finance industry in Malaysia. Financial institutions would also gain noteworthy advantages by taking up open banking, with one of them being direct participation in the digital ecosystem.
- Artificial Intelligence (AI)
Artificial intelligence (AI) has become one of the most powerful tools that is being implemented across multiple industries to optimise processes and enhance customer experiences. Their integration in our lives is so seamless that we may not notice, ranging from search engines, chatbots, smart assistants, self-driving cars etc. In the Fintech industry, AI is used in multiple areas, such as fraud detection, credit assessment, alternative financing, customer support etc. Here at JurisTech, we have Juris Mindcraft, our AI-powered solution that helps banks and financial institutions transform their digital landscape.
Juris Mindcraft is an automated Machine Learning (autoML) and artificial intelligence (AI) platform that uses advanced machine learning (ML) techniques to build powerful AI models. An effortless AI that enables enterprises, especially banks and financial institutions to make intelligent business decisions and gain insights to solve real-world problems.
Integrating AI into daily tasks and processes has made businesses understand the importance of leveraging advanced technologies, such as business analytics and machine learning, to conduct operations. With the ability to collect and analyse large amounts of data, financial institutions will be able to further understand their customers and deliver personalised services. In the long-run, utilisation of AI and machine learning will aid the digitisation of financial institutions and help them gain a competitive advantage. Those that successfully implement AI/ML into their daily operations will find it easier to step foot into the digital ecosystem and directly allow businesses to collaborate with existing participants. For example, Maybank has been using big data and artificial intelligence to generate customer-specific insights and offer personalised solutions, in response to competition from big-techs. Concurrently, Maybank is building their own digital ecosystem while fostering digital trust with users.
- Cloud Computing
When we mention ‘cloud’, one may instantly think of the fluffy bundle in the sky. Well, in the context of digital ecosystems, cloud computing is a type of service that can be in the form of infrastructure, software, or even a platform. Many ecosystem players use the cloud as a platform to exchange data and collaborate. Traditional methods of collaboration would need significant capital and investments, IT infrastructures, maintenance, as well as long-term planning. The cloud counters this by offering a faster, cheaper, and more simplified and innovative business platform, while enabling businesses from around the world to partner and share data within a virtual data centre.
It is inevitable that cloud computing plays an important role in building a digital ecosystem in all industries, especially the Fintech industry. Many Fintechs see cloud computing as an effective way to store data and access advanced applications, such as artificial intelligence and machine learning (AI/ML). On the other hand, some financial institutions, due to its positive impact on efficiency and cost-effectiveness, will adopt cloud computing as a business platform. One of the example of a financial institution leveraging on cloud computing would be Bank Islam. They partnered with Mambu, a SaaS cloud banking platform that acts as an engine and a process orchestrator. This move from Bank Islam has enabled them to step into a digital ecosystem consisting of global financial brands. For consumers, the adoption of cloud computing would birth a more enjoyable banking experience due to increased efficiency and accuracy. While for businesses, cloud computing would be stepping foot into a digital ecosystem, increasing productivity, flexibility, and innovation.
Transitioning into digital ecosystems is no longer a choice, but a strategy that must be adopted in all industries to gain a competitive advantage. As these ecosystems develop and evolve, businesses must actively identify, adapt, and adopt components that will better position them in the market. Understanding and utilising APIs, open banking, AI, as well as cloud computing are the first steps for businesses to involve themselves in, or even build, their own digital ecosystems.
JurisTech is a leading Malaysian-based Fintech company, specialising in enterprise-class software solutions for banks, financial institutions, and telecommunications companies in Malaysia, Southeast Asia, and beyond.
As one of the Fintech pioneers in Malaysia, our vision is to enable financial inclusion for the financial industry with our diverse range of solutions. Check out our latest AI-powered technology Juris Mindcraft, which helps banks and financial institutions to transform their digital landscape.