Hot on the heels of China and India are the rising stars of Southeast Asia. The digital economy in this region could triple in size to be worth $240 billion by 2025, reports TechCrunch.
For Southeast Asia’s 350 million internet users across its six largest countries, their window to the world is in the palm of their hands. Mobile tech is enabling fishmongers, hawkers and market stall owners to become entrepreneurs at very little cost.
But there are unique challenges that these countries face in service delivery, in terms of access, ease of use and scalability. One answer could be in open source innovation, the missing piece in helping these ballooning economies to leap forwards, say experts at open source software leader Red Hat.
More ways to pay
Open source innovation is driving the growth of digital banking in this region, for instance, says Benjamin Henshall, General Manager South East Asian Markets at Red Hat Asia Pacific. “In the last 10 years, the payment options throughout ASEAN have just exploded,” he says.
Grab, for instance, has expanded from ride hailing towards providing a digital payments platform. “In some ways you actually don’t even need cash, depending on the type of trip that you’re doing,” he says. “The company also supports millions of entrepreneurs with loans and insurance services – from SMEs to mom-and-pop shops,” he adds.
Apps have taken over where banks have stopped opening new physical branches, he explains: “particularly in the emerging markets, it is not profitable.” Banks simply cannot afford to maintain branches in rural areas, or across dispersed geographies. “Digital banking is a really critical distribution model to be able to have a high quality, low-cost banking experience for the high growth market in ASEAN,” he says.
This means that banks absolutely must deliver a great digital experience that is consistent, secure, and scalable for hundreds of millions of customers, Henshall goes on to say. “That fundamentally is a software development and delivery issue,” he remarks. This is where open source comes in play, Red Hat’s reliable, open source architecture helps commercial banks to achieve this, he adds.
Case study: Indonesia
Open source innovation is also helping governments achieve scalability, particularly for the financial services and fintech sectors. There is a huge opportunity for Indonesia to develop digital financial services: consumers in the country are “very open” to digital banking, reports McKinsey, and monthly digital banking usage has grown twice as fast over the past three years as other emerging markets in Asia.
But government agencies struggle to provide such services, and often lack the resources and skills to do so. “It’s not so much about buying tech, but really, the adoption and implementation at scale in respective agencies,” explains Rully Moulany, Country Manager for PT Red Hat Indonesia. Considering the “massive geographical scale” of a country like Indonesia, this is no easy feat, he notes.
Against this backdrop, Red Hat is working with the Ministry of Finance as part of their digital transformation journey. One project was with the Directorate General of Treasury (DG of Treasury), helping to scale up financial management and reporting services. By 2020, DG of Treasury projects as many as 384,000 users – more than 54 times its current user base of 7,100. “There is a huge number of users here, it is difficult for some people to comprehend – Indonesia is massive, regional government is massive,” Moulany explains.
The DG of Treasury successfully migrated services over to the Red Hat OpenShift Container Platform, and now uses agile development to build services. This allowed its teams to deploy and scale out flexible services really quickly, enabled by Linux containers.
Let’s talk about cost
Open source innovation offers compelling arguments for emerging economies in ASEAN and beyond. Governments can avoid vendor lock-in – which can mean really expensive licensing fees in the long run, according to Moulany.
The lower cost of development is another attractive factor, Moulany adds – up to 12 percent savings in staff productivity, according to a recent IDC report. This means that IT folks spend less time managing servers, doing routine IT tasks, resolving support calls, and the like.
“And open source innovation also means that software development unfolds at an accelerated pace – from days and weeks to almost a matter of minutes”, he notes, allowing agencies to create new applications quickly to serve ballooning numbers of stakeholders. “The speed that we have seen is tremendous.”
It is a thrilling time for Southeast Asia, with digital services and products cropping up to serve a swelling aspirational middle class. Open source is one cost-effective way to develop quickly and sustainably, shaping the future of this dynamic region.