According to KPMG’s latest survey, Malaysian consumers are ready and willing to embrace digital banking. The study revealed that 77 percent of the 1,220 respondents in Malaysia believe digital banking is the next evolution in financial services, and 82 percent are already using internet banking functions of their banking service providers.
According to Adrian Lee, Head of Financial Services at KPMG Malaysia, the changing socio-economic landscape has altered customers’ money management and spending patterns as well as the way businesses are run with the mode of payments and channels of financial management also changing.
Lee also said in a statement that the recent customer behaviours in both retail and commercial sectors during the pandemic have evolved in support of digital banking services.
“As customers and businesses seek alternatives to safely run operations, the potential is great for digital banking to be the next success story for the financial services sector in Malaysia,” he pointed out.
He added that digital banking presents a value proposition poised to help companies and individuals get back into the economic saddle, and financial services providers that design its products around customer needs will stand out the most.
Bank Negara Malaysia (BNM) is due to announce its application guidance for the five digital banking licences following a public consultation of the updated exposure draft on the licensing framework for digital banks, which is due to conclude on 30 June 2020.
“It is widely anticipated that BNM will see a large number of applicants for the five digital bank licenses in Malaysia due to the lower entry requirements in minimum capital and significant market opportunities locally and in the region,” Lee added.
Furthermore, given the emphasis BNM has placed on financial inclusion, the successful applicants will be the ones that demonstrate how their products and services will help the underserved and unserved segments rebuild themselves financially.
Meanwhile, Yeoh Xin Yi, KPMG’s Financial Services Advisory Partner and Head of Financial Risk Management said a successful digital bank should incorporate three areas into its strategic blueprint which are understanding customer behaviours and expectations, improve financial literacy and inclusion and lastly be an active platform.
“Malaysian consumers are clearly ready and willing to embrace digital banking,” Yeoh said, but it is up to the players to make the crucial step in establishing a customer-first model for digital banking.
Banks need to incorporate advanced analytics into understanding customer preferences and behaviour, from a historical as well as a forward-looking point of view. Information and data are key to providing customers with better products and services, thereby translating to economic value for the digital bank.
She also said that customers that fall into the unserved or underserved segments are more likely than others to have a profile that fall short of the conventional bank’s credit criteria when financing is sought.
Hence, digital banks can view this as an opportunity to expand its reach into untapped markets while also delivering on BNM’s aspirations for financial literacy and inclusion.
“Ideally, we would seek to have customers achieve higher financial literacy through the provider’s ability to advise, recommend and encourage positive financial behavior,” Yeoh added.
She said digital banks should be an active platform in the economic lifecycle of the segments it serves by forming an eco-system or be part of an eco-system that is relevant to their users, where the user will be immediately plugged into a host of services within the digital bank platform.
“For a micro enterprise, for example, the platform would enable receiving payments digitally, purchasing materials via a marketplace, micro-savings and micro deposit auto functions, analytics for its business and personal finance, and basic micro-financing that commensurate with their financial behaviour and capacity as a micro-enterprise,” Yeoh explained.
In conclusion, by leveraging on advanced technology, digital banks can fill the void that is within our economic environment and address the pain points of the unserved and underserved in both retail and non-retail segments.