Small and medium-sized enterprises are often the hardest hit when crises emerge, and the COVID-19 pandemic has been no exception. This deep and fast-paced transition of the sector has, in turn, placed immense pressure on financial services providers to adapt to meet their SME customers’ changing needs.
A recent EY survey of SMEs in 16 markets around the world, including Malaysia and five others in Asia-Pacific showed businesses in the region are more likely to consider switching their main financial services provider than their global peers. The results also highlighted key trends around the use of fintechs and digital-only banks, growth in digitisation of SMEs business and several ancillary services banks can target in the coming years to address SMEs evolving digital needs.
The survey findings reveal the growing need of Malaysian SMEs for simple and faster turnaround of financial products and solutions in the current business landscape. It also indicate the SMEs are open to tapping into other ancillary services via banks that support their digitalization and transformation efforts. This signals an opportunity for banks in Malaysia to introduce new, tailored offerings beyond their conventional ambit to help businesses transform, leverage the digital economy, gain broader access to markets and grow sustainably.
Speed and nimbleness are of the essence. The COVID-19 pandemic has accelerated Malaysia’s landscape for acceptance of digital banking, and we expect this will translate to more competitive and innovative digital products and services targeting the SME community.”
- SMEs in Malaysia hold an average of 4.5 business banking products, compared with the 3.5 global average and 4 in Asia
- Pacific. The vast majority of SMEs in Malaysia (69%) have a relationship with just one or two financial institutions.
- 73% of SMEs in Malaysia receive financial services via a traditional bank with branches, the highest rate among all 16 markets in the survey and compared with the 65% average for Asia-Pacific. By comparison, Hong Kong, another market in Asia-Pacific, had the lowest rate of SMEs that receive financial services through a traditional bank, with 50%.
- 54% of SMEs in Malaysia currently receive services from a fintech or an Internet/telephone-only bank, with 22% saying their main financial institution (MFI) is a fintech or an Internet-only bank. In fact, some markets in the region have the highest usage of fintechs as FIs in the world, with 28% of SMEs in Malaysia saying they bank with fintechs, followed by Hong Kong SMEs with 26% (22% in Singapore). Only 14% of Australian SMEs receive financial services from a fintech, the second lowest rate globally, behind only Canadian SMEs at 13%. While SMEs’ overall satisfaction with their MFIs is high according to 82% of respondents in Malaysia (72% global average), 37% of them are inclined to switch offerings, in line with the 36% global rate, but lower than the 41% average in Asia-Pacific.
- Bank with branches (50%)
- FinTech company (43%)
- Large corporation that traditionally provides non-financial products (38%)
- BigTech corporation (32%)
These figures suggest a significant opportunity for fintech and BigTech companies to further disrupt banking. Concerns from small businesses around their technology transformation pose an opportunity for banks to provide ancillary support services to help SMEs navigate their digital journey.
