Malaysia’s digital banks a disruptor but will also bring collaboration opportunities
[KUALA LUMPUR] While Malaysia will soon have five digital banks in operation in the coming months, industry observers said these newcomers are unlikely to replace traditional lenders any time soon.
Instead, there will be plenty of opportunities for collaboration as they both serve very different market segments, said participants at a banking and finance summit in Kuala Lumpur on Tuesday (May 23).
Some speakers even went as far to say that the two types of institutions will eventually converge, given how the banking sector will become more digitalised to serve the growing needs of customers.
Matthew Chen, the chief executive officer of OneConnect Financial Technology, said the future generation of banks will play a new role in becoming a facilitator or connector to orchestrate these collaborations, with the help of technology.
“I don’t think banks will ever disappear, but you will see more platform-level kinds of collaborations. Platforms have to be open, and not closed up in silos like in the old days,” he said.
Asked for his views on the global digital banking scene, he noted that many companies are not performing well.
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He predicted that most digital banks in markets such as Australia, Hong Kong and Singapore will not survive.
The ones that do, however, will most likely acquired by conventional banking groups in search of a quick win.
“Digital banking in future will no longer be the case (because) every single bank must be digital in order to survive,” added Chen.
“There won’t be any differentiation between a digital bank and a conventional bank in future.”
Veteran banker Vaseehar Hassan Abdul Razack, a former chairman of RHB Islamic Bank who moderated this session, concurred.
He said most banking groups in Malaysia are convinced that it may be easier to acquire a digital bank at a later stage, instead of reinventing themselves internally to accelerate the digitalisation process.
Nisha Paramjothi, the head of digital banking at managing consulting firm Kearney in Singapore, said digital banks have a major role to play in promoting financial inclusion, such as ensuring people from all backgrounds have access to savings products and sufficient insurance coverage.
She believes that the existing playing field is big enough for both traditional and digital banks as their business models are quite different.
Therefore, there are ample opportunities to work together to produce the best products to serve the market.
Ravi Kittane, a partner for financial services at EY, said the current banking landscape is at a transformative moment that was predicted by Microsoft co-founder Bill Gates back in 1994.
At the time, Gates had said that while banking was necessary, banks themselves are not.
Kittane noted that while Malaysia is currently about 92 per cent banked, a sizeable proportion of the population is underserved by the banking industry, and this in turn opened up opportunities for disruptions by the new players.
“It’s estimated that a quarter of Malaysians are working in the informal economy and the gig economy, and there is a huge underserved market there,” Ravi said.
Eric Quah, the Malaysia country manager of American software company ServiceNow, said digital banks can stay relevant by leveraging technology to provide better and faster after-sales services than the conventional banks.
“At the end of the day, it is about making a difference to the customers. Customer service will be the key differentiator,” he said.
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