THEORETICALLY, the largest banks have the most to lose if predictions of digital disruption do come true.
Not only are financial technology (fintech) firms after the business of banks, so too are the digital giants from Google to Facebook to Alibaba, at least going by some predictions.
The jury is still out on how much banks such as Malayan Banking Bhd (Maybank) stand to lose in this digital era. But Maybank, led by its tech-loving group president and CEO, Datuk Abdul Farid Alias, stands out as the local bank that is taking the tech revolution the most seriously.
Consider this: soon after assuming the top position in the middle of 2013, Farid arranged for a group executive committee (exco) meeting to be held at the office of software giant Microsoft in Singapore. For the uninitiated, Singapore is where many multinationals have their Asian innovation centres based. In fact, Singapore is throwing in a lot of resources and effort at building itself to be a global leader in the fintech space.
Back to that exco meeting. Farid recalls, “When I was appointed, the general frame of work was to continue the group’s plan that was initiated in 2010. But at the same time, it was clear to us that technology was increasingly going to have a huge impact on banking.
“One thing I realised very quickly was the threat of digital technology. One of our first exco meetings, comprising 12 key personnel, was held at the Microsoft office in Singapore. The whole idea was that we want to be in that (tech) environment and learn and feel the impact and change to people’s behaviour.”
The results of that brain-storming session include the launch of MaybankPay and Samsung Pay.
MaybankPay is the country’s first mobile wallet payment platform. An extension of this was its partnership with Samsung to roll out the Samsung Pay mobile wallet facility in Singapore and Malaysia.
“From that meeting, we created a division to look after digital, but we went on about doing it without fanfare and kept it low profile.”
Farid says the purpose was to “sieve through the noise and hype” and help devise a strategy, as the general perception was that bankers were not good at this.
The team then went out to touch base with tech organisations from Apple and Google to Facebook.
“Having started to understand digitalisation quite early, we have gotten off to a good start,” he says, adding that there are many streams of ideas on the digital front going on within the group that may be possibly launched in the future.
To put it in perspective, Farid says that in 2016, Maybank2U processed a whopping RM285bil in transaction value, and 60% of the transactions were done via the mobile phone platform.
Despite all the buzz on fintech, Farid does not think that “it is going to disrupt banking the way we think it is going to disrupt”.
“The only way fintech is going to disrupt the industry is when the technology is sufficiently easy for financial institutions themselves to adopt it. In other words, when a financial institution disrupts itself.”
He reckons that financial institutions will eventually disrupt themselves as a consequence of competing with each other.
“I think financial institutions now are sufficiently aware that many of them are testing different things even to the point of testing cryptocurrencies.”
Another reason the impact may not be felt in the very near future is because banking is unlike other industries such as steel.
“The whole intention is how financial services can be offered to customers at the lowest cost possible.
“But banking is not only about doing transactions. Banking deals with trust and to deal with trust, we have to deal with compliance issues like Know Your Customer and the Anti-Money Laundering Act.”
He adds that in banking, there are volatility and liquidity factors to be considered and this requires the banking industry to have all that infrastructure in place.
“That trust can only be given provided the environment is protected from a licensing perspective.”
Citing peer-to-peer funding in China as an example, he says many were caught with losses when fraud was discovered in some cases. “This is one issue technology has not been able to address.
“So while the digital age is here, it is still a bit early and we do not see a major impact in the next two years.”