Disruptive force: Britain is the global capital for fintech, which is shaking up the traditional banking and financial services industry.
KUALA LUMPUR: As the spread of financial technology (FinTech) grows rapidly, Malaysian traditional primary banks’ share of pie in the banking field is slowly taken over by their new competitors.
Malaysian banks lose about 50% of new banking products sales to a competitor, according to the "Customer Loyalty in Retail Banking: Global Edition 2016" report by Bain & Company issued on Friday.
The research found that deposits made up about 55% of purchases from primary banks in Malaysia over the last 12 months, compared to just 22% at competing banks.
With regard to the insurance segment, competing banks’s 36% of most sold products are insurance-related, followed by deposits.
Across the surveyed countries, consumers make products purchases digitally at competing banks at 1.4 times the rate at their primary banks. However, Malaysia is the only country where consumers purchase products more digitally at primary banks.
This is indicated by only 0.9 times purchases in competing banks compared to the primary bank.
The report highlighted that banks in a few countries have been more aggressive in closing branches due to the increased competition and other reasons. Spain and India had the highest proportion of respondents whom experienced a branch closure in the previous 12 months, at 17% and 16% respectively. About 9% of Malaysian respondents indicated that they experienced a branch closure in the past one year.
Bain’s Financial Services practice in Southeast Asia partner Chew Seow-Chien Chew said: “Many banks are missing the giant at their doorstep. It’s easy to say fintechs and technology companies are going after the high-value banking activity, but it’s also the more innovative established players that are winning a disproportionate share.
“The bigger challenge lies in how to organize the transition and instill the necessary changes, both at the frontline and in the back office, to improve how consumers do their banking,” Chew added.
The seventh annual report by Bain & Company surveyed more than 137,000 consumers in 21 countries, including Malaysia.
It found that although primary banks win nearly two-thirds of all purchases on average, those purchases represent mostly new, low-value deposit accounts.
The primary banks usually lose higher-value products to direct banks, FinTechs and technology platforms due to their relatively simple products lines and streamlined user experiences.
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