Fintech’s biggest winner – the consumer

Banks fear the large tech companies such as Alibaba more than they do the fintech start-ups. - Reuters

Banks fear the large tech companies such as Alibaba more than they do the fintech start-ups. - Reuters

IT is true that there is some level of hype surrounding fintech, not unlike the dotcom boom of yesteryears.

But that aside, the beauty of fintech is that it is going to result in consumers getting faster, cheaper and easier to use financial services. Who doesn’t want that? Here’s a sample of the kind of consumer benefits the fintech revolution is likely to bring about to consumers in Malaysia and we should see some shoots of these innovations in 2017.

Note that some of these innovations are being developed by fintechs independently, or in collaboration with established financial institutions or by the institutions themselves. As one senior digital officer of a large bank explained to me recently, it is thanks to the fintech movement that banks are dedicating more resources to digital intiatives. Also to be noted is that banks fear the large tech companies (such as Facebook, Amazon, Alibaba and Google) more than they do the fintech start-ups.

This is probably why we will see more collaborations between banks and the big tech firms, beginning in the area of payments. In any case, here’s why the consumer – both individuals and corporations – should be heralding fintech.

Cheaper remittances

Charges for cross border transfers are on a downward spiral. In fact, a global race has began to provide cheaper, faster and safer cross border remittances.

Just recently, Malaysia’s largest bank Malayan Banking Bhd (Maybank) launched a digital remittance service in Malaysia with global player Western Union. The service will run through Maybank2u mobile banking app, enabling customers to transfer money to more than 500,000 Western Union agent locations in over 200 countries and territories. Even before Maybank’s launch, there is local firm Merchantrade Asia, which provides a service called eRemit which offers something similar.

Then there are the fintechs, seeking to drive costs down even lower, by providing matching services to parties wanting to transfer funds. The idea is for both sides to enjoy better exchange rates than what banks and even money changers offer. Homegrown start-ups like MoneyMatch are creating their own platforms to match individual buyers and sellers of currencies. They are likely to ramp up their service to cater to the SME market which do a lot of cross border transfers in the normal course of business.

There are also global fintechs which target this space and which will be reaching our shores soon. UK-based TransferWise, which began in 2011 and today moves US$10bil a year through its platform, plans to launch in Singapore and Hong Kong after starting its Japan business in last September. Telcos are also inching into this space, considering they have a vast existing customer base to offer remittance and forex services

Robo advisory

This is where software is meant to bring investment advice to the masses in a cheap and efficient manner. Sort of bringing the private banking suite to the masses. Will it work? Why not, if it means giving basic, cheap and easily accessible advice for those willing or interested in investing small amounts of money.

The platform provider though would have to gain the confidence of investors and prove they can deliver on decent financial advice and returns for investors. This space is going to get more traction as the Securities Commission (SC) is close to releasing the guidelines for parties interested in applying for a licence to operate robo advisory services in Malaysia. Among the more notable robo players in mature markets are Betterment (which hit an asset under management figure of US$5bil last July) Acorns (which offers an app targeted at young investors, allowing users to deposit small amounts in a brokerage account that automatically buys a diversified group of exchange-traded funds) and Nutmeg (that allows an investor to play around with an account without any real money).


Digital innovations are having a significant impact on the insurance sector, largely because of its very consumer focused offerings. In Malaysia, it is still in its nascent stage although a few start-ups have been making some inroads. Among the services that digital insurance platforms are seeking to offer are insurance comparison services for areas such as travel, car and health insurance products and platforms that seek to provide customers with the ability to buy insurance products directly, cutting out the middlemen and brokers. Some are seeking to be more collaborative.

Consider GetCover Sdn Bhd which will soon launch GetCover, a free mobile application that allows users to buy motor insurance directly from insurers. It is expected to be the first of its kind in the market.

GetCover’s aim is to leverage on the efficiencies of digital distribution channels to benefit end-consumers.

The idea is to make it easier for consumers to research insurance products available in the market and for providers to streamline operations and save distribution costs.

Peer to peer lending

If you were an SME looking for debt funding to grow your business, you are in luck. Coming soon will be six technology-based platforms that have been licensed to match investors with SMEs looking to raise debt. All six will be quickly seeking to build their portfolio of borrowers and this can only be good news for SMEs, who now no longer have to rely on banks (that sometimes tend to avoid the smaller sized loan segment).

SMEs also now have a better option than turning to unlicensed money lenders or loan sharks. A few banks are believed to be backing some of the P2P players, which should boost the sustainability of these platforms. It is left to be seen if these platforms will attract sufficient number of investors, such as high net worth individuals.

Watch the fintech sandbox

As we know, the fintech space is a highly regulated one. Regulators will play a key role in the success or failure of fintech initiatives. In this regard, a close eye ought to be kept on the sandbox that Bank Negara Malaysia will be starting soon. Companies selected to participate have a high chance of getting legitamised to run their fintech offerings, although there’s nothing to stop those not participating to later apply for a licence to operate. The idea of the fintech is to see how these fintech operations impact the market and from it clearer rules will emerge for regulators to impose on players.

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