MALAYSIA’S aspiration to become a regional data hub may not be that far-fetched although big data analytics (BDA) adoption is still in infancy stage.
For more than five years, various government officials have spoken about the need to push the BDA adoption that drives the digital ecosystem of the country.
This is because BDA is central to growing other digital technologies such as artificial intelligence (AI), the Internet of things (IoT) and advanced automation.
Even the country’s Shared Prosperity Vision 2030, which was crafted by the government two years ago, saw the public and private sector cooperation as an important step to drive the adoption of BDA in the country.
After years, the light at the end of the tunnel can finally be seen.
This comes after Bank Negara announced that it is issuing five licenses for full-fledged digital banks, which is expected to happen after seven months.
But would digital banks shift the BDA adoption at a faster pace?
It is important to note that digital banks’ purpose is not only to fully digitise all traditional banking purposes.
According to Bank Negara’s licensing framework on digital banks, the institutions would be required to focus on serving the underserved and unserved market segment. These include the B40 population and the micro, small and medium enterprises (MSMEs) so as to boost sustainable economic growth.
Generally, traditional banks are not inclined to give credit to the B40 and the MSMEs because these groups may find it difficult to give proof of salary or revenue of their business to qualify for loans.
Digital banks would be required to serve this group as they would have the data to support the criteria of obtaining credit.
However, with less data available, digital banks would find it difficult to boost financial inclusion.
As such, tech expert Yao Jing, who is also the head of business development in Singapore and Malaysia for OneConnect Financial Technology, says digital banks would have to convince the private sector to get customer consent to link the billions of data they have in store.
“For instance, data on the person’s credit history can be used for loan application. It can also be data on your shopping loyalty points or even power consumption data that the bank can analyse on how much to lend.
“There must be infrastructure in place to allow legit sharing of data for the digital ecosystem, with part of the infrastructure coming from the government, ” he adds.
It is worthy to note that data of consumers alone can be converted into meaningful insights that are valuable for companies like the digital banks. Even for the retail sector, big data helps in target marketing to sustain customers. Meanwhile, telco players that have millions of data of customers can run analytics for retailers that may want to enhance their targeted marketing campaigns.
Having said that, the services sector in Malaysia will contribute 64% of total data-driven spending, with banking and telecommunications contributing nearly a third, according to Malaysia Digital Economy Corp’s (MDEC) commissioned study by IDC.
Last week, the study revealed that the BDA market in Malaysia is expected to grow to US$1.9bil (RM7.86bil) in 2025, from US$1.1bil (RM4.5bil) in 2021.
In the long run, George Lee, who is the general manager for business development at OneConnect, says there will be more data available that would allow digital banks to customise financial products based on their customer needs.
He explains that the launch of new products by digital banks would be created within weeks compared to traditional banks, which would take a much longer time.
“The availability of data would also allow customers to open a bank account or obtaining loan at a much faster pace with digital banks compared with traditional banks, ” Lee says.
In Malaysia, he believes that the future of banking landscape would change in the next three to five years, as the role of physical branches would be to provide value-added services only.
“In the next three to five years, I believe there will be zero bank counters in a bank’s physical branch. You would see coffee tables for customers to sit down for relationship managers to explain comprehensive financial products and value-added services, ” Lee explains.
In the forseeable future, Yao believes that big financial institutions would not expand their physical branches amid the accelerated digitisation.
However, he says, expansion of physical branches would only continue for smaller financial institutions that do not have enough coverage across the country.
Currently, in Malaysia, tech enablers are fully digitalising customer experience for banking to enhance digital banking capabilities that would serve small and medium enterprises (SMEs) more efficiently by reducing processes and operating costs.
Last year, fintech players like OneConnect has fully digitalised the SME loan experience of RHB Bank customers. This consist of RHB Financing (SME) mobile app for customers, a sales app for the bank’s relationship managers and a seamless SME loan management website.
It was Malaysia’s first AI-powered SME financing mobile app, which automates onboarding process where SMEs only need to submit two scanned documents – MyKad and a bank statement – via their mobile phones to apply for loans.
OneConnect has also partnered with another top-five local bank in Malaysia to develop a mobile banking app, making this the first electronic Know-Your-Customer (e-KYC) solution approved by Bank Negara.
The app is the first in Malaysia launched by a bank to deliver a digital experience without having to visit any physical branch amid the ongoing pandemic.
With the faster pace of BDA adoption and the new digital banks coming onboard, Yao says the financial industry would see more competition, declining operating costs and higher revenue for banks due to an array of financial products offered.