ONE of the smaller companies vying for a piece of digital banking in Malaysia is Pertama Digital Bhd, which has teamed up with Indonesia-based Crowdo Holdings Pte Ltd.
Little-known Pertama, formerly known as Sinotop Holdings Bhd, runs a digital court bail system called eJamin.
Its executive director Sabri Ab Rahman says the group has been building its capabilities in the financial technology space.
“The line of business we have now is strategically placed to be a building block for digital banking and through our subsidiary, Dapat Vista, we would be able to collaborate with the public sector for customer acquisition, ” he says.
Aside from its eJamin solution, the group also provides technology to the public sector in the form of Application Programming Interfaces (APIs) and operates the government’s SMS gateway called mySMS and the MyPay coin deposit machines.
However, the digital banking space is one in which larger enterprises are gunning for. These include the likes of Axiata Group Bhd and AirAsia Bhd that already have followers and customers. Will Pertama and Crowdo be able to compete with them for a digital banking licence?
In fact, it has been reported that as many as 40 parties have registered their interest to apply for the licence.
Applications for the licence closes on June 30 and Bank Negara is looking at issuing up to five licences by the first quarter of 2022.
To differentiate themselves, Pertama and Crowdo say the consortium would be focusing their offerings on the underserved and unserved segments.
Pertama director of strategy Saify Akhta says while more than 90% of Malaysia’s population own a bank account – which is among the highest rates in the developing world – a significant portion of Malaysians underutilise their banking accounts thus limiting their usage of other financial services.
“A large portion of the population is underserved. They have bank accounts but transaction activity is sporadic and so financial institutions can’t use their traditional method of scoring to extend services to them in a way that satisfies existing risk frameworks, ” he says.
“Instead of a personal loan, which may promote unnecessary consumption, what Pertama and Crowdo want to offer is ‘productive financing’ where we want to help Malaysians become entrepreneurs and build successful small businesses that would boost domestic economic activities.”
He says they want to offer digital banking services that provide responsible financing that has an economic impact, including initiatives like boosting financial literacy of the underserved segments.
This is where Crowdo’s expertise will be tapped, especially in providing digital banking services like micro-financing to micro, small and medium enterprises (MSMEs).
Crowdo was among the first batch of fintech players to be fully licensed by the Indonesian financial service authority Otoritas Jasa Keuangan (OJK) to provide digital lending services to small and medium enterprises (SMEs).
According to Crowdo co-founder and chief executive officer Leo Shimada, the company is a neo-bank that has provided services to SMEs in more than 30 industries ranging from ride-hailing to farming and fishery in Indonesia.
“The main goal here is to utilise digital innovation to accelerate financial inclusion, especially for the underserved and financially vulnerable such as food or market stall operators.
“Unfortunately, what we see in many developing markets across the region is that people are left behind by both incumbent banks and even fintech. When they do approach banks, they either lack credit history or the assets to be eligible for financing, ” he tells StarBizWeek.
With Crowdo’s artificial intelligence credit-scoring algorithm, Shimada says the company can assess the creditworthiness of those with no credit history, enabling access to financing while educating them about how to benefit from financial products.
“If you go into a relationship with a business owner by charging an exorbitant rate, it will be an unproductive relationship. We are combining technology and education to make sure they know what they are getting into while rewarding them for positive financial behaviour, ” he says.
Boosting the domestic economy has become more apparent due to the Covid-19 pandemic fallout that saw people who lost their jobs due to the pandemic turn to digital platforms to make a living.
So much so that the government has identified the gig economy as a new source of economic growth which would be made part of the 12th Malaysia Plan 2021-2025, further contributing to the gross domestic product (GDP) of the country.
Under the digital banking framework, Bank Negara has highlighted that digital banks are developed with the primary aim of expanding meaningful access to and responsible usage of financial solutions for the underserved and unserved market segment.
A report by the McKinsey Global Institute previously estimated that digital finance would add US$3.7 trillion (RM15.31 trillion) to the GDP of emerging economies in the years leading up to 2025.
Pertama is embarking on an ambitious digital banking journey and vying with the big boys for the slice of the pie. It is worth noting that many parties failed in their venture in providing micro-financing in the past.
One of the reasons, according to Saify, is high financing cost. But he says that could change as technology adoption could reduce cost.