Digital growth a key theme for banks now

Going digital: A man using an ATM in Shah Alam. The deadline for the application of a digital banking licence is this Wednesday and Bank Negara is expected to issue up to five licences by the first quarter of next year.

PETALING JAYA: Banks are upping their game plan in a bid to safeguard their turf and grow their digital banking businesses in anticipation of fierce competition from the entry of new players.

Most incumbent banks are seen accelerating their digital transformation to remain competitive and capture more customers in the various segments.


To date, only RHB Bank Bhd has announced its partnership with telco bigwig Axiata Group Bhd to vie for a digital banking licence.

The deadline for the application of a digital banking licence is this Wednesday and Bank Negara is expected to issue up to five licences by the first quarter of next year.

CIMB Group Holdings Bhd, a leading Asean universal banking group, is currently strengthening its capabilities to deepen its presence in the digital banking space.

On the strategies and plans that CIMB Group has put in place to further boost its digital banking business, CIMB Digital Assets CEO Effendy Shahul Hamid told StarBiz that there are multiple efforts taking place across the group’s franchise.

“Different business lines across the banking group continue to innovate offerings to customers in terms of enhanced product, user journeys and experience, and digitalised access.

“Our standalone digital businesses such as CIMB Philippines and Vietnam, and the Touch ‘n Go Group are continuing to accelerate digital-only propositions and platform-centric origination.

“We are confident that we have the right strategies and are comfortable with our position, going forward, ” added Effendy, (pic below) who is also the Group CEO of Touch ‘n Go Group.

Effendy Shahul HamidEffendy Shahul Hamid

In terms of CIMB Group’s revenue growth in digital banking for this year, without going into details, he said almost everything in the digital space has been seeing tremendous growth over the years, and the ongoing pandemic has actually accelerated this growth multiple-fold.

Digital adoption has become synonymous with the new norm, he said, noting that the group has seen robust growth indicators in its digital businesses in 2020.

“We expect such digital growth to continue to be a key theme as we move forward, and our efforts around these will be continuously enhanced, ” Effendy said.

On whether CIMB has plans to use Touch ‘n Go as the vehicle to apply for the digital banking licence as widely speculated, he said: “If we do apply for a digital bank licence, firstly, we would apply for it out of Touch ‘n Go and secondly, we would only apply if we can put the right consortium together.

“Where we are right now, we will unlikely apply but we will continue to evaluate opportunities to join forces with the right parties post-submission deadline.”

Meanwhile, in beefing up its digital initiatives, OCBC Bank (M) Bhd CEO Datuk Ong Eng Bin (pic below) said digitalisation is high on the bank’s radar.

Datuk Ong Eng BinDatuk Ong Eng Bin

Towards that, OCBC has channelled considerable amount of money, efforts and time in digital initiatives to support its growing customer base – ranging from non-bank financial institutions, large corporations and small and medium enterprises to the bank’s diverse set of retail customers.

With OCBC’s strong regional connectivity, Ong said it has put together a digital roadmap that invests in digital infrastructure to provide the expected customer experience.

In the second half of this year, he said the bank will be launching its Digital Wealth offerings on OCBC’s Internet and mobile banking platforms “where our customers would be able to invest in unit trusts and convert foreign currency online on their own.”

He also expects Digital Wealth will contribute to a higher revenue contribution from digital banking. In 2019, 36% of OCBC’s wealth revenue came from its digital capabilities, driven mainly by Wealth Trades performed digitally and without face-to-face interaction.

This grew to 39% in 2020 and is expected to see further growth in excess of 50% of wealth revenue in 2021, as more customers perform their Wealth Trades digitally, he said.

“The number of digital transactions by corporate customers, whether service or sales-related, has grown significantly over the course of this year. Over 90% of our consumers’ financial transactions are now performed digitally, ” he noted.

OCBC’s investment in technology and digital capabilities over the years has enabled the rolling out of a wide range of digital solutions for its customers – in account opening, payments, collection, cash management and more, said Ong.

“Our customers were able to transact digitally during the movement restriction periods without having to venture out to our branches to meet their relationship managers.”

Meanwhile, Deloitte Malaysia innovation and regulatory leader Justin Ong (pic below) felt that the upcoming digital banking new entrants is not an unexpected event by the banking industry and regulators.

Justin OngJustin Ong

“We observed and found that current incumbents have embarked on various digital transformations over the past years, either to transform their internal operations or in ways to better serve clients.

“Yes, there will be some impacts on existing banks but I would like to argue that the impact will be minimal over the next three years, as the new players will need time to build customer trust to acquire new customers, ” he added.

To counter the foreseen trend, he said banks are urged to continue or even accelerate digital transformation to stay competitive and enrich customer experiences.

In terms of challenges to existing banks with the entry of these new upcoming non-bank players, Deloitte’s Ong said they could bring strong value propositions to start and run the banking business.

One of them is the organic customer segment that a non-bank has in its current ecosystem, he said.

“A case in point, some non-bank applicants might bring with them hundreds of thousands or even more than a million customer base in Malaysia. This will give a strong momentum for a newly established bank to acquire and retain new customers.

“Consequently, the customer acquisition and retention costs will be lowered, making it financially viable to serve the underserved and unserved segments, where banking players find challenging, ” he added.

On whether there is a need to have a proper monitoring and assessment framework, which should be introduced to ensure a healthy growth and competition in digital banking, he said financial stability and consumer protection are the top agendas of the central bank.

The number and the timing of digital banking licences granted has to be a delicate balancing act, he noted.

“It needs to encourage innovations to further drive financial inclusions while maintaining healthy competition with the incumbents.”

He said Deloitte observed that there are various simplified regulatory compliance requirements introduced in the Bank Negara Digital Banking Licencing Framework.

“This is a welcome move by the applicants, as it is critical to protect digital banks’ viability, by keeping the compliance cost to a lower level during the foundational phase.

“The last thing we would like to see is the exit or closure of digital banks, which could be disruptive to the industry and the wider financial system in Malaysia, ” he said.

Currently only a handful of companies namely AirAsia Group Bhd through its card-based money app BigPay, tech firm Green Packet Bhd and the Sarawak state government have openly stated their interests to vie for a banking licence.

But as the deadline approaches, more names are starting to surface. State-owned energy company Petroliam Nasional Bhd (Petronas) is the heavyweight in the ring, after it emerged alongside other names such as Genting Bhd and New York Stock Exchange-listed Sea Ltd, which is partnering infrastructure conglomerate YTL Corp Bhd, going by the recent reports.

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Digital banking , growth , CIMB , OCBC , Ong Eng Bin ,


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