The next step in digital banking


With improved user experience, digital banks can address the many pain points associated with banking. The digital banks should not try to emulate traditional banks but instead build on their unique strengths. — Image by freepik

IT has been five years since digital banks first appeared in Asia’s most famous financial centres — Hong Kong and Singapore — but their impact has not been as big as expected.

Despite securing many customer accounts, deposit bases are relatively small compared to conventional banks while profits remain elusive.

Digital banks appear to be making greater inroads in other South-East Asian countries like Indonesia and the Philippines.

A less developed financial system and a burgeoning population with many more potential customers who fall within the underserved, unbanked or underbanked segments, are among the main factors supporting digital lenders’ growth in these countries.

What about middle-income, modestly-populated Malaysia?

After some delay, Boost Bank, GXBank and Aeon Bank, have finally started digital banking here.

Boost Bank CEO Fozia Amanulla says the consortium comprising Axiata and RHB positions itself “at the forefront of embedded banking, seamlessly integrating with Malaysians’ daily routines.”

Response has been positive and Boost Bank is monitoring the status of its pioneering embedded app, which was launched for the public on June 6, she adds.

Fozia says the embedded feature allows Premium Wallet customers to open an account through a two-step process.

“Our primary focus is to provide a seamless customer journey. Ensuring customer satisfaction and robust operational resilience are key benchmarks for our team,” she tells Star Biz7.

She says being the only digital banking consortium merging fintech expertise with a bank for now, users will benefit from innovative financial solutions delivered with the agility of a fintech, yet receive the reassurance and reliability of a bank.

“In the broader Asian markets, sustainable models that leverage ecosystems have proven successful and Boost’s unique position as an incumbent fintech with a comprehensive ecosystem and proven scalability meets all criteria for a thriving digital bank,” she adds.

With over 11 million Boost app users, more than 630,000 merchant touch points across Malaysia, and over RM4.4bil in financing disbursed in Malaysia and Indonesia, Boost Bank is well-positioned to serve new customers, Fozia says, while leveraging on the Boost ecosystem, including partners and Axiata’s wider network.

Getting the basics right

Hitts Technologies Sdn Bhd executive chairman Kong Khai Yeng believes that fundamentals and basics count first and foremost, if the digital banking concept is to succeed.

“Our infrastructure must be reliable and secure. Digital banking and all other online banking activities require a stable internet line and speed. Digital banking cannot work if the Internet is (always) down or disruptive.

“Banks should also have an effective call centre that operates 24/7 and where calls are attended to quickly,” he says.

Kong played a key role in helping with the design of the inter-bank messaging protocol known as MEPS as well as being involved in the design and development of the ATM system and online real-time credit card system in Malaysia.

He believes “it will still take some time” before digital banks can be fully accepted by the public.

“Telcos and banks should come together to develop an integrated security system, at least to draw up rules of operations for a more controlled environment. Hopefully, the banking landscape in Malaysia will continue to evolve to make it more secure.

“In any case, it is good to keep some physical cash at hand as Plan B,” he says.

Systech Bhd executive director Datuk Derrick Hooi is a bit more optimistic saying that while it is true some countries have not done too well, inspiration can be drawn from others like China.

“Giants like Alipay and WeChat Pay have revolutionised the banking and payments landscape by offering seamless and integrated digital financial services,” Hooi says.

He says Malaysian digital banks should target specific markets.

“They are uniquely positioned to serve tech-savvy and younger customers who prioritise convenience, speed and personalised services.

“By concentrating on this demographic, digital banks can carve out a niche that traditional banks may find challenging to address due to their legacy systems and traditional operational models.”

He feels digital banks should not try to emulate traditional banks but instead build on their unique strengths.

“This means embracing a tech-first approach, continuously innovating and staying agile to meet the evolving demands of their target market.”

StashAway Malaysia country manager Wong Wai Ken goes a step further in his optimism.

“With digital banking, the conventional bank may well fade into the background,” he says.

“With improved user experience, digital banks can address the many pain points associated with banking. Providing seamless and responsible access to credit would allow users to afford necessities such as cars and homes, as well as aspirational lifestyle options.”

Only time will tell how these views pan out.

For now, it’s crunch time for these new digital boys in order to prove the naysayers wrong.

This article first appeared in Star Biz7 weekly edition.

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