Question

Malaysian Banking Industry Pushes Fintech Development

by Fintechnews Singapore April 21, 2017

Banks in Malaysia are pushing fintech development as they seek to harness innovation and technology to improve the financial services.

The trend is largely led by the Malaysian central bank, Bank Negara Malaysia (BNM), which has been deploying efforts to modernize the domestic banking industry.

In particular, the central bank’s Financial Technology Enabler Group (FTEG) was launched in June 2016 to formulate and enhance regulatory policies to facilitate the adoption of technological innovations in the Malaysian financial services industry.

The FTEG is part of BNM’s commitment to support innovations that will improve the quality, efficiency and accessibility of financial services in Malaysia and is comprised of cross functional group within BNM.

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One of the committee latest efforts is the “Fintech Hacks,” an initiative launched earlier this week that seeks ideas from the public on possible improvements to financial services.

It aims to identify pain points in the delivery as well as the consumption of financial services, and solicits ideas using the application of technology to address the gap.

Malaysia has been one of the most advanced and favorable jurisdictions in Southeast Asia when it comes to fintech. The nation set up a regulatory sandbox last year to allow startups and banks to experiment with new products and business models in a safe environment. The regulatory sandbox is open to all fintech companies including those without any presence in Malaysia.

Datuk Muhammad bin Ibrahim, the current governor of BNM, has encouraged financial institutions to “embrace fintech as an opportunity.”

In view of the above, you are required answer the following questions;

a) Critique the above article and assess the future of the domestic banking sector in the light of the ever changing environment.

b) Analyze the financial performance any local bank of your choice and evaluates its future prospects.

a) Evaluate the different strategies the Bank of your choice in part ‘b’ is employing or should employ in the light Fintech development?

Answer 1

a) The above article shows the far-sightedness of the Malaysian policy-makers as it has clearly embraced change and is encouraging everyone around to use it to pave their way to a brighter future instead of treating technology as a disruption that holds them back. The first strong move of BNM was the the launch of FTEG which had one clearly stated purpose: the technological advancement of their financial services.

The latest move called 'Fintech Hacks' has now reached out to the end-users - the public for ideas on possible improvements in the sector. This is understandable since the consumers are sometimes the best critics of a product or service.

b) A local bank that has currently been having very stabilized and rationally growing policies and financial performance is the HDFC Bank. Through its sophisticated websites and mobile applications, it is reaching out to the tech-savvy new and urban generation while also ensuring enough number of physical branches to ensure that those who are technologically- handicapped have little problems in transacting. A very efficient labor force is helping them a lot on this path to success. It has the shortest processing time and an ever ready group of employees to tackle problems of consumers.

c) All local banks in this area are very backward in their fintech orientation. Although that it is not a surprise since this is primarily a labor-intensive economy and so introduction of technologically advanced products might render many people unemployed which would work detrimentally to the benefit of the nation.