Digital banking efforts intensify

IN a 58-page report by Mckinsey & Company entitled “The last pit stop? Time for bold late-cycle moves” released just earlier this month, the international management consulting firm warned that “a decade on from the global financial crisis, signs that the banking industry has entered the late phase of the economic cycle are clear”.

“Growth in volumes and top-line revenues is slowing with loan growth of just 4% in 2018,” it says.

Emerging market banks, according to it, “have seen return on tangible equity or ROTES decline steeply, from 20% in 2013 to 14.1% in 2018, due largely to digital disruption that continues unabated”.

Going by this alone, it is no wonder why banks have been stepping up efforts on the digital front.

Within Malaysia, banks have been pouring money into this area, some more others, as customers increasingly move away from over-the-counter services towards digital transactions.

“It’s a do-or-die situation for the banks,” quips one industry player.

In Malaysia, Maybank group CEO for community financial services (CFS) Datuk John Chong Eng Chuan points out that the lender currently enjoys the pole position in the digital scene but admits that there is more work to do.

According to him, some 66% of all mobile transactions in Malaysia go through its Maybank App while some 52% of internet banking transactions go through its Maybank2u.

Earlier this week, the bank announced that Maybank’s digital wallet MAE (Maybank Anytime, Everyone) which was launched in March, had surpassed the 1 million user mark, ahead of its initial yearend target of 100,000 users.

MAE, built on the Maybank2u mobile application, according to Chong is the “first and only e-wallet in Malaysia which comes with banking convenience and offering a next-generation mobile experience” including making it possible for the customer to open a banking account without having to step into a branch.

In terms of transaction volume, the most popular feature within MAE is QRPAY, which can be used at more than 300,000 merchants nationwide, according to him.

There are also other features like Send Money, Request Money and Send Reminders.

MAE is currently only available for use in Malaysia.

Although consumers in South-east Asia reportedly as recent as last year still preferred to use cash or bankcards , the trend of using e-wallets has certainly gained traction in the last one year.

There are now more than 20 local licensed e-wallet companies which are in the race for the same pool of customers.

Specifically, five Malaysian banks and as many as 28 non-bank entities as of last year, have e-money licences issued by Bank Negara, which enable them to issue e-wallets.

Most are not active in the e-wallet space and are focused instead on loyalty and petrol cards. Still, more are expected to enter into this space for fear of missing out.

Already there

“Technically, we are already there,” Chong says, when asked whether Maybank would be interested in a digital bank licence of which the framework by Bank Negara will be issued for industry consultation before the year is out.

A digital bank is essentially a bank with zero physical presence and where its customers and clients conduct all transactions online.

In March,bank Negara stated that it was looking to issue up to three digital or virtual banking licences, exciting the local financial market.

Since then however, Bank Negara governor Datuk Nor Shamsiah Mohd Yunus has been quoted as saying that

“there won’t be a number for licences issued”.

Bank Negara’s announcement came at the same time as Hong Kong’s move to issue three licences of this type to a combination of compafirms, nies partnering finance firms name Ely Standard Chartered, BOC Hong Kong Holdings Ltd and online insurn ance company Zhongan Online P&C Insurance Co.

Singapore has also since jumped on the bandwagon.

In Malaysia however, the announcement is particularly signifil cant because the central bank has not issued any new banking licences for many years now.

Having said that, the move to encourage pure online banking venne tures is very much in line with the fact that fintech innovations are slowly but surely seeping into the daily lives of people not only here but globally, providing cheaper and more often, easily accessible financial serseveral vices – notwithstanding several issues, including security-related ones.

Closer to home, India , China, South Korea and Japan have ventured into

this digital banking model.

Japan, for instance, went for the zero branch strategy as far back as the 1990s with the setting up of Japan Net Bank.

There have been other Internet banks there since then such as Seven Bank which has been providing financial services via ATMS across 7-Eleven convenience shops in Japan since the early 2000s.

In South Korea, the then-chair of the Financial Services Commission, Yim Jong-yong gave initial approval for the setting up of the country’s first two virtual banks back in 2015.

K Bank was its first, starting operations in April 2017 followed a few months later by kakaobank, which started with some 300 billion won (Rm1.069bil) in start-up capital.

Back to Maybank, Chong says the lender has some six million active Internet banking customers with 10 million subscribers in total.

“And our mobile growth has been growing about 150% year-on-year.”

“Ultimately it is about focusing on the customer, everything falls into place then.”