Covid-19’s push on digital banking
The presence of the Covid-19 pandemic has changed the socio-economic landscape of businesses, as it alters the way we socialise, work and live. In the centre of this change lies digital banking. Prior to the pandemic, Malaysia was well on its way to evolve this sector with the Exposure Draft on Licensing Framework for Digital Banks. With the deadline to respond to consultation papers on this framework extended to June 30, 2020, industry observers ask: Is the revolution still on? Has Covid-19 affected anything? BizHive investigates:
There has been no better time to extol the virtues of digital banking than today.
Giving customers the ability to access all their financing needs from wherever they are and whenever they want to is perhaps what Malaysia needs during a time where Covid-19 fears are at the top of their minds.
The proof is in the pudding: Banks in Malaysia are reporting an increase customers using its digital banking facilities.
Take Standard Chartered Bank for example, with its range of self-service requests through its digital banking channels. The bank’s clients in Malaysia, Singapore and India can now make most of all available service requests via Online Banking and the Standard Chartered Mobile app (SC Mobile). This capability is expected to be rolled out in the rest of the Bank’s Asean and South Asia markets later this year.
Banking service requests, which have been traditionally done through visiting a branch or calling into the contact centre, have been given a new digital lease of life.
According to Standard Chartered Malaysia head of retail banking, Lai Pei- Si, over the last two years, number of Standard Chartered clients who are digitally active has doubled and currently, 40 per cent of its customers in Malaysia are active users of SC Mobile.
“One in five of the total service reque st s w e receive from our customersarealreadyperformed online,” she added.
“We expect this figure to rise rapidly as we expand the number of services available online and from the growing number of customers switching to digital banking due to the pandemic.” This trend tallies with the fact that Malaysia leads other countries in Southeast Asia in the usage of mobile/digital wallets at 40 per cent, ahead of the Philippines ( 36 per cent), Thailand ( 27 per cent) and Singapore (26 per cent). According to a Mastercard Impact Study 2020, Covid-19 that led to wide movement restrictions had driven momentum in Southeast Asia towards the digital economy by necessitating rapid adopt ion of ecommerce, digital payments and preference for online activities.
The report indicated that even as countries in the region start to ease the restrictions and prepare for a ‘new normal’, some of the trends and habits formed in response to the pandemic would likely remain.
Nearly half of the consumers surveyed in Malaysia reported an increase in online shopping during the period.
Other online activities also saw heightened interest, such as surfing the Internet for news and entertainment (75 per cent), online video streaming (57 per cent), social networking (55 per cent) and home delivery of food or groceries ( 50 per cent).
Additionally, about 64 per cent of Malaysians said they will conduct online shopping in the same frequency as currently or before the pandemic, even after restrictions are lifted.
Malaysian consumers also shiftedto otherpaymentmethods other than mobile/digital wallet, such as contactless debit cards ( 26 per cent) and contactless credit cards (22 per cent), while cash usage declined 64 per cent since the beginning of the Covid19 pandemic.
An ever- evolving industry
All these trends point to Malaysians’ appetite for digital services, more so encouraged by Covid-19. How do regulations catch up?
Towards last year- end, Bank Negara Malaysia ( BNM) issued the Exposure Draft on Licensing Framework for Digital Banks that forms part of the series of measures adopted by the bank to enable innovative application of technology in the financial sector.
This fol lows its plan to issue up to five licences to qualified applicants to establish digital banks to conduct either conventional or Islamic banking business in Malaysia.
BNM said the exposure draft outlines the proposed framework for the licensing of digital banks to offer banking products and services to address market gaps in the underserved and unserved segments.
Such digital banks were expected to offer meaningful access to and promote responsible usage of suitable and affordable financial solutions to financial consumers, it said.
“The bank has adopted a balanced approach to enable admission of digital banks with strong value propositions whilst safeguarding the integrity and stability of the financial system as well as depositors’ interests, taking into account that such digital banks have not operated in a full financial and economic cycle, ” it said.
In the wake of the Covid-19 pandemic, BNM has announced that the deadline to respond to consultation papers on the digital banking licensing
“We expect this figure to rise rapidly as we expand the number of services available online and from the growing number of customers switching to digital banking due to the pandemic.” Lai Pei- Si, Standard Chartered Malaysia head of retail banking
framework has been extended to June 30, 2020.
Meanwhile,inotherinitiatives, the central bank earlier this week issued a policy document on Electronic Know-YourCustomer (e-KYC), which aims to accelerate and streamline practices of industry players in their adoption of e- KYC technology, the online process of identifying and verifying individual customers.
“The adoption of e- KYC technology by the industry is in line with the bank’s efforts to facilitate greater digital offerings of financial services,” it said in an accompanying statement.
“This is expected to pave the way for greater innovation in the financial sector, including endto-end offering of digital financial services for customers.”
The e-KYC initiative enables the digital on- boarding of customers to occur anytime and anywhere.
With implementation of eKYC, a majority of customers no longer need to visit the physical premises of a financial service provider to open an account.
In addition to increased cus tomer convenienc e , the digital on- boarding of customers enabled by e-KYC also lowers cost for both users and providers.
This can also help increase competition in the financial sector over the long term.
The policy document seeks to promote the safe and secure application of e- KYC technology in the financial sector by clarifying desirable outcomes in the use of e-KYC and sets out best practices, as well as parameters to ensure security and integrity of the on- boarding process for customers.