KUALA LUMPUR: Digital banks should focus on the unserved and underserved segment, as a survey conducted by KPMG in Malaysia has revealed that consumers are ready and willing to embrace digital banking.
KPMG in Malaysia’s head of financial services Adrian Lee said the changing socioeconomic landscape had altered customers’ money management and spending patterns as well as the way businesses are run, with the mode of payments and channels of financial management also changing.
“As customers and businesses seek alternatives to safely run operations, the potential is great for digital banking to be the next success story for the financial services sector in Malaysia.
“Digital banking presents a value proposition poised to help companies and individuals get back into the economic saddle, and financial services providers that design its products around customer needs will stand out the most,” he said in a statement today.
He said it was widely anticipated that Bank Negara Malaysia (BNM) will see a large number of applicants for the five digital bank licences in Malaysia due to the lower entry requirements in minimum capital and significant market opportunities locally and in the region.
“Given the emphasis BNM has placed on financial inclusion, the successful applicants will be the ones that demonstrate how their products and services will help the underserved and unserved segments rebuild themselves financially,” he said.
BNM is due to announce its application guidance for the five digital banking licences following a public consultation of the updated exposure draft on the licensing framework for digital banks, which is due to conclude on June 30.
Meanwhile KPMG financial services advisory partner and head of financial risk management Yeoh Xin Yi said a successful digital bank should incorporate three areas into its strategic blueprint – understanding customer behaviours and expectations, improving financial literacy and inclusion, as well as being an active platform.
Yeoh said banks needed to incorporate advanced analytics when understanding customer preferences and behaviour from a historical as well as a forward-looking point of view.
She added customers that fall into the unserved or underserved segments were more likely than others to have a profile that fell short of the conventional bank’s credit criteria when financing is sought.
“Digital banks can view this as an opportunity to expand their reach into untapped markets while also delivering on BNM’s aspirations for financial literacy,” she added.
Yeoh said digital banks should be an active platform in the economic life cycle of the segments they serve and they can do so by forming an ecosystem or being part of an ecosystem that is relevant to their users, where the users will be immediately plugged into a host of services within the digital bank platform.
“For a micro-enterprise, for example, the platform would enable receiving payments digitally, purchasing materials via a marketplace, having micro-savings and micro-deposit auto functions, analytics for its business and personal finance, and basic micro-financing that are commensurate with their financial behaviour and capacity as a micro-enterprise,” she added. – May 13, 2020, Bernama
