FINANCIAL wellness and digital money management tools have become the forefront of growing market share in the new engagement bank era, and who better to capitalise on that than digital banks?
In fact, a recent Backbase commissioned study conducted by Forrester Consulting found that 64% of Malaysian retail banking decision makers said their company is increasing spending on digital and engagement financial wellness initiatives – the highest figure in the Asia Pacific (APAC) region and even more than Singapore, Japan or Australia.
Backbase is a fast-growing fintech software provider that empowers financial institutions to accelerate their digital transformation and effectively compete in a digital-first world.
This comes following submissions for a digital banking license, which are now closed, with Bank Negara Malaysia (BNM) currently in the process of selecting the lucky five to be granted one in the first quarter of 2022, said a statement on the central bank’s website.
Malaysia’s retail banking sector is now preparing for the onslaught of competition by offering customers a host of new digital features.
According to Backbase regional vice president in Asia Pacific Iman Ghodosi, the window of opportunity for banks to build out their digital offerings is right now and the recent report revealed Malaysians have an insatiable appetite for digital offerings.
“For example, 67% of consumers surveyed said they used their institution’s existing mobile app, 87% believe an excellent mobile app is an attribute they value from financial services providers, and 82% conduct their day-to-day banking via their smartphone,” he said.
The retail banking sector in Malaysia is addressing this demand and ensuring banks can still compete in the digital space against the impending newcomers.
Retail banking business decision-makers interviewed found that:
- 90% said they were planning to or actively expanding their digital money management tools; and
- 88% revealed they were planning to or actively expanding their financial wellness and digital money management tools, with almost half of them saying it was critical.
Digital banks are coming for your customers
According to Ghodosi, the next six months is a critical inflection point in the digital banking space.
“The urgency and focus behind this are clear – Malaysia has five of the hottest digital banks waiting to explode into the banking scene and take market share next year, and the traditional banks are worried,” he said.
“Malaysians want a higher level of customer service and flexibility for the financial services they subscribe to.
“They want to access their personal finances anytime, anywhere, through any channel, and have the necessary tools to manage it. Traditional banks may lose ground if they don’t innovate quickly.”
Now more than ever, Ghodosi opined that it is important for traditional banks to own the relationship with their customers.
“We’ve entered the engagement banking era, an evolution that stresses a one unified platform approach for banking.
“The number one priority in this new era is to completely re-architect the bank around the customer, moving away from siloed technology investments.”
However, progress is not without its challenges and those faced by Malaysian banks were some of the highest in the APAC region.
Of the Malaysian retail banking business decision-makers interviewed:
- 74% said a lack of understanding of customer needs and outcomes is a barrier to their company implementing or further developing digital money management tools;
- 66% said outdated legacy technology challenges their plans; and
- 64% said organisational silos make things difficult.
“Banking sectors in all countries face challenges, but it was surprising that Malaysia’s challenges were higher than average,” Ghodosi remarked.
Financial literacy and protecting the vulnerable
One of the biggest motivations behind increasing money behind financial literacy isn’t profit but the increased capacity banks have for caring and protecting their customers.
Through these new channels of customer interaction, banks can now meet needs they previously couldn’t, by leveraging data analytics, artificial intelligence (AI) and mobile technology to make financial recommendations and improve engagement for users.
Trust in traditional banks in Malaysia is far higher than digital banks and initiatives such as these aim to increase their reputation.
- 64% of retail banking business decision-makers interviewed noted that preventing exploitation of vulnerable and older customers was in their company’s plans when developing such digital tools;
- 62% revealed they planned to assist customers to build better financial habits; and
- 66% are going to offer financial literacy tools.
Additional features that these digital and engagement apps will offer would include spending analysis, scheduling bill payments, advanced pay and income smoothing, automated savings, and retirement planning tools.
“Banks can offer so much value through these engaging digital services, while at the same time collecting valuable data from users,” justified Ghodosi.
“The competition is going to get fierce in Malaysia and that means the most important party, the consumer, will benefit long term. Time and market forces will tell which players will be the winners in the war for engagement in banking.” – Nov 6, 2021
