Banks and Insurance Companies: Go Digital or Go Homeby Fintech News Malaysia May 16, 2018
Earlier last month, I had the pleasure of joining TM ONE’S BFSI Open Day as a panelist. Joining me was veterans from the TM ONE team and we discussed in depth the state of play for digital transformation in the banking and insurance sector.
Digital Is No Longer a Matter of Why but How
The immediate consensus that the panelists reached is that we are far beyond the point of why banks and insurance companies should go digital but rather a more relevant question would be how. As it stands, statistics from the Department of Statistics in Malaysia shows that out of Malaysia’s over 30 million population, 16 Million of which are below the age of 35.
Which effectively means more than half of Malaysia’s population are digital natives. Thaib also chimed in by saying that 75% of the workforce are currently millennials. Beyond the typical narrative of the millennials’ love affair with all things digital, if we were to subscribe to the Diffusion of Innovation Model, we’re likely at the stage where the even the laggards have to some extent embraced the digital lifestyle.
The narrative that digital lifestyle is no longer just for the young is further supported by data from the Malaysian Communications and Multimedia Commission which indicates smartphone penetration in Malaysia is at 70% and broadband penetration is at 84.5%.
Evolution or Extinction
Mahmoud expressed that no one is spared from disruption and that even in the telecommunication sector they are being disrupted themselves, he added while banks are being disrupted by fintech, the telecommunication space is being disrupted by the likes of Facebook and Whatsapp who do not have disadvantages of legacy systems. Mahmoud believes that having faced similar challenges as bank and insurance companies do, makes them a strong partner for the BFSI’s digital journey.
“TM invested on key digital enablers such as data center, high speed connectivity, security and analytics to allow BFSI focus on their core business and new fintech innovations while outsourcing digital enablers to TM ONE.” Mahmoud added.
Digital First Mindset
The BFSI sector can no longer treat digital strategies as an afterthought, but rather embrace it as a core part of their strategy, this is perhaps best illustrated by digital only banks that are on the rise in both the Western world and in China as well.
Even in Korea we’ve witnessed phenomenal numbers during the launch of Kakao Bank by the messaging app Kakao Talk, which secured 820,000 customers in 4 days, to date they now roughly serve 5 million customers. Back home, the likes of CIMB are also adopting the strategy of digital only banks in emerging markets like Philippines and Vietnam.
The panelists also unanimously agreed that in going digital, the process has to be end to end, there is a certain amount of inconsistency when banks proclaim to be digitally focused when customers still have to visit the branch to open an account. This is where technologies like e-KYC will play huge role once BNM releases and industry wide framework following their e-KYC framework for Money Service Businesses.
Collaboration is The Way Forward, TM ONE Seeks Possible Partnership with Fintech
Carol emphasized that collaboration will be the way to move forward, she pointed at that despite the earlier hype of fintech eating the bank’s lunch, she and many other industry observers have instead seen many of them collaborating instead of competing
In that spirit, Carol also hinted at the possibility of TM ONE setting up a programme for them to collaborate and bundle their offerings to the BFSI sector. Given TM ONE’s existing clientele, this could prove advantageous for fintech startups with innovative solutions but with challenges penetrating the sector.