Why Digital Lending is the Next Frontier for This Malaysian Payments Giant
by Johanan Devanesan September 14, 2023Closing in on 30 years as a groundbreaking payment solutions provider in Southeast Asia, GHL Systems Berhad today can lay claim to an expansive payments footprint comprising over 452,800 touchpoints across Malaysia, Philippines, Thailand, Indonesia, Singapore and Australia. Now, GHL is pivoting its vast experience towards the digital loan and microfinancing segment in Malaysia.
Since its inception in 1994 as a legacy payment processing and IT hardware business, GHL has successfully evolved into a full-stack software and merchant services solution provider. Over the years it has grown into Malaysia’s largest prepaid credit top-up and bill collection network, getting listed on the Bursa Malaysia stock exchange in less than a decade in 2003.
Having acquired one of the largest merchant bases in the country, Malaysia-headquartered GHL sought to offer more diversified services — particularly to add value for the micro, small and medium enterprises (MSMEs) that make up a core pillar of the company’s value chain.
Bridging the Credit Gap among Underserved MSMEs
According to Kevin Lee, Chief Executive Officer, Malaysia of GHL Systems Berhad, the company had been looking at the digital loan and microfinancing market for MSMEs in Malaysia as it feels they have been underserved for a long time.
Kevin Lee
“We has been exploring the possibility of venturing into lending/microfinancing for years as a strategic move to provide value beyond payments to all our stakeholders. These are very much the smaller merchants, you know, the tier three, tier four merchants,” said Kevin, with tier three merchants referring to those with turnover of less than RM100 million and more than RM5 million, while tier four is merchants with turnover below RM5 million.
“While always keeping in mind to diversify our offering to include more value-added services to our merchants.”
Having been with GHL since 2009, Kevin is acutely aware of the digital loan financing gap for smaller businesses in Malaysia. “By diversifying into lending, we wanted to bridge the payment and credit gap among the financially underserved population.
“It also aligns with GHL’s commitment to deliver innovative solutions that support the growth of our merchant partners by addressing the financing needs of small and medium-sized enterprises (SMEs), which are crucial drivers of economic growth, helping them thrive in an ever-evolving business landscape,” he added.
Making the Leap from e-Payments to e-Lending
As a Bank Negara Malaysia-mandated end-to-end payment services and solutions provider, processing transactions from all manner of merchants and banks, GHL is no stranger to a strict regulatory environment. But the digital loan space is strictly regulated, with many unscrupulous activities carried out by licensed and unlicensed lenders alike.
“We prioritise compliance and strict adherence to regulatory standards in our lending business operations in Malaysia,” affirmed Kevin. GHL started offering working capital financing to its merchants in April 2022. Our Malaysia lending license is approved by KPKT under the Money Lenders Act.
“So our lending license is approved by or regulated by KPKT (Kementerian Pembangunan dan Kerajaan Tempatan, AKA the Ministry of Local Government Development, Malaysia) under the Money Lenders Act,” said Kevin, adding that the company’s compliance efforts will extend to two broad areas.
How BNM classifies merchants, with tiers 3 and 4 underserved by traditional financial institutions. Source: BNM Payment System Forum and Exhibition 2015
“One is continuous regulatory monitoring. So our compliance team will continue to monitor changes in the regulatory framework, ensuring that the company remains fully compliant with evolving requirements. The other area, it’s really an area of policies,” he stressed.
“So we have developed very comprehensive compliance policies and procedures that, first of all, are aligned with the Malaysian lending laws. So these policies cover very much how we do customer due diligence. AML (anti-money laundering), how we do KYC (or know-your-customer requirements), and also areas of data protection as well.”
Tech, Experience a Stepping Stone to Lending
Kevin also acknowledged the potential benefits of leveraging GHL’s technological expertise in payments to accelerate its capabilities in digital lending.
“This is one area that we are actively exploring and also evaluating, because the idea is that we know these merchants, we know these customers. I mean, it’s our bread and butter in terms of providing that core payment processing service to them. “
Apart from technological leverage, the chief executive stated the company’s experience also aids in the understanding of market demand as well. “Understanding what the merchant wants, what the merchant needs” also supplies GHL with expertise in the increasingly competitive Malaysian digital loan space.
Kevin insisted that the most important element is the right alignment with GHL’s long term strategic goals, which includes a continued focus at the beginning on its existing customers – merchant businesses that typically fall into the tier three or tier four quadrants.
“The first approach needs to go back to those existing merchants using our payment acceptance services. So we can offer them our SME Digital Loan [product], giving them a special interest rate, because they are assisting customers. And we are also at the same time offering services to merchants new to GHL as well, packaging [loans and microfinancing] with our payment acceptance products together. So we are looking at assisting new merchants at the same time,” he announced.
GHL promotes its SME Digital Loan to its existing captive merchant network. Source: GHL
“Our goal is to really ensure that we cater to a broad spectrum of our merchants’ needs, effectively and also responsibly.”
Differentiating GHL in a Competitive Digital Loan Market
Kevin said that along with engendering financial inclusion for tier three and four SMEs (bigger corporations can secure loans from banks, leaving smaller merchants underserved), GHL will differentiate itself from the marketplace by offering speedy digital loan approvals and promising a fast turnaround time to disburse funds to merchants.
“The other area is when we talk about the loan or the repayment deduction,” he went on, commenting that instead of the typical monthly repayment, GHL can leverage its funds processing and hosting to implement a unique bite-sized, daily repayment mechanism through the merchant daily settlement that the company can deduct from on a daily basis – giving the merchant more financial freedom and flexibility to make crucial business decisions.
Kevin was firm in stating that lending services are more than just an experiment for GHL. It is a strategic move aimed at diversifying their portfolio and contributing to the economic empowerment of society. Looking ahead, lending will become a key pillar in the company’s business architecture, fulfilling a vital role in promoting financial inclusion.
As the company continues to put in substantial investment and focus on their lending business, the market awaits with keen interest. Indeed, the strides GHL Systems Berhad has taken to bridge the financial inclusion gap, while serving a myriad of merchants’ needs, make it a story of innovation, commitment, and future growth.
