Embracing digital transformation offers significant promise for Micro, Small, and Medium Enterprises (MSMEs) in Malaysia. By adopting digital payments, MSMEs can better integrate into the formal economy, expand their market reach, and access financial services more easily.
This shift not only promotes a cashless society but also extends financial inclusion to remote and underserved areas, unlocking economic benefits and enhancing community well-being.
In recent years, Malaysia has made notable strides in financial inclusion by leveraging digital technology to bring banking services to the masses. However, as the nation rapidly moves towards a cashless future, questions arise about those left behind and the challenges that remain.
In a recent webinar, industry leaders gathered to discuss the state of financial inclusion in Malaysia, exploring both the progress made and the hurdles yet to be overcome.
The panel, featuring Alan Ni, CEO of TNG Digital; Siew Yuen Tuck, CEO of Jirnexu; Wilson Beh, President of the Fintech Association of Malaysia; and Gary Yeoh, Chief Marketing Officer of Payments Network Malaysia (PayNet), delved into the complexities of serving the underbanked, the role of financial literacy, and the potential of emerging technologies to bridge the gap.
As Malaysia stands at a crucial juncture in its financial inclusion journey, these experts offer valuable insights into how the nation can ensure that no one is left behind in the digital financial revolution.
From e-wallets to alternative credit scoring, their discussion paints a comprehensive picture of the challenges and opportunities that lie ahead in Malaysia’s quest for universal financial inclusion.
Malaysia’s financial inclusion landscape
Malaysia has made remarkable progress in financial inclusion, with over 90 percent of adults having bank accounts and 80 percent using digital payments. However, significant challenges remain for underbanked and underserved segments, particularly in rural areas and among micro, small and medium-sized enterprises (MSMEs).
Alan Ni, CEO of TNG Digital, provided context on the current state:
“More than 90 percent of adults already have a bank account. I don’t think the unbanked segment is very big in Malaysia, but I do think the underbanked, underserved segments are still quite big.”
He explained that traditional banks often find it commercially unviable to serve certain segments due to high operational costs, creating an opportunity for fintech players to step in.
The conversation highlighted the rapid evolution of e-payments in Malaysia. Vincent Fong, the moderator, reminisced about the introduction of e-wallets just five or six years ago, noting how quickly they’ve become essential for many Malaysians.
Alan Ni illustrated TNG’s approach to financial inclusion by offering micro-investment products starting from as low as 1 ringgit, micro-lending from 100 ringgit, and micro-insurance from 1 ringgit, significantly lowering entry barriers for financial services.
Trust and financial literacy
Siew Yuen Tuck, CEO of Jirnexu (operating the RinggitPlus brand), emphasised that trust and financial literacy are the greatest challenges to financial inclusion.
“There’s a lot of actual financial services that have been made available digitally. Providers have made it easier to access, but if the end-user doesn’t really understand it or doesn’t trust the digital channel yet, that’s where the challenge and, therefore, the opportunity is,”
Yuen Tuck explained.
He shared Jirnexu’s multifaceted approach to addressing these challenges, which includes conducting an annual financial literacy survey, partnering with financial institutions to create educational content, launching a WhatsApp-powered application for financial products, and collaborating with Experian to develop a credit score that enables banks to lend to previously underserved segments.
Alternative credit scoring and open banking
Gary Yeoh, Chief Marketing Officer at PayNet, discussed ongoing projects in alternative credit scoring and open banking. The alternative credit scoring project aims to leverage PayNet’s data to help individuals obtain loans they might not have previously qualified for.
“We need to make sure that this is useful data, this is the right data. We also need to find a lender, most likely we are thinking it could be someone like a FinTech, maybe a digital bank, that has a slightly higher risk appetite,”
Gary explained.
Regarding open banking, Gary envisioned a future where consumers can easily share their financial data with fintechs and banks, potentially streamlining processes like opening bank accounts and facilitating loans.
He also mentioned the potential of open banking in combating fraud and scams through better data visibility across the ecosystem.
The evolution of cross-border e-payments was highlighted as a significant opportunity for financial inclusion.
Gary detailed PayNet’s efforts:
“We’ve already enabled Singapore, Indonesia, Thailand, inbound from China. And through our relationship and partnership with Alipay International, we also have ten other countries that can now come into Malaysia and scan and pay on our shores through our DuitNow QR.”
He also mentioned the Nexus project, a central hub being developed by Bank Negara Malaysia to facilitate seamless cross-border payments and remittances.
Addressing the last four percent
Wilson Beh, President of the FinTech Association of Malaysia, stressed the importance of understanding the specific needs of the 4 percent of Malaysians still excluded from financial services.
He suggested a more nuanced approach:
“We need to be able to understand this segment. Who is this four percent, and, very importantly, why are they not included in this wave of e-payment or digital finance?”
Wilson also highlighted the success of equity crowdfunding (ECF) and peer-to-peer lending platforms in helping tens of thousands of small businesses raise funds, addressing a crucial financing gap for SMEs.
The role of education and collaboration
All panellists agreed on the crucial role of financial education.
Yuen Tuck proposed incorporating basic financial literacy in school curricula:
“Why don’t you teach it in schools or universities? You know, basic financial literacy is about the real basics of how credit works, why insurance is important, and why investment is important.”
Alan Ni emphasised TNG’s approach of simplifying user experiences and lowering entry barriers as part of its educational strategy.
He stated,
“We have to accept every user has a different educational background and knowledge about financial service products. It’s up to us how we can make this process as painless as it can be, as simple as can be, to get people to understand quickly and even try.”
Gary emphasised the need for a coordinated approach involving regulators, government agencies, and private sector players to address financial inclusion challenges effectively. He suggested that PayNet could potentially play a role in bringing various stakeholders together for more structured initiatives.
Wilson echoed this sentiment, stating,
“Increasing collaborations among all parties, whether it’s with FIs, whether it’s among different fintech players, and we have PayNet here as the national payment infrastructure, as perhaps the unified party for different players to come in to really advance financial inclusion in a more effective manner.”
The future of cashless payments
The panel discussed the emerging trend of cashless-only stores in Malaysia. While recognising the commercial benefits for merchants, the consensus was that customers should retain the choice to use cash.
Alan pointed out that some countries have laws against refusing cash payments and suggested that regulation might play a role in Malaysia if this trend continues.
“We would probably like to see consumers being given a choice. I would rather merchants work with people like acquirers or us to incentivise people to go cashless, rather than force-feed them to go cashless,”
Gary added.
Innovative approaches and future directions
The panellists shared various innovative approaches their organisations are taking. TNG Digital is focusing on serving segments often overlooked by traditional banks, including foreigners and refugees.
Alan mentioned a recent MOU with UNHCR to bring refugees into their ecosystem.
Jirnexu is developing alternative credit scoring methods and using popular platforms like WhatsApp to increase access to financial products.
The FinTech Association of Malaysia is promoting the use of ECF and P2P platforms to address SME financing gaps.
PayNet is exploring the use of AI in combating scams and fraud, as well as developing open banking initiatives to improve data sharing and financial service accessibility.
Closing thoughts
The discussion concluded with a call for greater collaboration among fintech players, traditional financial institutions, and facilitators like PayNet.
Alan emphasised the importance of partnerships and open platforms in achieving financial inclusion goals, stating that collective efforts can make a significant difference despite individual companies’ limited resources.
PayNet, through Gary, positioned itself as a potential collaborator for fintech companies, inviting them to explore partnership opportunities to accelerate innovation and financial inclusion initiatives in Malaysia.
This marks a shift in PayNet’s approach, moving from being perceived as a regulator to a potential partner in driving financial innovation.
As Malaysia continues its journey toward comprehensive financial inclusion, the panellists agreed that a multifaceted approach involving education, innovation, collaboration, and targeted solutions for underserved segments would be crucial in addressing the remaining challenges and opportunities in the country’s financial landscape.
Watch “Revolutionizing e-Payments: Fintechs as Catalysts” to learn about transitioning to a cashless society, extending financial inclusion to underserved areas, and enhancing community well-being.
Featured image credit: Edited from Freepik
