In an increasingly digital world, the Malaysian capital market is taking bold steps to embrace technological innovation and foster growth among smaller players.
At the forefront of this initiative is the Digital Innovation Fund (DIGID), a groundbreaking programme established by the Securities Commission Malaysia (SC) to co-fund innovative projects that leverage technology to create competitive propositions in the Malaysian capital market.
Fintech News Malaysia spoke with Dr Wong Huei Ching, Executive Director of the Digital Strategy and Innovation division and DIGID Chairperson, along with two DIGID award recipients: Ang Xing Xian, Co-founder and CEO of CapBay Sdn Bhd, and Raevendren Ramachandran, Founder of Cashku Sdn Bhd (Advisonomics).
Their insights offer a comprehensive view of DIGID’s objectives, implementation, and early successes in co-funding innovative projects that leverage technology to create competitive propositions in the Malaysian capital market.
Bridging the innovation gap
DIGID was born from recognising that smaller capital market players often face significant challenges in embarking on innovative projects.
“Micro, Small and Medium Enterprises (MSMEs) in the market typically have a more challenging pathway towards embarking on innovative projects like experimenting with Distributed ledger technology (DLT) or AI. These projects typically have a longer runway towards profitability,”
Dr Wong explained.
“Very often if there is no DIGID in place, they’ll probably park it aside and focus on revenue generating stuff. So that’s when we brought in. It’s meant to allow them helps. It meant to help de-risk such that the appetite for experimentation can take place,”
she elaborated.
The fund aims to address this gap by providing financial support and guidance to eligible companies, enabling them to take calculated risks and invest in cutting-edge technologies that might otherwise be out of reach.
Objectives and intended outcomes
DIGID’s primary objectives are multifaceted. The fund aims to assist and catalyse smaller capital market players in their digital transformation journey.
It involves spurring further innovation in capital market products and services, driving efficiency and productivity in capital raising and investment activities, and promoting greater inclusion to serve underserved markets or segments.
“The intent was to actually help jump start the ability for our MSMEs, which is the majority of our current market players, to actually innovate. That’s the simple intent,”
said Dr Wong.
The intended outcomes of DIGID-funded projects include new sources of growth, enhanced process efficiency, improved customer delivery and satisfaction, and enhanced risk management and regulatory compliance efficiency.
Eligibility and application process
DIGID is open to SC-regulated capital market players, with specific criteria for Small and Medium Sized Enterprises (SMEs) and Mid-Tier Companies (MTCs).
The rigorous application process requires a comprehensive pitch deck outlining the project’s value proposition, development roadmap, and potential impact.
Dr Wong emphasised the importance of this process:
“We are very clear about the need to see innovation. It doesn’t necessarily need to adopt the latest, greatest technology, but it has to be around the proper position it creates.”
DIGID offers substantial financial support, co-funding up to 70 percent of approved qualifying expenses.
For SMEs, this is capped at RM500,000 per project, while for advanced technology and industry infrastructure projects, the cap may be exceeded based on the project’s scale and value.
The fund is disbursed on a reimbursement basis, with payouts tied to project milestones. This structure ensures accountability and encourages project completion within the stipulated 18-month timeframe.
Early Success Stories
The impact of DIGID is already being felt in the Malaysian capital market, with several innovative projects underway.
CapBay, a Recognised Market Operator, uses DIGID funding to develop machine learning capabilities for predictive analytics on user behaviour.
Ang Xing Xian explained their approach:
“We’re focusing on providing financing embedded within a supply chain finance process. One of the challenges we found is that SMEs often don’t have much data, so they don’t qualify for financing from banks.”
By leveraging alternative data within the supply chain, CapBay aims to assess SMEs more accurately and efficiently.
“With AI and machine learning, we’re able to make decisions a lot faster, not just more accurately,”
he added.
Cashku is developing a data-driven advisory solution to make financial planning more accessible.
Raevendren shared his vision:
“The average cost of a financial plan in Malaysia is about RM2,500 to RM3,000. Now, imagine for a working professional, even someone who works in a bank, that cost for a financial plan is huge.”
Cashku’s solution aims to provide affordable, algorithm-based financial planning, mainly targeting the B40 and M40 income groups.
“It’s really about making it accessible and accountable,”
he emphasised.
Raevendren revealed that Cashku is on the brink of going live with their innovative solution.
When asked about their launch timeline, he stated,
“We are very particular about our testing. We plan to kind of look at it, if I may say, end of this year.”
Challenges and future outlook
While DIGID has shown promising results, challenges remain. Dr Wong said that many capital market players still struggle with resource constraints regarding innovation.
“Every time we ask around any of the industry players, what’s your number one challenge with digitisation, of course, is always the number one thing raised, and we realised after we came up with DIGID then, then we hear a second complaint is really time and then resources,”
she said.
Looking ahead, the SC is pushing for further innovation, particularly in areas like tokenisation using blockchain technology.
Dr Wong hinted at future developments:
“We’re hoping that once that comes on, then there’ll be more proposals coming in as to how they adopt blockchain.”
A step forward for innovation in Malaysia’s capital market
DIGID represents a significant step forward in Malaysia’s efforts to foster innovation in its capital market.
By providing financial support and guidance to smaller players, the fund is helping to level the playing field and drive the adoption of cutting-edge technologies.
As Ang Xing Xian aptly said,
“The environment is pushing for that to happen. I think all these advancements in AI, all those things are just given. I think the policies are favourable.”
With continued support and innovation, DIGID is poised to play a crucial role in shaping the future of Malaysia’s capital market, driving growth, efficiency, and inclusivity in the years to come.
Dr Wong underscored the transformative potential of the initiative, stating,
“Digitisation as a whole is a great platform for inclusiveness. It really helps with, you know, previously, companies that were never considered, can now be considered within risk parameters.”
As DIGID continues to evolve and support innovative projects, it is a testament to Malaysia’s commitment to fostering a dynamic, inclusive, and technologically advanced capital market ecosystem.
Dr Wong’s final thoughts encapsulated this vision:
“We have other platforms that come to us where they don’t have a mobile application yet, and they’re pivoted to mobile to sort of strengthen their strategy within the retail market. Again, it drives inclusiveness agenda.”
This forward-thinking approach promises to keep Malaysia at the forefront of financial innovation in the region and beyond.
Featured image credit: Edited from SC
