Gaps and opportunities in digital banking

The COVID-19 pandemic has forced consumers to do more transactions online. This behavioural change gives banks more opportunities to offer their customers a complete digital experience.

According to Backbase Regional Director for ASEAN and South Asia Riddhi Dutta, significant events in the past, including the SARS epidemic in Hong Kong in 2003  and the 2016 demonetisation in India, have forced these countries to adopt digital transactions much faster than other countries in Asia.

He added that the lockdowns to curb the spread of  COVID-19 worldwide, including Southeast Asia and Malaysia, have made consumers onboard themselves to make online transactions.

Some consumers, according to Dutta, have made lifestyles changes supported by super apps on their mobile phones.

Recently, the Department of Statistics Malaysia announced that income from e-commerce transactions surged 30 per cent year-on-year in the first quarter of 2021 to RM254.6 billion from RM195.9 billion in Q1 2020.

Meanwhile, income from e-commerce in 2020 rose 32.7 percent to RM896.4 billion compared with 2019.

"Consumer trends have changed. Consumer behaviour has changed. But in terms of the gaps that the industry can do better... probably focusing a little bit more on the SME and MSME, which I think the Bank Negara Malaysia is trying to address through these new potential digital banking licences," he said during an interview on Niaga AWANI.

In July, Bank Negara Malaysia announced that it received a total of 29 applications for digital bank licenses under the Financial Services Act 2013 and the Islamic Financial Services Act 2013, following the six-month application period that ended on June 30, 2021.

In a statement, the central bank said it is issuing up to five licenses and will notify successful applicants in the first quarter of 2022.

Bank Negara announced that "a diverse range of parties have submitted applications for the digital bank licence, ranging from banks, industry conglomerates, technology firms, e-commerce operators, FinTech players, cooperatives and state governments."


Dutta added that industry players could focus on the credit segment, which still lacks digitisation.

During the same interview, RHB Banking Group Group Chief Strategy Officer Dr Siew Chan Cheong added that banks need to use data analytics to offer more personalised services to their customers.

"It's not just getting the services out through digital means, but also quickly, at the right time and right product," he said.

He added that while banks are moving away from adding new branches, cutting paperwork and streamlining processes, they must also look at their culture, particularly in shifting employees' mindset to win in the digital space.

CIMB Digital Assets Chief Executive Officer Effendy Shahul Hamid said that banks and large incumbents in the financial sectors must understand the digital growth and evolution. Banks must have a clear strategy in place to better manage internal processes..

"Banks must not get taken in by the fad. They must stay focus and understand the strength but also ensure that you are evolving in many ways to compete. If banks are stay the way they are today, they will be unable to compete with the players of the future," he said.