Digitalisation can become a powerful force for sustainable financial inclusion due to lowered costs

by NUR HAZIQAH A MALEK/ pic by MUHD AMIN NAHARUL

THE new Consumer Credit Act will further strengthen the foundation for consumer finance development in the digital age, said Bank Negara Malaysia (BNM) deputy governor Jessica Chew Cheng Lian (picture).

Chew said the Act will reinforce fundamental protections provided to consumers in credit provision, including the ones provided by non-traditional entities via digital solutions.

“Second, it will institutionalise inter-agency arrangements between authorities responsible for regulating consumer credit activities to promote consistent minimum protections and fair treatment of borrowers.

“And third, it will provide stronger assurance of more responsive and coordinated consumer prot e c t ion arrangements, to take into account the fast-evolving financial services landscape going forward,” she said in her speech at the BNMOECD Conference on Financial Education and Financial Consumer Protection in Asia Pacific yesterday.

She said regulators are constantly trading off considerations of privacy against efficiency, fragmentation against competition, as well as access against risks of abuse.

“Safeguarding the interests of consumers without stifling innovation remains one of the most difficult to achieve for regulators.

“In the digital age, these trade-offs become impossible without equipping consumers with the information, knowledge and tools they need to protect themselves and make decisions that are in their best interests,” she said.

She also added that the financial services in Asia Pacific have been seeing an increase in the digital adoption rate.

“As adoption rates rise, online banking, e-insurance and e-payments are quickly approaching a tipping point, at which they will eclipse physical branches, ATMs and cash as conduits for financial transactions.

“In some markets, this is already a reality. It has been reported that nearly twothirds of consumers in the Asia-Pacific region are active financial technology users,” she said.

The services are estimated to contribute about 5% to the total revenue of the financial sector this year in South-East Asia and is expected to jump to 11% within the next five years.

Chew said in Malaysia, the most recent demand side survey on financial capability and inclusion indicated that four in 10 Malaysians utilise Internet banking services, up from just one in 10 as recently as three years prior.

“This trend is expected to intensify, with the expansion in digital product offerings and growing acceptance of online financial services,” she added.

She said digitalisation can become a powerful force for sustainable financial inclusion due to lowered costs and increased scale and reach.

“By lowering costs and increasing scale and reach, it has become a means for providing access to essential financial services such as e-payments, micro-insurance and online remittance to previously underserved segments.

“Other innovations such as banking and insurance aggregators are also helping consumers make better financial decisions, in turn, increasing their confidence in using financial services,” she said.

The inclusion may also hold the potential to transform the rural-urban divide, where the financial needs of all society segments are catered to.

“Several pre-conditions, however, must exist to realise this potential, and they all have to do with securing the trust and confidence of consumers in the digital financial system.

“This includes a regulatory framework that is appropriate and proportionate, a secure digital financial infrastructure and incentive systems that are aligned with providers that are both responsive and responsible,” she said.