Competition is also driven by customers who demand high-level and exible nancial services which are easily accessible

by NURUL SUHAIDI / Pic by MUHD AMIN NAHARUL

MALAYSIA’S retail banking sector is now innovating a better digital feature amid future competition by digital banks.

A recent Backbase commissioned study, conducted by Forrester Consulting found that 64% of Malaysian retail banking decisionmakers said their company is increasing spending on digital and engagement financial wellness initiatives as the result of a digital banking licence by the central bank.

The highest figure shown is in the AsiaPacific region more than Singapore, Japan or Australia.

Backbase Regional VP in Asia Pacific Iman Ghodosi said the recent report revealed Malaysians have an insatiable appetite for digital offerings.

“67% of consumers surveyed said they used their institution’s existing mobile app, 87% believe an excellent mobile app is an attribute they value from financial services providers, and 82% conduct their day-to-day banking via their smartphone.”

He added that the retail banking sector in Malaysia is addressing this demand and ensuring banks can still compete in the digital space against the impending newcomers.

Correspondingly, business players interviewed in the survey said 90% of them are planning to or actively expanding their digital money management tools while 88% revealed they were planning to or actively expanding their financial wellness and digital money management tools, with almost half of them saying it was critical.

Ghodosi also believes that the next six months are a critical inflection point in the digital banking space.

“The urgency and focus behind this are clear — Malaysia has five of the hottest digital banks waiting to explode into the banking scene and take market share next year, and the traditional banks are worried,” he said.

Additionally, he highlighted that competition in the digital space is also driven by customers now demand high-level and flexible financial services which are easily accessible with the tools that can manage them that traditional banking is lacking.

“Now more than ever, it’s important to own the relationship with your customer. We’ve entered the Engagement Banking Era, an evolution that stresses a unified platform approach for banking. The No 1 priority in this new era is to completely re-architect the bank around the customer, moving away from siloed technology investments,” he added.

However, in adopting this digital shift, businesses especially in the Asia-Pacific region are facing various obstacles such as 74% said a lack of understanding of customer needs and outcomes is a barrier to their company implementing or further developing digital money management tools, 66% said outdated legacy technology challenges their plans while 64% said organisational silos make things difficult.

“Banking sectors in all countries face challenges, but it was surprising that Malaysia’s challenges were higher than average,” said Ghodosi.

Apart from that, there is also a lack of understanding at legacy institutions in Malaysia on who owns the budget for these types of initiatives.

Trust in traditional banks in Malaysia is far higher than digital banks and initiatives such as these will aim to increase their reputation.

“Through these new channels of customer interaction, banks can now meet needs they previously couldn’t, by leveraging data analytics, artificial intelligence and mobile technology to make financial recommendations and improve engagement for users.”

For example, 64% of retail banking business decision-makers interviewed noted that preventing exploitation of vulnerable and older customers was in their company’s plans when developing such digital tools.

Whereas 62% revealed they planned to assist customers to build better financial habits and 66% are going to offer financial literacy tools.

This is because additional features that these digital and engagement apps will offer include spending analysis, scheduling bill payments, advanced pay and income smoothing, automated savings and retirement planning tools.

“Banks can offer so much value through these engaging digital services, while at the same time collecting valuable data from users,” Ghodosi added.

“The competition is going to get fierce in Malaysia and that means the most important party, the consumer, will benefit long term. Time and market forces will tell which players will be the winners in the war for engagement in banking,” he concluded.