Seven out of 10 SMEs prefer digital banks

by AZREEN HANI / pic by Bernama

CLOSE to seven in 10 Malaysian small and medium enterprises (SMEs) expressed interest to bank with digital banks, based on the findings of the Visa SMB Digital Banking Study.

According to the study, this is extremely timely given the Bank Negara Malaysia’s announcement on the five digital banking licences being awarded.

In addition, eight in 10 Muslim SMEs who used Islamic banks as their main bank showed more interest to use digital banking than their non-Muslim counterparts (55%). They cited reasons such as confidence in automated processes, and digital interactions providing a better banking experience for their high level of interest. 

According to the study, SMEs that shared the need to check Shariah compliance has delayed fund transfers, and automated processes offered by digital banks might reduce the time needed for making these transfers.

Digital banking will address the top-of-mind challenges faced by almost nine in 10 Malaysian SMEs, including access to financing and loans due to complicated application procedures (37%), high-interest rates (36%), and loan approvals (29%), the study stated.

“The Visa SMB Digital Banking study showed the need for existing banks and new players to solve the needs and challenges faced by SMEs in Malaysia, especially for the underserved segment,” Ng Kong Boon, Visa country manager for Malaysia said in a statement.

“Across the SME spectrum, micro-SMEs had the lowest awareness about digital banks (67%), even though they would benefit most from the financing solutions, especially since almost half of them (46%) do not qualify for traditional bank loans,” he added.

Ng also believes that new digital banking players and existing banks will transform the banking and payment experiences for both consumers and businesses, and create relevant solutions that can fulfil the needs of SMEs. 

“SMEs are an important segment for Visa, and we want to work with our bank partners and new digital banking players to support them as they grow their businesses and navigate the new digital ecosystem,” said Ng.

Based on the study, SMEs shared that the top reasons for wanting to use services offered by digital banks include having less physical interaction when performing their banking activities due to Covid-19 concerns (44%), and digital banking being perceived as a faster and more convenient way of banking (35%). 

Findings from the study also highlighted that SMEs prefer financial loan features such as micro-loans (33%), cash advances of three to six months (26%), and Buy Now Pay Later solutions (16%).

Visa SMB Digital Banking Study was conducted on 500 SMEs across various industries in Malaysia in September 2021. The study was conducted by CLEAR and included qualitative and quantitative approaches to assess the level of interest of SMEs in using digital banking.