The financial wellness war – Malaysian banks vs digital banks

Malaysian banks are starting to notice the moves in digital banking. It seems that digital banks are focusing on financial wellbeing and digital money management here – and traditional banks want a huge chunk of that.

For the uninitiated, financial wellbeing (also known as financial wellbeing) is a person’s overall financial health and can be achieved through judicious spending management.

Increased digitization spending by Malaysian banks

A recent study by Forrester Consulting (on behalf of Backbase) found that 64% of Malaysian consumer business decision makers said their company is increasing spending on digital and engaging financial wellness initiatives.

Interestingly, that is the highest value in the APAC region, and more than Singapore, Japan or Australia.

The country’s retail banking sector appears to be gearing up for intense competition in the digital banking space. As a reminder: Malaysia’s Central Bank, Bank Negara Malaysia (BNM), closed applications for digital banking licenses Beginning of July. Over 40 applications were received, of which only five would receive the coveted license next year.

According to Forrester’s research, the sector is trying to meet increased consumer demand for digital banking, particularly financial wellness and digital money management.

Of the banking decision-makers surveyed, 90% said they are planning or actively expanding their digital money management tools. In addition, 88% said they are planning or actively expanding their financial wellbeing and digital money management tools – with nearly half of them viewing this as critical.

Significantly, the report found that 82% of users do their day-to-day banking with their smartphone. Additionally, 67% of consumers used their institution’s existing mobile app, with 87% saying that having a great mobile app is an attribute they value financial services providers.

“The window of opportunity for banks to expand their digital offerings is now, and the latest report showed that Malaysians have an insatiable appetite for digital offerings,” said Iman Ghodosi, regional vice president of Backbase in the Asia-Pacific region the next six months would be a “critical turning point” in the Malaysian digital banking space.

“The urgency and focus behind it is clear – Malaysia has five of the hottest digital banks waiting to explode into the banking scene and take market share over the next year, and traditional banks are concerned,” he added.

According to Ghodosi, Malaysians are demanding better customer service and flexibility in financial services. Time is of the essence – they want to access their personal finances anytime, anywhere, and through any channel, but unfortunately traditional banks’ existing tools are insufficient to meet their needs.

“Today it is more important than ever to have a relationship with your customer. We have entered the era of Engagement Banking, a development that emphasizes a unified platform approach to banking.

“The number one priority in this new era is to completely redesign the bank around the customer and away from isolated technology investments,” added Ghodosi.

Malaysian banks face the greatest digitalization challenges in APAC

The report sheds light on how Malaysian banks are dealing with it – 74% of respondents agreed that the inability to understand customer needs and outcomes is an obstacle to their digitization efforts.

Unsurprisingly, 66% complained about outdated or outdated technology, and 64% agreed that organizational silos were hampering those efforts as well.

“Also, the old Malaysian institutions lack understanding of who owns the budget for these types of initiatives. Is it considered a customer experience? Is it a corporate strategy? Or is it marketing? In fact, there are all three and more, ”added Ghodosi.

The state of the Malaysians’ financial well-being

According to a paper from the credit advisory and debt management agency (AKPK) “Financial Behavior and Welfare of Malaysian Working Adults“Financial well-being refers to the ability to make ends meet, to be comfortable with the current financial situation, and to have financial resilience.

In the AKPK paper, Malaysians of working age just exceeded (6.1 points) the surviving range (6.0 – 8.0) for financial well-being on a scale from 0.0 to 8.0. Women and older workers generally did better than their colleagues.

Unsurprisingly, the higher the income, the higher the individual’s financial well-being, with those who earn over RM 10,000 a month scoring 7.32 points.

For the emerging ASEAN country with 32 million inhabitants, the average monthly income of employees is around 2,900 RM in 2020, nine percent less than RM 3,200 in 2019, according to statistics from the Malaysian Department of Statistics (DOSM); Because of the pandemic, no doubt.

The importance of financial literacy

According to Backbase, a major motivation for increasing financial literacy is not just profit, but the banks’ increased ability to “look after and protect their customers”.

Malaysian banks are increasingly using technologies such as AI, data analytics and mobile apps to recommend financial services and improve user engagement. Of course, consumer digital trust in old Malaysian banks is much higher than in their newer digital counterparts.

“Banks can deliver so much value through these engaging digital services while collecting valuable data from users,” said Ghodosi.

He added, “Our research indicates that digital money management apps are the primary interface between institutions and their clients on our journey into the future. Consumer demand and industry sentiment show that we are only at the beginning of the journey.

According to Backbase, spend analysis, bill payment planning, prepayment and income smoothing, automated savings and retirement planning tools are some of the digital features that Malaysian banks can implement to meet consumer needs.

“Competition will get tougher in Malaysia and that means that the most important party, the consumer, will benefit in the long run. Time and market forces will tell which actors will be the winners in the war for banking involvement. “

Jamilah Lim
| @TechieKitteh

Jam (she / she) is the editor of Tech Wire Asia. You are a humanist and feminist with a love for science and technology. They are also aware of the intersectionality of the above with ethics, morals and their economic / social impact on people, especially on marginalized / underdeveloped communities.

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