BFM Enterprise Futurescapes series: Future Of Finance

Posted by BFM on Thursday, 7 October 2021

The financial landscape is constantly evolving and with it the nature of finance. On 7th October 2021, BFM hosted its very first episode of the FutureScape series focused on the Future of Finance. As part of the panel of speakers, our CEO, See Wai Hun, David Low, General Manager of SE Asia, Luno, and Hann Liew, Co-Founder & Director, RinggitPlus bring us some of the latest insights happening in the financial industry. 

Let’s dive right in.

Insight 1: Surprising or unexpected digital finance trends in the last 18 months

• High growth of digital data: There is an acceleration of the usage of mobile and web to perform financial transactions leading to unprecedented growth of digital data.
• High demand for AI: There is a huge surge of demand for artificial intelligence (AI) to contextualise AI that is to teach the AI to understand what is put in front of it from a “human” perspective and to consider both the information and the context in which it is presented.
• More non-finance players going into finance: According to Wai Hun, she sees more endpoints producers going into finance, for example, organisations selling speciality goods embedding finance to provide finance to their customers. Hann also solidifies this trend by stating that there is a tremendous adoption of digital acquisition by financial services, probably with the exception of banks. For example, you can get a complete insurance package online, trade online, or even do online fund management.

“The only thing you can’t seem to get easily is the online loan.” – Hann

• The rise of digital banking players interested to serve the underserved market: With Bank Negara promoting digital banking, there is a lot of keen interest to serve the underserved segment by providing alternative credit solutions such as micro-financing to those who lack credit history, thrusting into financial inclusion.
• The rise of  BNPL(Buy now, pay later) players: BNPL is fast emerging as a popular payment method leading to the rise of alternative credit.
• Nationwide training and adoption of QR code-based payments: According to Hann, due to the pandemic, there is a tremendous increase of nationwide UI and UX training for QR code-based payments, on top of the usage of QR code payments for financial transactions despite the low adoption rate in 2019.
• High willingness and interest in cryptocurrency: Luno did a survey recently with a thousand Malaysians across all states and discovered 62% of Malaysians are open to investing in cryptocurrency.
• Global adoption of DeFi, or decentralised finance: DeFi is a new way to execute financial transactions through applications that are conducted over the blockchain.
• Increase of demand in non-fungible tokens (NFTs): According to David, NFTs are pegged against digital arts and have gained tremendous global traction.

In terms of digital finance, particularly here in Malaysia, there is an uptake in the awareness of digital finance. According to the 2021 Visa Consumer Payment Attitudes study, over 74% of Malaysians are aware and 66% are interested in using digital banking. The consumers are aware of the digital finance trends, however, Wai Hun and Hann believe that many providers and issuers such as large banks, insurance companies, investment houses are not ready. Wai Hun spoke about how banks are interested in utilising advanced technologies but she feels the compliance, legal, and regulatory hurdles are holding them back slightly giving non-banks an advantage to provide these services as they are not highly regulated like banks.

“Even if the awareness is here, it’s whether the providers are ready to ride on this curve we’re in” – Wai Hun

Insight 2: Local businesses and SMEs adoption towards the new digital trends

According to The Star quoting from the SME Association of Malaysia, about 100,000 companies had ceased operations since the first MCO. Wai Hun believes that SMEs need to up their game in terms of navigating in this new era. She mentioned how many of her entrepreneur friends running SMEs still need to be physically present at the office to do their work or make even payments. The era has changed and SMEs now need to learn how to pivot and operate in the “New Norm”. 

Hann added on stating survival breeds innovation. He mentioned that the silver lining to those SMEs who managed to pivot and survive the pandemic have started adopting digital trends enabling them to leap five to ten years forward.

David agrees that it is crucial for SMEs to digitise their business as their first step. He added that there are a lot of opportunities once they have digitised their business in terms of accessing talents, lowering cost, and increasing assets and capital. This will unlock new opportunities for SMEs to go into this space to release capital to expand their business.

Insight 3: Major stumbling blocks locally when it comes to the adoption and awareness of digital finance and new trends in the industry.

According to Hann, Malaysian regulators are forward-looking, however, the regulations are not. These regulations were written ten to twenty years ago and are rather rigid Quoting Hann, regulators who are very adaptive and innovative are hamstrung by their own regulations. This needs to be addressed in order for a smooth adoption and execution of digital finance trends.

For Wai Hun, she mentioned banks have a lot of interest in these trends and are creating innovation teams to push for it. However, one stumbling block would be their concerns for what they are allowed and not allowed to do since banks are highly regulated. As a highly regulated industry, pushing for the latest digital trend might take time.

With regards to a question from the floor – “The other challenge with the larger institutions is staying ahead of the game because of legacy systems when it comes to Fintech. It’s also moving very fast. How far can they really plan and what should they be looking at first?” Wai Hun answered that banks need to separate their systems of records and systems of innovations. Banks need to have a bold digital vision and know that it actually takes time to realise the benefits of that bold digital vision. If they are not investing now for the future, they may end up irrelevant. Furthermore, banks need to act fast and change the way regulation works. Not all services and systems can be put through the same rules. Systems of innovation can’t be subjected to the same regulations as systems of records.

Insight 4: The importance for businesses to be aware of the crypto space

• Allows you to discover opportunities that other businesses do not have, adding to your competitive advantage: According to David, if you’re a tech company, knowing about the IEO regulations by the SC, gives you an additional option to go to the market to do alternative fundraising that will allow you to fuel your business tremendously.

“The beauty of crypto is that you can raise money from anywhere around the world for as long as someone can send crypto directly to your wallet over the internet.” – David

• Growing impact of blockchain, the tech behind cryptocurrency: Blockchain can disintermediate how we can approach digital finance in the future. More than 80% of central banks are already exploring the Central Bank Digital Currency (CBDC) which is based on blockchain, with China already piloting the Digital Yuan. According to Wai Hun, there is so much potential for us to look at the digital world in a different way because of blockchain and what crypto can bring in peer-to-peer exchanges. Connecting hype with reality, a lot of the technology that is powering the cryptocurrency, the blockchain, would be powering a lot of the innovation in the future.

The mind-blowing session ended with the 3 speakers sharing their final thoughts on the industry entering the endemic phase. The key takeaway was – Change is definitely happening and the future of finance is here. The golden question is are you ready? 

If you are interested in enabling digital transformation in your organisation, reach the underserved segment with advanced technologies, or embed AI into your solutions, hit us up at contact@juristech.net.

About JurisTech

JurisTech (Juris Technologies) is a leading Malaysian-based fintech company, specialising in enterprise-class software solutions for banks, financial institutions, and telecommunications companies in Malaysia, Southeast Asia, and beyond.