Malaysia to Ramp Up MFS to Reach Underbanked Residents
With a rather high level of financial inclusion, Malaysia is still on the way to a cashless society. Bank account penetration in the country makes up 85% whereas only 21% have a credit card, as little as 11% have a mobile account, and no more than 47% purchase online (including paying the fare online), Digital 2019 Malaysia report notes.
The state of financial inclusion in Malaysia
The gross domestic product amounting to $314.7 billion, the value of the e-commerce market makes up modest $4 billion, and only half of it is accounted for by mobile commerce.
With the penetration of the Internet being 80.1% and that of smartphones making up 63.9% of the population, a vast majority of the residents remain unbanked or underbanked in respect of Mobile Financial Services.
Another authoritative source, Statista, refers to a negligible share of mobile payments transaction value, though predicting its sustainable annual growth.
While shopping and using the public transport system Malaysians prefer paying in cash or with a bank card, rather than making mobile payments through MFS.
Yet, despite the high level of bank account penetration, the Malaysian economy remains rather cash-based. Only 11% of Malaysians take advantage of mobile POS payments, although the share of citizens employing total digital financial services makes up a whopping 62.5%.
Why cashless payments and transactions are important for a society
Cash transactions turned out to be a stumbling block for a modern bank as they need manual counting making banking operations far more costly. Cashless operations make the whole process accountable and transparent and thereby promote economic efficiency on a macro scale. On the other hand, digital and mobile financial services, in particular, are very convenient to use making life easier for both customers and businesses. Nevertheless, still, a lot of Malaysians are hesitant to kick the habit of paying in cash.
Malaysian financial institutions and telecoms
The solution for this issue is sure to be found in the mutually beneficial collaboration between financial institutions and telecom companies.
The top banks in Malaysia include:
▪ Maybank
▪ United Overseas Bank (Malaysia)
The existing in the country providers are Maxis, Celcom, Digi, U Mobile and Unifi Mobile. The largest Malaysian telecoms (Maxis, Celcom, Digi) hold a market share of more than 30% each.
Banks and mobile providers are expected to collaborate
Compared to a telecom company, it is much more difficult for a bank to acquire new clients. Therefore, the market share of a leading bank is usually far smaller than that of a renowned mobile provider.
This is partly due to a difference in the business approach. Telecom’s client acquisition model is developed far better, than that of a bank. It includes an ID verification and a Know Your Customer (KYC) approach. The scheme with a low acquisition cost is clear, simple, and efficient.
A telecom client is likely to be more loyal while a bank customer can turn to several financial institutions able to meet his needs. As a result, telecom companies know everything about their clients whereas banks have only financial information about their customers.
Bank business mentality shaped a few centuries ago is based on managing active and passive transactions. Financial institutions mostly employ static, rather than a client-oriented approach. Telecoms focus on ARPU constantly trying to increase this index. A mobile provider has to take into account a customer’s needs and opportunities. As a result, telecoms accumulate a loyal client base that is essential to a bank.
Given the fact that mobile financial services are the future, a lot of fintech companies are trying to develop, design as well as to put them into practice in the market. One of the efficient solutions present in the market is digital wallet factory.
This wallet platform is a powerful tool able to coordinate the activity of 3 main players – banks, telecom companies, and merchants. The platform is based upon an e-money processing center for any prepaid solutions. Wallet platform by Wallet Factory offers not only a technical solution but also develops your business supervising every stage of your promotion.
Simply put, wallet platform provides you with “a bicycle” as well as teaches how “to ride” it. Integrating financial institutions with telecom companies, this mobile financial service grants access to a huge client base of a mobile provider enabling the bank to reach as many customers as possible. And, no doubt, Malaysia has an untapped potential in this respect.
