Covid-19 Opens Up New Opportunities for Financial Services Digitisation in Payment Solutions, Online Banking, SME Financing, Alternative Financing and Electronic Savings

Out of adversity comes opportunities. The COVID-19 pandemic and the oil price collapse has resulted in governments and international and regional agencies all over the world introducing emergency financing and aid packages to mitigate their impact on the global economy and national finances.

Government agencies are scurrying to introduce measures to support, businesses, banks and social enterprises to facilitate greater access to funding for major entities, small and midcap companies, as well as Micro, Small and Medium Enterprises (MSMEs).

Datuk Syed Zaid Albar, the Chairman of the Securities Commission Malaysia (SC), the capital market regulator, at the launch of its latest 2019 Annual Report in April went one step further, calling on the industry “to seize the (COVID-19) opportunity to accelerate their digitisation transformations and offer more online products and services to investors as the Commission has observed a significant increase of new online trading accounts opening in recent months. The SC itself, in view of this new norm, will expedite guidelines for holding virtual general meetings. The SC will also review the Rules On Take-Overs and Mergers to facilitate e-service of documents and compliance with regulatory requirements for take-over and merger transactions.”

In response to increasing interest of MSMEs to tap into alternative fund-raising channels, the Commission on 16 April also lifted fundraising limits on Equity Crowdfunding (ECF) platforms and allowed ECF and peer-to-peer financing (P2P) platforms to undertake secondary trading, both with immediate effect. “From now until 30 September 2020, the government co-investment fund MyCIF, administered by the SC, has also increased its funding matching ratio from 1:4 to 1:2 for eligible ECF and P2P campaigns, to provide additional liquidity into the alternative fundraising space,” he added.

At the same time, the SC and Bank Negara Malaysia (BNM), the central bank, in April warned the Malaysian public to be on the alert for online scams, as scammers tend to target people during times of uncertainty. The SC is particularly concerned that Malaysians could be lured into investing in illegal investment schemes and investing in unauthorised digital asset exchanges (DAX) operating in Malaysia, following an increase in the number of queries and complaints the regulator has received. The regulator has added 12 companies operating without a licence or authorisation under its watch-list.

The SC, stressed Datuk Albar, is determined to maintain market Integrity and Investors’ and consumers’ protection and would take a targeted approach to protect vulnerable investors and minority shareholders.

Not surprisingly, the government-backed Malaysia Digital Economy Corporation (MDEC) in April tied up with seven crowdfunding operators to help entrepreneurs mitigate the economic challenges brought on by the COVID-19 pandemic. They include Ata Plus, CapBay, Crowdplus Asia, Eureeca, Funding Societies, microLEAP and pitchIN.

Despite the recent RM10bil financial lifeline for micro-entrepreneurs and SMEs introduced by the Malaysian government, many entrepreneurs may not be successful in obtaining government grants and other financial aid. MDEC through its Global Growth Acceleration Division has been relentlessly exploring alternative financing avenues and making these options known to businesses that are struggling to stay afloat during these trying times.

In this second funding initiative, MDEC is supported by the Registered Digital Market Association (RDMA) with members comprising Equity Crowdfunding (ECF) and Peer-to-Peer Financing (P2P) operators that are registered by the SC.

As of end December 2019, the financing platforms had collectively raised over RM700 million and benefitted more than 8,000 MSMEs, which are underserved by the traditional financial system.

Another regulator, The Saudi Arabian Monetary Authority (SAMA), in April permitted nine new FinTech Companies to operate in its Regulatory Sandbox, bringing the total number of companies permitted by SAMA to 30.

The new batch of companies comes as part of SAMA’s endeavor to accomplish and promote the digitization of financial services and drive towards digital transformation in the financial sector in line with the requirements and objectives of the Financial Sector Development Programme.

SAMA stated that they have received many requests, reaching a total of 103, and they have approved the innovative solutions which fulfilled the eligibility criteria in accordance with the published Regulatory Sandbox Framework. Applications related to payments, financing and insurance are eligible to apply to obtain the license directly and comply with the recently issued rules and regulations.

The Sandbox, according to SAMA, is a regulatory process that acts as a ‘safe space’ in which financial services firms are given facilities to test new digital solutions under a set of conditions and limitations designed to protect consumers, but without being immediately required to comply with all the normal regulatory obligations resulting from engaging in the activity in question.

This latest batch of products and services promoters comprise Electronic Saving Solutions for individuals, Crowdfunding Platforms for SMEs and Entrepreneurs, Digital Payments and Currency Exchanges.

The private sector, especially the banks, corporates and FinTech start-ups, are also playing their role in this digitisation quest. Qatar Islamic Bank (QIB), the largest in the emirate, in March urged its individual and corporate customers to bank safely by using its mobile application as well as the Personal and Corporate internet banking platforms. These steps come as part of the Bank’s initiative to encourage customers to opt for a contact-free and safe banking experience, in order to safeguard customers, employees and the entire community.

Bassel Gamal, QIB’s Group CEO, explained that “in order to protect our customers and employees during this medical crisis, we strongly urge all of our customers to use our mobile application and online platforms to fulfil their daily banking needs remotely. Our bank has continuously invested in upgrading our online platforms to ensure our customers have an easy, secure and convenient banking experience, that doesn’t require a branch visit. A key measure to limit the spread of the Coronavirus disease is to transact through remote, digital channels and limit customer and employee physical contact.”

QIB recently also went live with the mPay digital wallet initiative on its mobile app. The new payment method supports the efforts led by Qatar Central Bank to achieve a safe, secure and cashless economy, ahead of the FIFA World Cup Qatar 2022 and beyond.

The mPay digital wallet payment solution provides customers with a range of benefits and features such as the ability to make payments easily through a secured channel, cashless and cardless transactions, reduced fees, receiving transaction details, statement inquires, and SMS notifications for any transaction made. Soon, the mPay digital wallet solution will offer enhanced services such as paying merchants or bills, and withdrawing cash from ATMs, all directly through the wallet.

Meanwhile, BIMB Investment, a wholly-owned subsidiary of Bank Islam Malaysia, launched in April “a robo-intelligence investing platform focused on sustainable and Sharia’a-ESG assets.” The platform, BEST Invest, will give investors access to a suite of BIMB Investment’s Shariah-ESG unit trust funds across asset classes including global equities, Asia Pacific equities, Sukuk, and money market.

“The underlying funds in BEST Invest app are Shariah-ESG compliant. We are an UNPRI signatory and have been focusing on ESG investing since 2015. We are currently managing more than 1 billion ringgit of ESG investment assets,” said BIMB Investment CEO Najmuddin Mohd Lutfi in a statement.

BIMB Investment became an official signatory of the United Nations-supported Principles for Responsible Investment (UNPRI) in July last year. At the time, the company’s CEO said it had integrated more than 250 ESG metrics in its investment process since 2015. BIMB Investment’s new robo-advisor will allow users to either start investing for themselves or enable the system to identify and select the best investment methods, suitable funds and investment amount based on each person’s risk profile.

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