Why Malaysian Students Should Consider Studying Financial Technology (Fintech)?
One of the aims of choosing a course is to find a job or career. The aim of having a job is to obtain a salary in order to take care of ourselves, our future loved ones and parents. Therefore, it is important to choose a course which will have a job in the future.
Financial technology, or fintech, is rapidly changing all that by making it easier to save, borrow and invest online or with a mobile device, without ever dealing with a traditional bank. For old-fashioned banks and money managers, fintech is causing dramatic upheaval.
Financial technology (FinTech) is touted as a game changer — the revolution that is turning the financial services industry on its head. All this talk about how FinTech is blurring the lines between the financial services and technology sectors evokes a sense of upheaval and change, with the outlook and final outcome uncharted and uncertain.
Malaysia’s fintech sector grew by 27% in 2021 to 294 fintech companies. Payments still dominate the industry, with 60 companies, followed by lending (55), e-wallets (43), and insurtech (31).
The central bank, Bank Negara Malaysia, is working to raise the profile of FinTech amongst financial firms and insurers to improve the quality and efficiency of the country’s financial services sector. This push has created more job opportunities for candidates in the emerging technologies space including mobile and the web.
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What Is Fintech?
Fintech is changing the world of finance for consumers in a myriad of ways. For example, you can now open a bank account over the internet, without physically visiting a bank. You can link the account to your smartphone and use it to monitor your transactions. You can even turn your smartphone into a “digital wallet” and use it to pay for things using money in your account.
Fintech is short for financial technology. Fintech is an industry that covers any kind of technology in financial services – from businesses to consumers. Fintech describes any company that provides financial services through software or other technology and includes anything from eWallet apps to cryptocurrency.
The Oxford dictionary defines it as “Computer programs and other technology used to support or enable banking and financial services”. On the other hand, Wikipedia defines “Fintech” as a line of business based on using software to provide financial services. Financial technology companies are generally startups founded with the purpose of disrupting incumbent financial systems and corporations that rely less on software.
Generally, Fintech is any company using the internet, mobile devices, software technology or cloud services to perform or connect with financial services. Many fintech products are designed to connect consumers’ finances with technology for ease of use, although the term is also applied to business-to-business (B2B) technologies as well.
E-wallets in Malaysia are a relatively recent phenomenon, most players including the three big names like Boost, TNG Digital, and GrabPay all received their licenses as recent as 2017.
Fintech has made inroads with many applications and has changed the way consumers access their finances. From mobile payment apps like Grab Pay, Touch nGo eWallet to cryptocurrencies, insurance and investment companies, fintech has disrupted traditional financial and banking industries. It is possible to manage funds, trade stocks, pay for food or manage insurance through this fintech conveniently on your smartphone. Many banks and financial institutions are laying off staff and replacing them with this new technology. But graduates in Fintech are high in demand.
The tools provided by fintech are changing the way many consumers track, manage and facilitate their finances through easy-to-use technology.
Some examples of Fintech are:
Blockchain and Cryptocurrency
Cryptocurrency and blockchain are hallmark examples of fintech in action.
Cryptocurrency exchanges like Coinbase and Gemini connect users to buying or selling cryptocurrencies like bitcoin or litecoin.
But in addition to crypto, blockchain services like BlockVerify help reduce fraud by keeping provenance data on the blockchain. And while cryptocurrency and even blockchain may be somewhat controversial uses of fintech, they have certainly taken parts of the investment world by storm in recent years.
- Founded in 2017, SINEGY is the only Malaysian homegrown crypto exchange that was recently granted conditional approval by the Securities Commission Malaysia. Their exchange currently allows for trading of Bitcoin, Ethereum and XRP. It is the only Malaysian company granted approval by the regulators to run a crypto exchange. The company traded more than US$ 16 Million in their first 6 months.
- Etherscan is Block Explorer and Analytics Platform for Ethereum, a decentralized smart contracts platform. Some have described it as Ethereums leading block explorer. Simply put it is a search engine that allows users to look up, confirm and validate transactions on the Ethereum platform. It is widely recognised within the global community as one of the big names within the Ethereum block explorer space. It has a simple and clean interface that does what you need it to do and between 4 – 7 million users rely on it every month to track transactions on Ethereum.
Bank Negara Malaysia (BNM) has unveiled the consortiums that obtained a digital banking licence in Malaysia, a set of digital licence banking frameworks that marks the beginning of digital banking in Malaysia. Three out of the five consortiums are majority-owned by Malaysians, namely Boost Holdings and RHB Bank Berhad; Sea Limited and YTL Digital Capital; and KAF Investment Bank.
So, what is a digital bank?
The COVID-19 pandemic has changed consumer and business behaviour, demanding more digital delivery and cost-effective financial solutions. The adoption of mobile and online banking has increased significantly, and this widespread adoption will continue to last even when the pandemic is over. As a matter of fact, mobile banking transactions rose to RM800 billion in 2021. This is an opportunity for banks, credit unions, and other financial institutions to embrace the benefits of digital banking.
In simpler terms, digital banking works the same way as most traditional banks, except it is fully operated online. This means that almost all banking activities that were previously only available at bank branches can now be done online with digital banking. They are, however, different from online banking that is offered by most traditional brick-and-mortar banks. For instance, online banking primarily focuses on essential transactions such as money transfers, bill payments and basic online account management. On the other hand, digital banking is all forms of financial services, transactions and operations that are only available online.
One of the advantages of digital banking is giving customers the freedom to bank whenever, wherever and however they want, and it only gets better with features such as real-time assistance and personalised services. For instance, digital banks provide real-time assistance by delivering instant support through tools like chatbots to scale their customer support. Meanwhile, a complete grasp of customers’ behaviour through data and insights collected made hyper-personalisation possible, enabling digital banks to recommend products and services that match their needs. Therefore, banks, credit unions and other financial institutions that provide digital banking experiences will gain an upper hand in the competitive landscape as digital banks have agility, personalisation and enhanced user experience advantages.
In addition, digital banking’s ability to collect alternative data can also be used to enhance credit scoring and credit reporting. Alternative data can provide lenders with valuable customer insights to help them offer better financial services to the unbanked and underserved segments. For example, in the lending landscape, most banks and financial institutions are sceptical when it comes to approving loan applicants that lack traditional credit data and credit history as they have a high risk of default. Thus, these applications are rejected most of the time. Digital banks, however, allow non-traditional ways to do credit scoring. By collecting data such as consumer spending behaviour through digital channels like e-wallet apps, digital banks can create their own alternative credit data, and make use of them to rate an individual’s creditworthiness before denying or approving an application.
Furthermore, digital banks are much cheaper to operate compared to incumbent banks. Operational costs such as physical branches maintenance fees and labour costs incurred by traditional banks are not applicable to digital banks. Hence, digital banks are able to offer cost-effective financial services to retail customers and the underserved business community such as individuals from lower-income groups. By immensely improving their financial well-being, BNM believes that not only will the underbanked community be taken care of, but it will also promote an inclusive financial sector, fostering the growth of Malaysia’s economy.
Online Payments & Remittance
- iPay88 is one of the earlier pioneers within the online payment gateway space in Malaysia. Founded in 2006 the company’s role in powering Malaysia’s e-commerce growth through payments cannot be understated. In 2015, Japanese tech giant NTT Data acquired iPay88, it is arguably one of Malaysia’s first successful exits within the fintech space.
- MoneyMatch is a cross border payments startup in Malaysia providing digital remittance services at competitive rates. MoneyMatch pioneered eKYC account opening within digital remittance space and was the first to graduate from Bank Negara Malaysia fintech sandbox into a fully licensed digital remittance service provider. They are the first startup in Malaysia to be on Ripple’s network and in 2018 they bagged an award at the Singapore Fintech Festival.
- Founded in 1994 GHL is one of the biggest names in Malaysia in the payments space. GHL is listed on the Main Board of Kuala Lumpur Stock Exchange and has presence across multiple ASEAN markets like Indonesia, Philippines, Thailand, Cambodia, and Singapore. GHL is an established player with strong traction and regional presence, processing over RM1 billion in transaction value per month.
It seems as though everyone with a smartphone uses some form of mobile payments. In fact, according to Statista data, the global mobile payment market is on track to surpass $1 trillion in 2019.
Using increasingly sophisticated technology, services have emerged that allow consumers to exchange money and payments online or on mobile devices – including popular payment apps like Big Pay, Grab Pay.
- BigPay prefers to describe themselves as an alternative to banking as opposed to an e-wallet, they often say they are built more in the mould of neo-banks like Monzo and Starling. Cheekily, one of its tagline “Challenge Banking” is just one alphabet short of calling itself a challenger bank. BigPay comes with a well-designed budget management function and pre-paid Mastercard which you can load and use in any merchants around the world that accepts Mastercard
- TNG Digital is formed as a joint venture between Ant Financial and Touch ‘n Go. They are best known for the e-wallet brand Touch ‘n Go eWallet.They have now secured 125,000 merchant points and over 7 million users.
Fintech has even disrupted the insurance industry. In fact, insurtech (as it’s been so-called) has come to include everything from car insurance to home insurance and data protection.
- Fi Life is an insurtech company offering online term life insurance. It was launched in 2015 under the brand name U For Life and has since been bought over and rebranded to Fi Life. Fi Life offers a simple way for Malaysians to purchase life insurance digitally. The company provides a very competitive pure protection plan of up to RM 1 Million, which is among the highest you can buy online in Malaysia without needing a medical check-up.
- Jirnexu operates Malaysia’s most popular financial marketplace RinggitPlus which provides an end-to-end online application solution for Malaysians to research, compare and select banking and insurance products. They also operate under the brand name KreditGogo in Indonesia.
- KATSANA through its DriveMark brand aims to introduce usage-based insurance to Malaysia. DriveMark is a reward ecosystem for safe drivers, the app tracks driving behaviour and allows drivers to compete with each other to win prizes and cheaper personal and motor insurance.
- PolicyStreet is an insurance technology company which customises and offers insurance to individuals and businesses. It is the first homegrown insurtech to be awarded a Financial Adviser approval by Bank Negara Malaysia, which enables the firm to give unbiased insurance recommendation and financial planning services
Robo-Advising and Stock-Trading Apps
Robo-advising has disrupted the asset management sector by providing algorithm-based asset recommendations and portfolio management that have increased efficiency and lowered costs.
Since the rise of more advanced technology that can analyze various portfolio options 24/7, financial institutions have adapted to offer online robo-advising services – including the likes of Charles Schwab (SCHW) – Get Report and Vanguard.
Additionally, other popular robo-advising services include Betterment and Ellevest.
Perhaps one of the more popular and big innovations in the fintech space has been the development of stock-trading apps. When once investors had to go directly to a stock exchange like the KLSE, now, investors can buy and sell stocks at the tap of a finger on their mobile device.
- MYTHEO is the only homegrown company approved by the Securities Commission Malaysia to operate a Digital Investment Manager or better known as robo-advisor to most. The company was joined as joint-venture between Japan’s first robo-advisor Money Design Co. and Silverlake Group a leading software provider in the banking space.
- Fundaztic is a homegrown P2P financing platform licensed by the Securities Commission Malaysia. They were among the first batch of P2P finance operators licensed to operate in Malaysia. In 2018, the company raised RM3 million in just 38 minutes on pitchIN. It enables investors to start investing for as low as RM 50.
Malaysia’s Fintech Growth
2022 has so far been an exciting year for the Malaysian fintech industry, building on booming customer adoption, favorable new regulations, and a five-year national digitalisation plan.
Bank Negara Malaysia (BNM) issued the Financial Sector Blueprint 2022-2026 in January, setting out the central bank’s development priorities for the financial sector over the next years and shared ambitions for an open data ecosystem, a national digital identity scheme, and real-time payment linkages.
Besides an ambitious five-year development plan, 2022 also saw the announcement of Malaysia’s first digital banks. All five digital banking licensees are consortia comprising of at least one technology company. These new market entrants are expected to bring about a wave of innovation in the banking sector and help improve financial inclusion.
Malaysia’s five digital banks are currently undergoing a period of operational readiness that will be validated by BNM through an audit before being permitted to commence operations. This process may take between 12 to 24 months.
Malaysia’s fintech sector grew by 27% in 2021 to 294 fintech companies. Payments still dominate the industry, with 60 companies, followed by lending (55), e-wallets (43), and insurtech (31).
These recent developments build on the successful year 2021 during which fintech innovation accelerated significantly amid increased demand for better and more inclusive financial services, an expanding startup scene, and rising funding levels.
In the first three quarters of 2021, fintech companies in Malaysia raised a record US$117 million in funding, surpassing 2020’s total of US$77 million by 52%, according to the Fintech in ASEAN 2021: Digital Takes Flight report by United Overseas Bank (UOB), released in November 2021.
BigPay’s US$ 100 million funding round accounted for a large chunk of Malaysia’s 2021 total funding. Despite setting a high record, Malaysia still lags behind its neighbours like Singapore, the Philippines, Vietnam, and Indonesia.
Data from BNM show that transactions through electronic payment channels increased by 30% in 2021, reaching over 7.2 billion transactions. Looking deeper at payment trends over the years, it is clear that the adoption of Internet banking and mobile banks has grown sharply since 2019, with Internet banking transactions rising from less than 500 million to more than 2 billion transactions in 2021, and mobile banking transactions rising from 489 million to 1.4 billion.
High Job Demand for Fintech Professionals in Malaysia
Technology and transformation roles across industries in Malaysia remain in high demand as more companies work on improving their business processes and delivery following the advancement in digitalisation. The country’s job market demand in the next decade will shift from traditional labour to high-paying jobs that require technological skills.
With digital and technological advancements, employers are paying a premium for talent in these areas. Moreover, as Malaysia invests more into its technological infrastructure, the more it will see tech talent flooding into the nation, thereby growing its digital economy and pushing forward its Industry 4.0 goals.
According to the MDEC Digital Talent Report, come the year 2020, the nation is estimated to be in a shortage of talent in the digital industry — IT and computer science by 1,200, engineering by 2,900 and the creative arts by 4,900.
- With the advancement of new technology brings new challenges and opportunities, it is important that Malaysia’s higher education play a key role in producing graduates equipped with the skills that employers will need. The explosion of the internet and the mobile internet has catalyzed the rapid development of financial technology (Fintech). Malaysia is also moving rapidly towards a cashless digital society. The WeChat mobile wallet is now live – the platform’s first expansion outside of China and Hong Kong. Together with Alipay and Samsung Pay, these players will disrupt the payments space.
- The Fintech industry covers businesses that use technology within financial services to improve a product or service for customers and this covers everything from payment methods to setting up bank accounts. Demand for tech savvy candidates with experience with e-money and blockchain technologies and digital transformation skills remains high.
- Perhaps the greatest barometer of Malaysia’s comfort with technology is the rise of the e-commerce sector, which grew to represent 6.1 per cent of GDP in 2016, up from 5.9 per cent the previous year. This rise is expected to continue, as the ‘National E-Commerce Strategic Plan 2016-2020’ initiative aims to almost double the industry’s growth rate to 20.8 per cent by 2020. As a result of this, Malaysia is witnessing an upsurge in both mobile commerce and e-commerce and is adopting an increasing number of cashless forms of payment including blockchain technology, e-wallets and even mobile payment applications, leading to some 17 per cent of Malaysia’s fintech companies being e-wallets and social network giant WeChat entering the already crowded market.
- APAC Fintech solutions and services are expected to gross more than $70 billion in revenue by 2020, growing at a CAGR of 72.5%.
- According to Bank Negara Malaysia assistant governor Marzunisham Omar, by 2020, digital banking consumers in Asia alone are expected to reach 1.7 billion from the current estimated 670 million. Malaysia’s Islamic financing is most likely to ride on success of Fintech
- The Fintech Industry will introduce the use of AI systems, already used in social media networks, to manage the Digital Ecosystems of established financial institutions. This allow for a uniform consumer experience amongst diverse types of financial services.