Malaysian banks turn to financial wellness apps to compete as digital banks prepare to take flight

KUALA LUMPUR – There’s a hive of activity buzzing by digital banks who believe financial wellness and digital money management tools are at the forefront of growing market share in the new Engagement Banking Era. A recent Backbase commissioned study, conducted by Forrester Consulting found that 64% of Malaysian retail banking decision makers said their company is increasing spending on digital and engagement financial wellness initiatives – the highest figure in the APAC region; more than Singapore, Japan or Australia.

This comes following submissions for a digital banking license, which are now closed. The central bank is now in the process of selecting the lucky five to be granted one in the first half of 2022. Malaysia’s retail banking sector is now preparing for the onslaught of competition by offering customers a host of new digital features.

The retail banking sector in Malaysia is addressing this demand and ensuring banks can still compete in the digital space against the impending newcomers. According to the retail banking business decision-makers interviewed;

90% said they were planning to or actively expanding their digital money management tools
88% revealed they were planning to or actively expanding their financial wellness and digital money management tools, with almost half of them saying it was critical

Digital banks are coming for your customers

Backbase Regional Vice President in Asia Pacific, Iman Ghodosi, believes the next six months is a critical inflection point in the digital banking space.

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

“Malaysians want a higher level of customer service and flexibility for the financial services they subscribe to. They want to access their personal finances anytime, anywhere, through any channel, and have the necessary tools to manage it. Traditional banks may lose ground if they don’t innovate quickly.”

Financial literacy & protecting the vulnerable

One of the biggest motivations behind increasing money behind financial literacy isn’t profit, instead it’s the increased capacity banks have for caring and protecting their customers. Through these new channels of customer interaction, banks can now meet needs they previously couldn’t, by leveraging data analytics, AI, and mobile technology to make financial recommendations and improve engagement for users.

Trust in traditional banks in Malaysia is far higher than digital banks and initiatives such as these aim to increase their reputation.

For example;

64% of retail banking business decision-makers interviewed noted that preventing exploitation of vulnerable and older customers was in their company’s plans when developing such digital tools
62% revealed they planned to assist customers to build better financial habits
And 66% are going to offer financial literacy tools

Additional features that these digital and engagement apps will offer include spending analysis, scheduling bill payments, advanced pay and income smoothing, automated savings, and retirement planning tools.