More Islamic Banks Need To Offer FinTech Solutions

KUALA LUMPUR, March 20 (Bernama) -- More Islamic banks need to come on board in offering financial technology (FinTech) solutions as this will distinguish Malaysia from the rest of the world.

AmInvestment Bank Chief Executive Officer Raja Teh Maimunah Raja Abdul Aziz in stating this, also said the country was however on the right track towards this goal, led by Bank Negara Malaysia (BNM).

"When current Governor Datuk Muhammad Ibrahim took office, he had in his first public address at the Global Islamic Finance Forum 5.0 in May last year, spoken about digital banking.

"He said FinTech is challenging the status quo of the financial industry and that new business models would emerge.

"He also said the delivery channels would challenge existing norms and transaction costs would be reduced and rather than look at the FinTech revolution as unwelcoming, financial institutions ought to embrace it as an opportunity," she added.

Raja Teh Maimunah's comments came during a 30-minute chat titled, Malaysia's Unique Mix: Startups, Banks Islamic Finance, at the two-day Finnovasia Conference, starting today.

She also highlighted that Muhammad in his speech also mentioned that between 10 per cent and 40 per cent of overall banking revenue could be at risk by 2025 due to financial technology or finTech innovations.

Maybank, RHB and CIMB are three Malaysian banks that have been quick in embracing FinTech and currently working with related companies to enhance their digital solutions for customers.

Raja Teh Maimunah said although the trend is encouraging, there are some smaller Islamic banks that do not realise that the digital solution is the only way for them to grow.

"As they are small and came late into the game, they can't grow as quickly as the conventional bank in terms of branch networks and so forth.

"FinTech is the solution for this. Unfortunately in many instances, Islamic banks in Malaysia are not a stand alone, but subsidiaries of conventional banks and tend to be led by them," she added.

On the development of the industry among startups, she said mergers and acquisitions would allow them to grow.

"At the end of the day, it's a business for startups with a highly competitive landscape that needs a good business model.

"Based on research that I have read, most don't last beyond 20 months and there are even companies that close down due to a lack of funding, despite having brilliant ideas," Raja Teh Maimunah said.

She cited Malaysian-based subscription video-on-demand service, iflix, which went to the market three times to raise funds, as an example.