DIGITAL TRANSFORMATION
Why eKYC is Key To Unlocking Malaysia’s Digital Banking Revolution
I’ve moderated and sat in a fair
number of fintech panel discussions over the years, a question that is
brought up 9 out 10 of every panel discussion is “What do you think are the key technology shaping fintech and banking in Malaysia?” and some variation of that same question.
If you’re like me and have attended too many fintech conferences,
the answers will come as no surprise to you. The common answers are
often; blockchain, artificial intelligence, open banking, virtual
banking, and mobile payment.
Yet despite the importance of eKYC and digital identity, very rarely
do you hear any panelists in these conferences pointing out the impact
of eKYC and digital identity in Malaysia’s banking and fintech
ecosystem.
A study conducted by Mckinsey shows that there is a potential cost
reduction of 90% in customer onboarding cost by enabling eKYC. The same
study also indicated that digital identity could potentially enable 1.7
billion of the unbanked population to gain access to financial services.
A separate study by Refinitiv further breaks down the cost KYC, much
of the cost is largely attributed to staffing costs, which supports
that idea that digitising the KYC process could significantly reduce the
cost of customer onboarding.
It is a fact that has not gone unnoticed by Bank Negara Malaysia, in
2017 the regulator issued the eKYC framework for remittance companies
and subsequently in 2019, a similar draft was issued for money changers.
Though there’s development particularly within the Money Services
Business (MSB) space, the regulator has not made any formal announcement
for eKYC guidelines for the wider financial services sector.
There have been some nuggets of information though, during the
MyFintech Week earlier this year, BNM’s financial development and
innovation department director Suhaimi Ali mentioned that there are
currently 11 banks trialing eKYC solutions.
Suhaimi did not disclose further the nature of the trial nor the
details of the provider but credit reporting agency CTOS who is also
present at the event shared in a separate session that they are trialing
their eKYC project with several banks and they are looking to enter
Bank Negara Malaysia sandbox.
Neither party has stated they are referring to the same thing,
though there’s a good chance that the snapshot below could be what it
looks like.
With Malaysia’s population becoming increasingly digital and eKYC
technology becoming more affordable, it would be very ideal for Bank
Negara Malaysia to release eKYC guidelines for the wider financial
services sector.
When you consider those factors alongside the fact Malaysia will be
dishing out virtual banking license soon, it’s clear that eKYC
regulation for the wider industry is inevitable.
But Malaysia doesn’t have to reinvent the wheel, there are already
plenty of countries who have launched digital IDs and eKYC, we just need
to learn from them.
Image Credit: Mckinsey
Meanwhile, Muhammad Ghadaffi Mohd Tairobi, the Vertical Director for Banking, Financial Services & Insurance acknowledges
that there are many benefits of Digital ID from a business perspective,
as it will save time and money by reducing it to over the counter
transactions, increasing productivity and enabling seamless and digital
driven experiences for customers.
He believes that eKYC then becomes an important process for the
banks to perform customer on-boarding faster compared to traditional way
of over the counter.
However, Ghadaffi’s key concern was on managing digital ID fraud. He said,
“This is why eKYC solution is in compliant with Risk Management in
Technology (RMiT) and Data Residency and Sovereignty requirements to
assist the BFSI industry in the successful implementation of this
initiative”
https://klse.i3investor.com/blogs/muze/2020-02-04-story-h1482038686-NETX_5G_The_National_Digital_ID.jsp
