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Who is the biggest winner from the growth of fintech?

The biggest beneficiary from the rapid growth of the fintech industry is clearly the consumers. At least, that is the original intent of the rise of the fintech industry.

Four out of five Malaysians have used fintech in the past year, an Asian Institute of Finance (AIF) study revealed. It is undeniable: The explosion of fintech has certainly disrupted the financial services sector and changed the way customers approach their finances.

Fintech businesses have been targeting the end-customer directly, bypassing traditional banks and deepening the impression that they are disrupting a sector ripe for innovation. It is not surprising that 82% of financial institutions in Malaysia are concerned about the threat that fintech poses to their business, according to a PricewaterhouseCoopers (PwC) study titled, "Catching the FinTech Wave".

iMoney Group CEO Mitul Lakhani

The same AIF study also found that Malaysians have a high level of trust (92%) with the fintech industry in the country. This is further enhanced by the active role played by the government and the Bank Negara Malaysia (central bank) in promoting and facilitating fintech businesses and their benefits to the general population. The truth is, fintech thrives on the inefficiency of traditional financial institutions and it moves at an almost frenetic pace to fill that gap.

Here are a few core objectives of fintech businesses with respect to consumers:

1)    Increase accessibility of financial products and services for consumers through predominantly digital distribution channels

Fintech makes financial products and services more accessible to consumers via direct digital distribution and engagement networks that leverage the smartphone behavior patterns and Internet penetration in Malaysia. This enables consumers with limited awareness and access to financial products and services to learn, apply for and secure financial products and services as well as continue their relationship with their provider from the safety and comfort of their homes via their smartphones. This is particularly relevant in reaching a larger segment of the population, particularly those in rural areas and East Malaysia, where existing providers have limited physical coverage. 

2)    Offer tailored and customized products and services that meet the consumers’ needs

Gone are the days of one-size-fits-all financial products and services. With the advent of more sophisticated risk profiling models, aggregation of consumer data points and access to online consumer behaviour patterns, fintech businesses are better positioned to offer consumers customized and tailored information, products and services.

With this level of customization, applying for financial products and services is made much simpler by matching the right product not just based on the customer’s requirements, but also based on their demographic profile and habits. This will increase their probability of qualifying for the product or service as opposed to applying for a product without having any indication of their chances of approval.

3)    Adopt cost-efficient business models to offer better value for money to consumers

Competitive services and rates are also possible because fintech companies are not encumbered by legacy costs and processes. Combined with cutting edge technology, this allows them to be more agile, focused, and innovative in their products and services resulting in better value for money for consumers.

4)    Encourage and enhance consumers credit and financial well-being and habits

In this digital age, it becomes more important for consumers to be empowered in their financial decisions. Financial literacy can be improved with better education through the Internet and this allows consumers to be more proactive in managing their money.

Furthermore, fintech drives innovation of products and services like checking of credit score online (such as the iMoney CreditScore), personal finance management through apps and robo-advisory services that help consumers manage their monthly budget, cultivate better spending habits and encourage healthy saving and investment decisions.

In Malaysia, fintech is starting to grow out of its infancy stage to toddlerhood, with exciting and innovative solutions to address financial and socio-economic related problems, such as the availability of funding for entrepreneurs and SMEs to start and grow businesses, the availability of affordable mortgages for first-time home buyers and low insurance penetration.

The rise of alternative funding platforms seeks to address some of the challenges around availability of funding for first-time home buyers (for example, the FundMyHome initiative recently launched by the government), entrepreneurs and SMEs, while insurtech businesses and other initiatives by insurance providers aim to increase penetration of insurance products among Malaysians. 

The healthy competition between financial institutions and fintech entrants will continue to drive innovation for the benefit the consumers. This competition has already seen many banks and fintech start-ups collaborating directly across the fintech ecosystem and banks also undertaking digital initiatives.

Finally, a conducive regulatory environment will continue to encourage and drive fintech innovation amongst the new entrants as well as the incumbent financial services providers ultimately benefiting the consumer.

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