By Tsering Namgyal
The FinTech wind is blowing not just through the corridors of the large Asian financial centers of Hong Kong and Singapore. Other nations in the Asean region such as Thailand, Indonesia and Malaysia are also working on various initiatives to create ecosystems that help startups grab a share of FinTech opportunities, especially in the field of promoting financial inclusion to the millions of unbanked population in the region. In this first series on fintech in Asean, we speak to the president of the Fintech Association of Malaysia Mohd Ridzuan Abdul Aziz on various steps taken by the regulators and other stakeholders in making Malaysia a competitive hub for startups.
Q What are some of the initiatives in terms of regulations and policies announced by the Malaysian authorities including Bank Negara and the Securities and Futures Commission (SFC) to make the country a FinTech hub?
A: Both the Bank Negara Malaysia (BNM) and the Securities Commission have announced various initiatives.
Under BNM, they have announced and acted on the following initiatives:
- Setting up of a regulatory sandbox that allows experimentation of innovative and technology-driven business model in a controlled environment for up to 12-months period. This initiative is on-going and BNM have established a dedicated department named ‘Financial Development and Innovation’ with a director-level head who reports to the governor.
- Announced that digital bank guideline will be issued by Dec 2019 and application for virtual bank license will be opened thereafter.
- Concurrently, BNM is engaging the incumbent banks for the adoption of an open banking eco-system that would allow bank customers to consolidate different bank accounts information/details with one bank to facilitate seamless banking.
Under the Securities Commission, they have issued the following initiatives:
- Issued comprehensive guideline for the establishment of licensed Recognized Market Operator (“RMO”) that allows eligible operators to carry out crowdfunding activities (debt & equity), digital investment management and digital asset exchange activities.
- A smart-contract blockchain-based project named Castor where all RMO operators to report their regulated activities via Castor platform where blockchain use cases can be developed in an effort to create a secured, immutable yet easy-to-use private-public platform between the industry, regulator and other relevant stakeholders.
- Initiated a discussion paper on fundraising via ICO, STO or other types of tokenization that would augment well with the RMO eco-system mentioned above.
Q. Are the regulators forward-thinking in terms of promoting fintech and blockchain startups in the country? What do you think they need to do in order to create a conducive environment for fintech start-ups?
A: First, both financial regulators are relatively forward-thinking, proactive and comprehensive in enhancing the development of fintech, including use cases for blockchain technology in Malaysia. They are focus on identifying genuine companies that would be able to contribute positive value for Malaysia by focusing on specific areas such as (a) suitable talent, including ability to grow and scale (b) sufficient funding to sustain their business model and value proposition, (c) able to create unique branding that add-value to the Malaysia digital economic initiatives, (d) implement technology with innovation that value-add to all stakeholder and (e) creating a business environment that’s positive internally and externally.
3. Why do you think the FinTechs should choose Malaysia as their launchpad?
A: First, given the above initiatives and with coordinated supports from Malaysia Digital Economy Corporation (MDEC) and various other government agencies, Malaysia has the right elements to become a competitive fintech hub for the Association for Southeast Asian Nations (Asean). In addition, the cost and ease of doing business in Malaysia are being improved as the government is focused on making fintech one of the key elements to catalyze the digital economic initiatives in making Malaysia a high-income nation in the next 5 to 10 years.
Second, the level of collaboration between private and public sectors focusing on the following key areas:
(a) nurturing and sustaining relevant talent to grow and scale businesses, (b) providing relevant funding to sustain fintech business model and value proposition, (c) ability to facilitate the right branding that add-value to the Malaysia digital economic initiatives, (d) expediting the implementation of technology-driven innovation that value-add to all stakeholder, and (e) conducive business environment in place for fintech companies to take advantage of.
4. If you could name some of the most exciting sub-sectors in fintech (eg financial inclusion) that are thriving in Malaysia?
A: Some examples include:
(a) Islamic and ethical fintech
(b) digital and open-banking
(c) Health-tourism eco-system
(d) Online-only remittance services.
Q. What are some of the work that Fintech Association of Malaysia is doing to promote FinTechs in the country?
A: First, FAOM has a clear vision based on a five-pillar strategy:
(a) nurturing and sustaining relevant talent to grow and scale businesses
(b) providing exposure and path for our members to the relevant funding/grants/financing to sustain FinTech business model and value proposition
(c) helping create right branding that add-value to the Malaysia digital economic initiatives
(d) expediting the implementation of technology-driven innovation via collaboration with government agencies, regulators and policymakers, and
(e) sharing experiences from other countries experiences in establishing conducive business environment that’s positive to internal and external environment for our members to learn from.
Second, as a national level body, we have established great relationships with all relevant stakeholders and are well-placed are well-placed in various policy-making, government agencies in executing our 5-pillars strategy for our members and Malaysia FinTech industry. We are now focusing on the next level focus of enlarging international network and connectivity to enable our members and Malaysia in general to position ourselves in leading certain areas related to Islamic/ethical fintech that clearly will give Malaysia an advantage and value-add, going forward.