Cloud ⍺ Series #11: Three Digital Banking Trends to Watch in 2021

Nov 10, 2020
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The pandemic has accelerated digitisation in industries, and financial services are no different. Biometrics, personalised services and increased cybersecurity controls are set to bring Malaysia’s banking sector into the future.

In 1994, Bill Gates said that “banking is necessary; banks are not”. 16 years later, his words remain true.

The banking industry has seen an eruption of change over the past two decades: from cryptocurrency to blockchain, from biometric log-ins to customised services. Afternoons spent lining up at the bank to set up a new account are now only a vague, unpleasant memory.

Digital banking is set to impact individuals and enterprises across the country. GovInsider examines three (3) trends set to transform the banking industry.

Biometrics

Passwords are easily hacked or forgotten, and so are not a very good way of securing bank accounts. Enter a new way of identity authentication: biometrics. These verify customers’ identities with fingerprint scanners or facial recognition technologies, so log-in information can’t be stolen or duplicated.

In 2019, Hong Leong Bank introduced an eToken that allows their corporate and SME customers in Malaysia to authenticate log-ins and approve payments with facial recognition tech. This eliminates the need for a physical token.

The eToken will also be integrated with Hong Leong Bank’s mobile banking app to create a more seamless experience. Customers can confirm transactions with just a “single tap”, according to the bank’s website.

This new service is expected to have a significant impact on customers’ banking experience. In the financial year before the app’s release, Hong Leong Bank processed more than 27 million transactions through its business internet banking platform. More than eight out of ten corporate and SME transactions were completed online.

This initiative was driven by the bank’s commitment to innovate around customer needs and preferences. “The introduction of facial recognition eToken is based on our understanding and insights on customers’ pain points when using a physical dongle and conventional passwords, which can be misplaced or forgotten,” said Yow Kuan Tuck, the bank’s Managing Director, Business Corporate Banking.

Besides using physical biometric features to authenticate log-ins, banks can also use behavioural biometrics to detect potential fraud, wrote BiometricUpdate.com. Banks can study how a customer usually interacts with their account, such as what time they usually log in, and the average value of their transactions.

The behavioural biometrics software alerts security teams on any drastically different behaviours, which may be a sign of a fraudulent transaction. They can decide to block the transaction or ask for additional authentication from the user.

An upside to behavioural biometrics is that there are no privacy concerns, according to BiometricUpdate.com. Each user’s behavioural data is converted to a mathematical representation, which holds no value for criminals.

Personalised services

Could a banking app suggest personalised promotions the way Netflix gives movie recommendations? With transactions moving towards more online, it’s much easier to observe customers’ cashflow, searches, app usage, location and even the demographic variables, wrote Silicon Valley Innovation Center. This information holds precious insights into customer behaviour.

Singapore startup Crayon Data’s Artificial Intelligence (AI) engine allows businesses to suggest updates and services that suit customers’ needs and lifestyle. This helps businesses engage with customers better, which improves response rate, loyalty and frequency of card usage.

Crayon Data focuses on serving lifestyle-related businesses, such as banks, telcos and retailers. These industries have access to multitudes of customer data, but don’t have the ability to make the most out of them, wrote The Business Times.

The startup’s simplified solution analyses banks’ data to create a personalised profile for each customer, based on their preferences. This can be done within a week. Banks can then use this profile to conduct more targeted marketing.

Using blockchain to address cybersecurity concerns

Banks hold reams of sensitive financial data. It’s no wonder that they experience 300 times more cyberattacks than other types of organisations.

Mobile and online applications have made payments easier, but they bring inherent risks. 78 per cent of banks in the Asia Pacific claims that real-time payment platforms have led to more fraud cases, according to a Jumio report. The report highlighted the need for additional identity and authentication technologies.

Additionally, Verizon found that web applications were the number one threat pattern for financial services data breaches in 2018, wrote Codete. Accenture found at least one known security risk in all 30 of the major banking applications it studied.

The most common causes of security vulnerabilities are insecure data storage, insufficient authentication, and direct code tampering, according to Codete. Internet of Things (IoT) presents yet more risks to digital banking. As nations move to become smart and connected societies, the large number of devices will increase the attack avenues for cybercriminals. Protecting these devices is even more urgent given the extensive volumes of personal data they collect, Codete reported.

TM ONE, Telekom Malaysia Berhad (TM)’s enterprise and public sector business arm, uses blockchain to address these cybersecurity issues. Its Blockchain Secure Authentication (BSA) is a new password-less authentication method, allowing users to securely access their online accounts and to securely approve an online transaction over web or mobile. It does not require a password for authentication, simple to use, extremely secure and almost impenetrable solution, represents the next layer of defence in securing online businesses.

Blockchain is a secure way of storing digital information since its records cannot be deleted. TM ONE has partnered with Korean tech company FNS Value Co to become the sole distributor to rollout BSA in Malaysia and Indonesia, says Thaib Mustafa, Head of Cybersecurity services at TM ONE.

It is the first patented authentication solution using blockchain technology in the world. BSA provides a secure and trusted access to the web and mobile services – protecting customers’ personal data and information; prevent security breaches, data leakages, ID and Password brute-force credential or digital identity attacks, he added.

The pandemic has accelerated digitisation in all industries, and financial services are no different. Biometrics, personalised services and increased cybersecurity controls are set to bring Malaysia’s banking sector into the future.

eKYC is Key to Unlocking Malaysia’s Digital Banking Revolution

Sep 05, 2019
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A study conducted by Mckinsey shows that there is a potential cost reduction of 90% in customer onboarding cost by enabling eKYC.

I’ve moderated and sat in a fair number of fintech panel discussions over the years, a question that is brought up 9 out of 10 in every 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 who 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 electronic Know Your Customer or eKYC and digital identity, very rarely you will hear any panellists in these conferences pointing out the impact of eKYC and digital identity in Malaysia’s banking and fintech ecosystem. 

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 of KYC, much of the cost is largely attributed to staffing costs, which supports the 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 is development particularly within the Money Services Business (MSB) space, the regulator has not made any formal announcement on 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.

Meanwhile, Muhammad Ghadaffi Mohd Tairobi, the Vertical Director for Banking, Financial Services & Insurance of TM ONE 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 TM ONE 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”.

Written by: Vincent Fong, Fintech News

Riding the Fintech Wave in Malaysia

Aug 06, 2019
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The BFSI industry is being redefined with the evolution of FinTech. Despite being new, the growth rate is phenomenal and it is expected to remain so over the coming years.

Financial Technology, or FinTech is the new technology and innovation that aims to compete with traditional financial methods in the delivery of financial services. The Banking, Financial Services and Insurance (BFSI) industry is being redefined with the evolution of FinTech. Despite being new, the growth rate is phenomenal and it is expected to remain so over the coming years.

investment in fintech

In Malaysia, payments, wallets, and cryptocurrency dominate the FinTech market, making up close to half of the market share.

Fintech market share

It is also making presence in Malaysia, although still in its infancy. The rise of digital consumer also contributes to the growth of FinTech in Malaysia.

The rise of digital consumer

The are several factors driving the growth of FinTech in Malaysia

  1. Regulations lowering barriers
  2. Becoming a digital world
  3. Millennials entering the workforce
  4. Growth of social media
  5. Technology advancements have lowered entry barriers
  6. Consumer demands and expectations are changing

What is Robo-Advisory?

Robo-advisory is a platform where users input preferences, which are analysed to recommend the most suitable portfolio. This is done via an automated and algorithm-based allocation.

Bank deposits accounting for more than one third of total financial assets of Malaysians, indicating opportunities for new robo-advisory players to tap into this market.

The Securities Commission has also introduced the regulatory framework to facilitate Digital Investment Management, and with only one player currently in the Malaysian market, there is wide room for new players to come in. From 10,000 robo-advisory users in 2018 to have exponential growth to 60,200 robo-advisory users by 2022.

What is InsurTech?

Insurance Technology, or InsurTech refers to the use of technology innovation with the purpose to reduce costs and create efficiency from the current traditional insurance industry practices.

The potential for the InsurTech is huge, where players can venture into the following areas:

  • AI, Machine Learning (ML) – Big data Analytics will enhance underwriting accuracy, claims management and pricing.
  • IoT – behaviour based insurance telematics in motor insurance, telematics and sensors in property and casualty management, biometric wearables for real-time health monitoring and diagnostics in Life & Health insurance
  • Blockchain Technology – vast potential in insurance technology, including contract management and identify theft protection.
InsurTech

What is RegTech?

Regulatory Technology, or RegTech can be described as the use of technology to facilitate and enhance compliance in regulated industries.

Currently, 45% of Malaysia Fintech startups says that it is difficult to conform to local regulators.

With RegTech, provides solutions to ensure that users are up to date with the changing regulatory requirements by providing technologically advanced solutions to the increasing demands of compliance within the financial industry.

It helps to effectively and efficiently analyse the regulatory environment using algorithm, AI and ML.

RegTech activities include:

  • Anticipating future issues through tracking and predicting problems in compliance.
  • Uncovering and discouraging non-compliant behaviour in the organisation.

What is Artificial Intelligence (AI) applications in FinTech?

Artificial Intelligence (AI) is the creation of intelligent machines that perform various cognitive tasks such as speech recognition, learning, planning and problem solving.

Machine Learning (ML) is one application of AI which gives machines the ability to learn and adjust new information without being explicitly programmed or monitored.

Deep Learning (DL) is another application which uses ML techniques to imitate human decision-making.

Applications of AI technology in BFSI industry include:

  • Virtual Financial Assistant
  • Predictive Budgeting Tools
  • Facial and Emotion Recognition and
  • Detection
  • Products recommendations
  • Automated Insurance Underwriting
AI technology in BFSI


Infographic View

Malaysia’s 5G push

Apr 23, 2019
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Out of the different industries, respondents from Malaysia felt that manufacturing, financial services and public safety would benefit the most from the roll-out of 5G in that order.

2019 will be the year where the transition from 4G to 5G in Malaysia is expected to kick into higher gear. By September, the National 5G Task Force set up by the Malaysian Communications and Multimedia Commission is expected to recommend a holistic strategy for 5G deployment in the country.

As the 5G era dawns, the promise of massive bandwidth, lower latency and large connected device ecosystems is prompting an R&D flurry as companies explore new use cases. From smarter cities to futuristic factories and autonomous vehicles, all technology categories will be upgraded by 5G.

A report by IHS Markit predicts that 5G, which could be up to 100 times faster than 4G, will enable $12.3 trillion of global economic output by 2035.

Within Malaysia, Cyberjaya and Putrajaya will become the first 5G testbeds. “The aim is to explore the practical uses and modes of implementation of 5G as well as to learn and iron out policies, regulations and spectrum planning of 5G,” said Communications and Multimedia Minister Gobind Singh Deo in October.

In a survey produced by MIT Technology Review alongside Huawei last year, some 69% of respondents from Malaysia said they expected 5G to be available by 2020. Survey respondents are also proactive regarding the 5G transition, with 65% already discussing how it will impact their business, and 54% investing in technologies that can be deployed when 5G has been launched.

Currently, Malaysia ranks 14th in the Economist Intelligence Unit’s Automation Readiness Index from 2018, which measures countries’ preparedness to access the opportunities, and fend off the challenges, of automation. That’s two spots above where the country was previously. The country has a particular strength in education policies where strong career guidance provisions and counsellors were available in almost every Malaysian school.

Unique features of Malaysia’s digital transformation also include its burgeoning partnerships with China, the regional powerhouse, notably collaborations with Alibaba in AI-driven solutions to traffic congestion in Kuala Lumpur. It is also a testbed for Tencent as Tencent begins exporting its WeChat digital wallet.

Out of the different industries, respondents from Malaysia felt that manufacturing, financial services and public safety would benefit the most from the roll-out of 5G in that order. However, uncertainties do remain with some 82.86% saying that infrastructure upgrade costs or complexity will be the biggest challenge while some 48.57% think that a lack of business models to integrate 5G use cases is the biggest hurdle.

Hazami Habib, CEO of the Malaysian Academy of Sciences, sees a number of use cases for 5G when it does arrive. “Remote control of robotics in healthcare and manufacturing can be the future for Malaysia once 5G is in place,” she says. “There are pockets of AI initiatives and testbeds for IoT, and with 5G these can be launched and applied. The development of IoT systems for food traceability and halal logistics are all in the works.” The halal economy is a major global segment, with 1.5 billion consumers, set to rise to 2.2 billion by 2030, says Habib.

There is no doubt that technology always takes time to mature and 5G is no exception. While there has been a lot of talk about new network capabilities, commercially 5G is still in its infancy. For Malaysia to truly become a leader in the space, a collaborative 5G ecosystem between governments, businesses and telcos is key. Thankfully, that is already under way.

Next Generation of Cybersecurity in the Digital Transformation Age

Apr 10, 2019
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Security is crucial to inspiring consumer confidence and to achieving commercial success for new emerging technologies. However, the world of cybersecurity is ever-changing, with new threats and countermeasures emerging daily.

Executive Summary

Security is crucial to inspiring consumer confidence and to achieving commercial success for new emerging technologies. However, the world of cybersecurity is ever-changing, with new threats and countermeasures emerging daily.

With organisations actively adopting cloud-based delivery models and committing to digital transformation, the traditional cybersecurity models becomes unsustainable and obsolete. How can the businesses enable their digital transformation journeys in a secure and compliant manner?

Table of Contents

  1. Executive Summary
  2. Introduction
  3. Cybersecurity setting the Cyber-scene
  4. Hyper-connectivity in a data-driven world
  5. Issues, challenges and risks
  6. The attacks are closer than you think
  7. Data Breach & Encryption Attacks
  8. Future of Cybersecurity in the Era of Digital Transformation – Next Generation Cybersecurity Threats – is your business ready for it?
  9. Regulatory Requirements
  10. Managed Security Solution Offerings by TM ONE
  11. Summary and Final Note – Step into the future of your business.

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