SCxSC 2020: ECF and P2P platforms in Malaysia breach US$240 mil raised in 2020

• ECF, P2P financing funds raised in 2020 to date benefitting more than 2.5k MSMEs
• Demand for online brokerage services in 2020 increased 270% compared to 2019

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“Given it is a tech event, it is only fitting we use technology to connect,” says Securities Commission (SC) Malaysia chairman Syed Zaid Albar when giving his welcome remarks to the SC x SC Fintech Conference 2020. This marks the 7^th iteration of the annual conference that, due to the Covid-19 pandemic, is held virtually for the first time.

Held from 5 to 7 October 2020, the event covers discussions on a broad range of topics that include local fintech players navigating the ‘new normal’, investment behaviour in turbulent times, and the role of fintech in responsible fundraising and investing.

Zaid Albar acknowledges the difficulty of the current times. Yet there are silver linings amidst the gloom. For one, Syed notes that despite the challenging environment, investors have continued to show confidence in the Malaysian capital markets.

“We have seen a considerable increase in individual investor participation via digital investment managers, equity crowdfunding (ECF) and peer-to-peer (P2P) financing platforms, digital asset exchanges (DAX) and online brokers. So, the retail participation in this challenging environment has only increased,” he says.

The silver lining certainly shines bright here, with some fascinating discoveries. For one, the total funds raised on ECF and P2P platforms have broken the US$240 million (RM1 billion) mark in 2020, benefitting more than 2,500 MSMEs.

“Supporting this growth are investors under the age of 35, who account for 60% of individual investors. The presence of retail investors – constituting 84% of participating individual investors - further underscores the appeal of these platforms,” Zaid Albar elaborates.

Other numbers of significance

There are other positive things to note. This year, SC issued three more digital investment management licenses, totalling seven overall. “I am pleased to note that these digital investment managers have attracted many first-time investors… with close to 90,000 new accounts opened this year,” Zaid Albar continues.

In addition to that, demand for online brokerage services have also increased – the number of new account openings through online-only brokers, grew by more than 270% this year compared 2019. “That is an almost four-fold increase. Their average trading volume has also tripled this year, so once again, lots of silver lining.”

Zaid Albar goes on to say that SC approved three digital asset exchanges last year – and all three have now gone live with four digital assets permitted on trading on these platforms. Collectively, these DAXes have seen more than 400,000 accounts being opened, with the value of trades surpassing US$24 million (RM100 million) in the month of August.

According to Zaid Albar, the country has seen rapid adoption of digital technologies across every economic sectors. “Companies have relied on digital tools and means to reach out to customers, as well as to ensure uninterrupted operations due to the physical limitations imposed.

“The SC is continuing to work together with industry to leverage these unexpected but positive outcomes to advance our digital agenda for the capital market. One would caution, of course, about digitisation and that, is that as market participants scale up their use of technology and digital tools, we need to recognise the risks that come with increased technology adoption,” he adds.

“The SC will remain vigilant and will continue to enhance the market’s cyber resilience, particularly against cyber-attacks and online scams.”

Zaid Albar also took the opportunity to remind investors to exercise “common sense” during investing.

“Verify the individual or company offering capital market products or services - that they are on SC’s public register. Please also help us by reporting any suspicious activities. As you know the number of online scams is increasing, so investors must avoid being deceived in their search for yield in this low interest rate environment,” he explains.

“The SC remains committed to promote what we might call the Triple A capital market; Accessible, Agile and Accountable. That includes broadening the range of alternative fundraisings and investment opportunities as the market matures, and further market innovations are welcomed and encouraged.”