‘Do it first and ask for forgiveness later’

• Malaysia should be innovator of regulatory policies says fintech panel
• Era of banks as only money-lender & deposit-taker will eventually no longer be relevant

THE reign and legacy of conventional financial institutions are being shaken by today’s disruptive fintech startups. At the 12^th -13^th May Cyberjaya Startup Summit 2018, six panellists came together to discuss Fintech in Malaysia and shared their experiences, insights and hopes for the fintech landscape going forward.

The panellists were Sam Shafie, the CEO and cofounder of the pitchIN, Naysan Munusamy, the co-founder of MoneyMatch, Mehedi Hasan, founder and CEO of MyCash Online, Nazroof Hakim, CEO of BillPlz, Ling Kay Yeow, partner from Ernst & Young’s Advisory Services, and Hanson Toh, the head of strategy at Boost, which is an e-wallet developed by Axiata Digital Services.

Diving straight into the topic, Shafie acknowledges the good work the central bank, Bank Negara and Securities Commission (SC) Malaysia have done. “Many of us see how things are done overseas and think our regulators are not forward minded. But actually, they’re just being careful. Give them some time, you will see a lot more innovation in this space.”

Also as cofounder of WTF Accelerator, Shafie shares that they were the first investors in MoneyMatch and MyCash Online who were from the accelerator’s first batch. MyCash Online is a platform for migrant workers to carry out transactions with operations based in Malaysia, Singapore and more recently, Australia. Meanwhile, MoneyMatch is a cross border payments platform for remittances and exchange of foreign currencies that exploits the inefficiencies in the current financial system.

With the use of technology, the agility of these startups in providing financial services may just restructure the way banks carry out business. Billplz has developed a simple cash solution to send bills and collect payments in real-time. Nazroof, shares about the company’s standard operating procedure, “We are all about providing the fastest solution with the lowest cost possible.”

Meanwhile, one of the panellists says he has fully immersed himself in fintech even before it became a buzzword. Ling from Ernst & Young is equipped with 19 years’ experience in financial services and was one of the first few employees in a tech company during the dot-com boom until it shut down.

The wealth of knowledge and experience he gained throughout that duration led him to his current role at Ernst & Young as a tech expert in financial services which he has held for about a decade. He says that fintechs must innovate to carry out functions more efficiently using digital technology. “With new blood entering the market, new ways are being thought of. But it’s important that the younger generation work together with the old players that have been in the industry for the past 20 years.”

What’s next for Malaysia’s fintech?

Addressing the recent shift in Malaysia’s political climate, the speakers talked about some of the changes they would like to see happen within the fintech scene, especially now that Dr Mahathir Mohamad is prime minister of Malaysia again and is known for his pro-technology stance.

In terms of policies, Shafie says some of the policies introduced by the previous government are good and relevant to the startup ecosystem. “When the last budget was announced, ministries were encouraged to set up their own regulatory sandboxes to allow for companies to innovate although they don’t necessarily fall under the present purview of regulatory law.”

This particular government initiative has proven helpful for MoneyMatch adding that the current government should carry on with it. “When they first started, it seemed almost impossible for them to pull off their business idea. But with the Bank Negara’s Malaysia Sandbox, MoneyMatch have managed to launch,” says Shafie.

However, he looks forward to Bank Negara and SC being more forward-minded. “It would be great if Malaysia could be an innovator of policies instead of a follower. Why wait for other countries to introduce policies and follow suit?”

With Malaysia’s rich expertise in Islamic Banking and Takaful, Ling puts forth that Malaysia should move towards a more collaboration-based economy and trade knowledge instead of just goods. “We should work together with countries such as Switzerland and Germany to share our Islamic financial capabilities.”

Moreover, Ling also talks about cross-industry collaboration between financial institutions such as banks, insurance and wealth management companies with telcos, retail and oil and gas companies. “New paths must be opened. Soon, the license that banks have as the only money-lender and deposit-taker in the world will no longer be valid.”

Additionally, Nazroof shares that the concept of fintech itself is not new. “Innovation in the financial and banking sector has always existed. But what I would like to see in the future is payments being fully-owned by Malaysians.” He is confident that it is possible to locally develop solutions that are better and more cost effective than AliPay.

Licensing first or ask for forgiveness later?

Since licensing is a major concern for fintech startups, the panellists had a lot of advice to share. Naysan’s advice to startups who cannot afford lawyers is to be well-informed and spend time on studying and understanding Bank Negara regulations.

In terms of addressing queries, he says the Financial Technology Enabler Group (FTEG) set up by Bank Negara as part of their regulatory sandbox have been very receptive and helpful. “All these Bank Negara policies are available online. Do your research and reach out to them if you have any questions,” he says.

As for fintech startups who are looking to acquire licensing, Nazroof has some valuable advice. “Obtaining licensing is costly. You need to know whether or not the license is useful and necessary to your business.” Since the fintech industry is still at nascent stage, Nazroof says there is still a lot of grey area in terms of regulation.

“The fintech game falls within a regulated environment and compliance is important. But if you can find a more efficient way to meet regulation compared to your competitors, you have found your space,” Ling says. He adds that regulators do not intend to impede the industry and it is up to fintech startups to be creative in their solutions.

Shafie shares that when MoneyMatch was first accepted into the WTF Accelerator, the startup did not have a regulatory license. “They validated their business idea by doing it first and it took a lot of guts.”

Although Shafie was reluctant to encourage fintechs to carry on without licensing, Nazroof had no qualms suggesting, “Do it first and ask for forgiveness later.”

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