Why Malaysian banks are spending more on financial wellness apps

They spent the most amongst other markets in the Asia Pacific region.

Malaysian retail banks are scrambling to ramp up their digital and engagement financial wellness initiatives, according to a Backbase commissioned study, conducted by Forrester Consulting.

The study showed that 64% of Malaysian retail banking decision makers said their company is increasing spending on digital and engagement financial wellness initiatives – the highest figure in the APAC region even more than Singapore, Japan or Australia.

This comes following submissions for a digital banking license, which are now closed. The central bank is now in the process of selecting the lucky five to be granted one in the first half of 2022.

90% of retail banking executives said they are planning to or actively expanding their digital money management tools whilst 88% revealed they were planning to or actively expanding their financial wellness and digital money management tools, with almost half of them saying it was critical.

The reason for this massive increase, according to Backbase Regional Vice President in Asia Pacific, Iman Ghodosi, is the entrance of digital banks in the market. Ghodosi said Malaysia has five of the hottest digital banks waiting to explode into the banking scene and take market share next year which got traditional banks worried.

“Malaysians want a higher level of customer service and flexibility for the financial services they subscribe to. They want to access their personal finances anytime, anywhere, through any channel, and have the necessary tools to manage it. Traditional banks may lose ground if they don’t innovate quickly,” Ghodosi.

The worries of Malaysia’s traditional banks are not without merit because according to the study, 74% of retail banking decision makers said a lack of understanding of customer needs and outcomes is a barrier to their company implementing or further developing digital money management tools whilst 66% said outdated legacy technology challenges their plans. Another 64% said organizational silos make things difficult.

“Banking sectors in all countries face challenges, but it was surprising that Malaysia’s challenges were higher than average. There’s also a lack of understanding at legacy institutions in Malaysia on who owns the budget for these types of initiatives. Is it considered customer experience? Is it a corporate strategy? Or is it marketing? When in fact it is all three, and more.” Ghodosi added.