How do you see the FSI solutions sector - both in Malaysia and Asia - in the coming 12-18 months?
Malaysia is a highly strategic market for us. Firstly, this is a market with a significant export oriented SME (small and medium enterprise) community and for Malaysia to grow, this SME market needs to be supported and provided with world class financial services. In this scenario, Intellect is well positioned to work with forward thinking Malaysian Banks to bring world class financial transaction management services in an affordable way to the SME community.
Intellect has successfully delivered these capabilities to our clients apart from the US and Europe but also to our clients in India, Middle East and Africa and have the holistic and ready-made solutions to implement these capabilities in an accelerated period of time and do it in a cost effective manner. It is this effort to drive down the cost of innovation that will make these services attractive to the SME community who in the past, could not afford these services like corporate cash management and liquidity management.
Bank Negara Malaysia, the Malaysian Central Bank has also given the industry a significant push in this area by pushing reforms and adoption of digital payments in a big way with the banking community in Malaysia.
In the retail banking space, Malaysia has proven itself to be receptive to innovative digital solutions due to its high adoption of internet connectivity. You will see services from local banks that are already world class, for instance one bank offers a complete bank loan servicing from application to disbursement within 10 minutes! This is definitely world class.
There is another bank that offers 'digital lifestyle' banking where the client can engage the bank online on a browser or their smartphones and then seamlessly interact with the bank in a kiosk, branch or have a bank's representative meet them with a connected tablet to execute the transaction. Truly something to be respected.
However in the past, these solutions have proven to be extremely expensive and requires a long deployment time as most of these solutions were custom built by local systems integrators.
We have changed this paradigm by bringing to market ready-made solutions that addresses the retail and corporate needs, with our strong CANVAS platform for omni channel digital delivery and backend integration, projects can be executed at much lower cost and risk levels. As CANVAS is built to be a Configure Once Run Anywhere (CORA) platform, our solutions come out of the box deployable over browser, tablet and smartphone. Any changes that need to be made, is only done once and automatically deployed over all touchpoints.
With this, the supports costs for maintaining the system is also dramatically reduced.
Another major factor impacting the market is also with the increased liberalisation of the banking sector in Malaysia, the level of competition from foreign banks will increase dramatically in Malaysia. Malaysian banks will have to up their game and rapidly bring to market cutting edge services and products to compete effectively.
As we already serve a majority of the global banks who are active in the APAC markets, we are in an interesting position to rapidly level the playing field by giving Malaysian banks the same level of technology as the global players and this leaves them to focus on go to market capabilities as a core competence while we provide the technology and systems expertise.
How does the Malaysian FSI solutions sector compare with those in Asia?
It has been said that the fastest growing financial services markets in Asia are Hong Kong and Singapore.
It has been our experience that markets like the Middle East and India are becoming powerhouses in their own right. The relative stability in Malaysia as compared to the other Tier 1 ASEAN countries and the innovative mind-set of its banking community does position Malaysia potentially a key player in financial services in ASEAN and as a major financial services partner to the ASEAN and China markets.
While major investments have been made in the retail financial services sector in the past few years, I feel that the priority has to shift to the corporate financial services space. With a large SME and corporate sector that serves the international markets, we need to enhance the level of corporate financial services available through the local banks. A cursory evaluation tells us that companies go to the local financial services institutions to obtain loans and credit facilities. But once the loans are secured, the money is transferred to their foreign banks for all the transaction services which drives fee based income for the institution. This is a serious revenue leakage for the Malaysian banks.
This typically happens as the transaction banking services from the foreign banks are seen as more mature and easy to use. If the Malaysian banks make the right investments in their systems over the next 12-24 months, this playing field can be made level.
On the retail side, I feel that access to loans and funding is also not as good as it can be. There is still a thriving unregulated loans market in Malaysia and this is not good news to the Malaysians who are trapped in this vicious game. We have already seen through services like RHB EASY that the loans application and execution process can be dramatically made more efficient by leveraging technology driven business processes and smart integration with the credit bureaus, BNM (the Malaysian Central Bank) and KWSP ( the Malaysian Central Provident Fund).
While earlier deployment of these capabilities were costly in nature, we feel that with our approach and capabilities, we can significantly lower the challenges in bringing these kinds of services in the Malaysian market. We already have implementation case studies in India and the Middle East where loans can be processed in under 3 minutes, which will make access to loans in the retail segment much more appealing.
Malaysia really still has the potential to leapfrog the rest of ASEAN and become a financial services powerhouse. It is really taking a world class mind-set and thinking "digital first" instead of "legacy first" that will propel our financial services sector.
What opportunities can Malaysia expect in banking technology spending in the coming months?
Gartner estimates that the Malaysian IT market will grow 7.5 percent in 2015 to RM65 (US$15.17) billion. This is a healthy sign and while there are no numbers attributed to the financial services industry that I believe, I feel that approximately 30 percent of this number will come from the financial services industry.
What is extremely clear though is that the main priority in IT spend in 2015 and 2016 in Malaysia will be in the area of digital enablement. All the major banks that we are talking to have significant plans in digital enablement for the next 12-24 months.
This view is further strengthened by the fact that BNM (Malaysian Central Bank) is driving major initiatives to drive the mass adoption of digital payments. Digital payments will be a key driver for Malaysia towards lowering the costs involved in payments processing and making real-time payments a reality in Malaysia.
Another positive trend that I believe plays in our favour is that most banks in Malaysia are in 'cost containment' mode so gone are the days of extravagant spending on IT projects. What the banks are looking for is clear and true capabilities, product and implementation approaches that optimise costs while reducing project related risks and time to market.
Most of the digital systems in Malaysia tend to be a 'spaghetti ball' of locally developed and international systems and still look at digital as siloed applications for browser, mobile and tablets.
We have spent the better part of the past 24 months building an industrial grade platform for omni channel digital service delivery and re-architecting all the relevant business processes to be omni channel digital enabled. This way, a client may find out about a product on the website and key in some details. This conversation can be continued securely via the bank's internet banking channel and application status updates delivered through email or SMS. Then in compliance with KYC regulations, the application can be finalised at a bank's kiosk/branch or even through a bank relationship manager's tablet with no data loss.
A key challenge of course is that most banks still hold on to "legacy first" thinking. We spend quite a bit of time sharing with local banks our experience and what is possible and nurture "digital first" thinking. At a group level we have even launched an executive programme with the Sa'id Business School of Oxford to run intensive short courses to teach techno-banking skills to leaders in the global financial services sector. The good take up of this course tells us that there is an immense desire to inculcate these skills at the very highest levels of the banking community.
Intellect is perceived as fairly recent solutions player: could you detail how the recent split (into Intellect Design and Polaris Consulting) will bring more value to the banking technology market?
Intellect through our Polaris Group actually has a rich 25 year history in providing IT services and innovation to the global banking community. We serve more than 200 key banks across the globe and are key partners in driving innovation in partnership with our clients.
Through the years, we have built a large international business that covers IT services and product delivery to our clients who are 100 percent in the financial services industry. This recent re-organisation just allows us as a company to invest in and grow our two distinct service and product delivery capabilities correctly.
As a product business, Intellect has matured at a dramatic pace and is now a comprehensive and industry leading provider of innovative and fully digital banking solutions across the globe.
Extensive investments have gone into making our platform leading edge in terms of being digital ready over the past 2 years and today that gives us and our clients a significant advantage in using digital strategies and services to grow their businesses and market share.
Which of your innovations excites you and what has been the reaction from the customers in Malaysia and Asia?
To me, Intellect is really about bringing the best in digital omni channel services to the banking industry in a cost effective and simplified manner.
We are able to optimise costs as we are an Asian based company and our costs are Asian based. We bring this cost advantage to our clients across the globe. But cost containment is not only about managing resource cost. We have invested in building a strong digital omni channel platform that we call CANVAS to enable rapid development and enhancements to our banking applications. We also have one of the largest intellectual property in banking which reduces the need to undergo extensive development activities while we deploy.
One of the related benefits that we bring is that due to the extensive IP that we have, our projects also require less changes to the existing host systems to drive new digital initiatives.
One example I can share is that typically when a bank wants to offer a new corporate service, let's say, Corporate Liquidity Management. While we provide the digital front end, typically the host needs to handle the processing of the Liquidity instructions which will require enhancements to the core banking system. This can be extremely expensive. Our strategy is to deploy our Liquidity Back End capabilities as a Product Processor, so as part of our engagement we will do the end to end instruction handling and processing management and digitally integrate the results and the journal entries to the host system.
This lowers cost and risk to the project and dramatically reduces the cost to deploy. And being one of a handful of CMMI Level 5 companies in the world, you know that the products have been developed to exacting world class standards.