Fintech or Financial Technology is possibly one of the most prominent buzz words which are going around in recent years. What is really going on with Fintech which has taken the world by storm and growing so exponentially?
Origins of Fintech
This phenomenon actually comes around and exists because of the internet. It has grown so big, it was reported that fintech investments in Asia-Pacific grew from US880 million to US3.5 billion from 2014 to 2015. This amount is expected to breach US40 billion by 2020 across the world which means Malaysia will be part of this rapid movement.
What is Fintech?
The underlying concept of Fintech is that this refers to the type of business that offer financial services using modern technology. In most cases, many fintech companies are start-ups and are usually disruptive. In other words, their sheer existence will affect the current corporations that are offering similar services but are less dependent on technology (which gives these start-ups the upper hand).
One of the most popular examples of fintech is ECF or equity crowdfunding. In Malaysia, several ECF operators have been approved to offer funding platforms for the SME and entrepreneur businesses.
Another area that has been gaining a lot of traction is P2P or peer-to-peer lending. This is a type of online marketplace where businesses can meet with lenders without having to go through the conventional firms like banks. ECF and P2P lending are areas that have caused a lot of disruptions in the banking industry.
Is Fintech regulated in Malaysia?
The Malaysia’s Securities Commission is the regulating body in the country for fintech firms. The Guidelines on Recognised Markets was amended for this market. To allow companies in the SME sector get into debt funding, a regulatory framework for P2P lending was introduced. Among the highlights of this regulation include:
- Owners are only allowed to raise money to fund projects and businesses and not for monetary purposes
- a ‘fit and proper’ test must be taken and passed by operators of P2P lending
- Predatory lending is not allowed. This means that the financing rate cannot be over 18%
Fintech firms in Malaysia
As mentioned, most fintech firms (operators) in Malaysia are startups. The Securities Commission approved several operators which among them include:
- NextMoney KL – This is one of the fastest growing fintech collaboration platform in the world today and is the Malaysian chapter of this firm.
- pitchIN – A popular crowdfunding platform which is reward-based.
- Moneymatch – One of the notable fintech start-ups where the users get to save on transactions when they exchange currencies at midrate
- CurrenSeek – Users use this platform to find which outlet has the best exchange rate so they do not need to succumb to hidden costs
- Skolafund – A popular platform among students. They are able to find scholarships for higher education fees
- iMoney.my – An alternative channel for users to compare and apply for loans and credit cards, among other financial services
The future of Fintech in Malaysia
Malaysia’s start-up industry has been growing very rapidly in the last 5 years at least. There has been a lot of developments which have been very positive especially from the response from the customers and service providers alike. Malaysia’s fintech transactions in 2017 was reported at US6.37 million.
This is a far cry from the global transactions which totaled more than US760 billion. But that is expected to grow by leaps and bounds in the coming years. This is compounded by the innovations and new products with more fintech players entering the market and as more firms are starting to take notice of what fintech can do.
It is after all, a whole new platform that will help companies in the SME sector (which collectively form the largest group of companies in Malaysia).