THE drastic surge in digital adoption among businesses and consumers in the Covid-19 era has helped accelerate Malaysia’s growth on its journey to become a more equitable and sustainable economy.
To drive such economic growth, the World Bank believes that digital technologies play a leading role in promoting inclusion by enabling existing firms and entrepreneurs to serve markets that are currently underserved, lowering costs and increasing efficiency for existing firms and entrepreneurs to become more competitive and allowing for the creation of new forms of business.
In this vein, the biggest issue will lie in resolving the existing urban-rural divide, especially in financial services, to ensure that Malaysians from all segments of society can contribute to the economy.
Currently, mobile and digitally-enabled payment methods and by extension, e-commerce platforms, are only viable for Malaysians with access to a bank account with a financial institution.
Referencing data from the Global Findex Database, Universiti Malaysia Sarawak senior lecturer Dr Goy Siew Ching notes that 15% and 14% of Malaysian youth aged between 15+ and 25+, respectively, lacked a bank account in 2017, with barriers including expensive servicing costs, documentation requirements and the lack of nearby financial institutions.
She says, “This is where in my opinion, digital banking plays an important role to complement the services provided by conventional financial institutions to serve those who are currently unbanked and underbanked and to empower vulnerable groups who are participating in the digital economy with better cashflow through innovative financial solutions.”
Moreover, the integration of e-wallets into marketplaces has also enabled wider segments of Malaysians to buy directly from local sellers nationwide without the need for a credit card.
This, Dr Goy says, is an early indication that financial inclusion can be achieved through a digital economy with innovations such as e-marketplaces and e-wallets, alongside a strengthened logistics infrastructure.
“However, as the digital economy matures in Malaysia, there is a need to move beyond e-wallets for true financial inclusion to happen and subsequently create greater impact to the GDP (gross domestic product),” she opines.
Digital banking era
As with other countries in the Asia-Pacific, there has been promising progress on the digital banking front in the country, with Bank Negara set to issue up to five licences to conduct digital banking business or Islamic digital banking business by first-quarter (Q1) 2022, following the release of the digital banking framework on Dec 31, 2020.
On the consumer end, when it comes to market readiness and digital maturity, Malaysians are more ready than ever to embrace digital banking.
PwC’s 2019 study on banking consumers in Malaysia, Singapore and Hong Kong, titled “Virtual banking: Malaysian customers take charge”, revealed that 74% of its Malaysian respondents were keen to become a customer of a virtual bank and 77% were interested in additional services provided by their banks beyond financial products. Another key finding was that respondents wanted access to an integrated experience that offered e-commerce and lifestyle services on a single platform.
Interestingly, among the possible contenders for the Malaysian digital banking licence, aside from familiar names such as Axiata and Grab, is e-commerce platform Shopee’s parent company Sea.
Sea, which has a foothold in not only e-commerce but also online games and financial services, has already been selected to receive a digital bank licence in Singapore and according to Forbes, is said to have acquired Indonesia’s Bank BKE to transform it into a digital bank.With its ecosystem that combines Shopee’s sizeable database of buyers and sellers as potential future customers with its mobile wallet ShopeePay, the group could be well positioned to take on a bigger role through digital banking.
Towards financial inclusion
To deliver on the nation’s aim for financial inclusion that fosters a sustainable economy, however, also necessitates changing the mindset of the youth or the unbanked segment.
Dr Goy says, “A successful digital bank is not one which is able to offer more products or credit, but one that is able to drive a change in mindset, especially around wealth creation versus pure consumption, as well as promoting financial literacy among youth through ways they best understand it (digitally) by leveraging existing channels such as e-commerce platforms for digital entrepreneurship and customer education.”
While wealth creation is important, digital entrepreneurs will also require financial literacy and discipline to thrive, which is something that tends to be lacking among Malaysian youths.
According to Bank Negara, 46% of the unbanked population in the country are youth between 15 to 24 who tend to struggle to keep up with their financial responsibilities, with much lower net worth and fewer assets compared to those from the older generation.
Adding to this backdrop is the rising trend where Malaysians are seeking digital avenues to earn additional income, which is becoming increasingly necessary for the younger generation. Even so, they face challenges in securing loans due to a lack of track record or insufficient documentation.
A 2020 Shopee Sellers Survey also showed that 5,406 of the total 11,850 local sellers it surveyed are new sellers who operate their business solely on e-commerce platforms. Of the number, 70.7% are aged between 18 and 35 years old, with one in three being SPM leavers and registering average monthly sales of RM6,000.
In addition, 35.4% of these respondents are new sellers using the platform as a second and third source of income to cushion against additional shocks.
Dr Goy comments, “This indicates that the digital economy has a profound influence on societal well-being, from resource allocation to income distribution and growth.
“[Such platforms] enable a small-time sago producer in Mukah, Sarawak, for instance, to generate better wealth by eliminating the middlemen and selling his or her products directly to customers throughout Malaysia and beyond.”
Economic participation
Shopee chief operating officer Terence Pang adds that its goal is to be inclusive and uplift the livelihood of the communities in the markets it operates in, which is the guiding principle that drives the e-commerce platform’s direction.
He shares, “An entrepreneur is able to start selling on Shopee in 30 seconds, with the integration of features such as inventory management, payment system and logistics, as well as marketing services, which saves sellers a lot of time and resources.
“This makes it convenient for any Malaysian to explore entrepreneurship. For students especially, the money earned can help cover their expenses and tuition fees, whilst allowing them to pick up entrepreneurial skills and mindset at a young age.”
Through e-commerce and digital entrepreneurship, he says, Shopee can encourage and direct Malaysian youth – who are more likely to be financially excluded – to gain access and participate in the digital economy.
“With more Malaysian consumers in the cashless spending ecosystem, smaller businesses like convenience stores, petty traders and burger stalls will also see the convenience and benefit of adopting cashless payment methods to tap into new consumer bases. This digital push will be a win for the country’s digital economy,” he adds.
For 34-year-old Ermie Adnan, he attributes getting a start in his business, Keropok Lekor Pok Loh Kerteh, to Shopee. The business currently generates RM20,000 on average per month on the e-commerce platform.
He shares, “I started my business on Shopee and then started receiving repeat orders. Now, customers who initially bought my product there are also buying from me offline.
“I’ve since expanded and started a physical storefront because of the demand I received from Shopee. That gave me the capital and confidence to start the offline store, which now generates as much income as the online store.”
On top of that, a customer who found Ermie’s product on the e-commerce platform has recently reached out to him to stock keropok lekor at the frozen food section of his supermarket.
As for clothes merchant Boronggolok Enterprise’s founder Noraini Jalaludin, it was the first movement control order (MCO) in March 2020 that forced her to shutter the doors of her physical store in Kelantan and disrupted her daily stock supply from Thailand, which negatively impacted her income.
Although the 36-year-old turned to single-handedly sewing and selling her own dresses on Shopee, response was slow until she changed her product offerings to cater for bridemaid’s dresses.
“Eventually I started diversifying into types of clothing like tengkolok and tanjak, sampin and traditional Malaysian costumes. As such, I was still able to earn an average of RM4,000 per month during MCO.
“Now, I am even getting bulk orders and orders from as far as Singapore through the Shopee International Platform, which would play a big role as I would like to offer more variety to my customers and export more,” she says.
Source: https://www.thestar.com.my/business/business-news/2021/09/02/e-commerce-empowers-inclusion-in-digital-banking-era