ELECTRONIC COMMERCE ENABLES INCLUSION IN THE DIGITAL BANKING AGE
The drastic rise in digital adoption among businesses and consumers in the age of Covid-19 has helped accelerate Malaysia’s growth on its path to becoming a more equitable and sustainable economy.
To stimulate such economic growth, the World Bank believes that digital technologies play a leading role in promoting inclusion by enabling existing businesses and entrepreneurs to serve currently underserved markets, reducing costs and increasing increasing the efficiency of existing businesses and entrepreneurs to become more competitive and allowing for the creation of new forms of business.
In this vein, the biggest challenge will be to resolve the existing divide between urban and rural areas, especially in financial services, to ensure that Malaysians from all segments of society can contribute to the economy.
Currently, mobile and digital payment methods, and by extension e-commerce platforms, are only viable for Malaysians with access to a bank account with a financial institution.
Referring to data from the global Findex database, Universiti Malaysia Sarawak Senior Professor Dr Goy Siew Ching notes that 15% and 14% of young Malaysians aged 15+ to 25 and over, respectively , did not have a bank account in 2017, with obstacles such as high service costs. , documentation requirements and the lack of nearby financial institutions.
She says, “This is where, in my opinion, digital banking plays an important role in complementing the services provided by mainstream financial institutions to serve those who are currently unbanked and underbanked and to empower vulnerable groups who are contribute to the digital economy better cash flow. thanks to innovative financial solutions.
Additionally, the integration of e-wallets into markets has also enabled wider segments of Malaysians to buy directly from local vendors across the country without the need for a credit card.
According to Dr Goy, this is a first indication that financial inclusion can be achieved through a digital economy with innovations such as electronic markets and electronic wallets, as well as 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 occur and subsequently create a greater impact on GDP ( gross domestic product) “, she said.
The era of digital banking
As in other Asia-Pacific countries, promising progress has been made on the digital banking front in the country, with Bank Negara set to issue up to five licenses to conduct digital banking business or Islamic digital banking by the first quarter (Q1) 2022, following the publication of the digital banking framework on December 31, 2020.
On the consumer side, when it comes to market readiness and digital maturity, Malaysians are more ready to embrace digital banking than ever before.
PwC’s 2019 study of banking consumers in Malaysia, Singapore and Hong Kong, titled “Virtual banking: Malaysian customers take charge”, found that 74% of its Malaysian respondents were eager to become customers of a virtual bank and 77% were interested in other 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 candidates for the Malaysian digital banking license, besides familiar names like Axiata and Grab, is the parent company of the Shopee e-commerce platform, Sea.
Sea, which is present not only in e-commerce but also in online games and financial services, has already been selected to receive a digital banking license in Singapore and, according to Forbes, has acquired Indonesian bank BKE to transform it. into a digital bank.With its ecosystem that combines Shopee’s large database of buyers and sellers as potential future customers with its ShopeePay mobile wallet, the group could be well positioned to play a larger role through the digital bank.
Towards financial inclusion
However, to achieve the national goal of financial inclusion that promotes a sustainable economy, it is also necessary to change the mindset of young people or the unbanked segment.
Dr Goy says: “A successful digital bank is not a bank capable of offering more products or credit, but a bank capable of changing mindsets, especially when it comes to wealth creation versus pure consumption, as well as the promotion of financial literacy among young people. how they best understand it (digitally) by leveraging existing channels such as e-commerce platforms for digital entrepreneurship and customer education.
While building wealth is important, digital entrepreneurs will also need financial literacy and discipline to thrive, which tends to be lacking among young Malaysians.
According to Bank Negara, 46% of the country’s unbanked population are young people between the ages of 15 and 24 who tend to struggle with their financial responsibilities, with much lower net worth and fewer assets than those in the older generation.
Coupled with this is the upward trend that Malaysians are looking for digital ways to earn extra income, which is becoming more and more necessary for the younger generation. Despite this, they face difficulties in obtaining loans due to lack of track record or insufficient documentation.
A Shopee 2020 seller survey also showed that 5,406 of the 11,850 local sellers surveyed are new sellers who operate their business solely on e-commerce platforms. Of these, 70.7% are between 18 and 35 years old, with one in three graduates from SPM and recording 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 protect themselves from further shocks.
Dr Goy comments: “This indicates that the digital economy has a profound influence on the well-being of society, from resource allocation to income distribution and growth.
“[Such platforms] enable a small sago producer in Mukah, Sarawak, for example, to generate greater wealth by cutting out middlemen and selling their products directly to customers across Malaysia and beyond.
Shopee’s COO, Terence Pang, adds that its goal is to be inclusive and improve the livelihoods of communities in the markets in which it operates, which is the guiding principle that guides the platform. form of electronic commerce.
He shares: “An entrepreneur is able to start selling on Shopee in 30 seconds, thanks to the integration of features such as inventory management, payment system and logistics, as well as marketing services, which enables sellers save a lot of time and resources.
“It allows any Malaysian to explore entrepreneurship. For students in particular, the money earned can help cover their expenses and tuition, while also enabling them to develop skills and an entrepreneurial mindset from an early age.
Through e-commerce and digital entrepreneurship, he says, Shopee can encourage and guide young Malaysians – who are more likely to be financially excluded – to access and participate in the digital economy.
“With more Malaysian consumers in the cashless spending ecosystem, small businesses like convenience stores, small 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 victory for the country’s digital economy, ”he adds.
For Ermie Adnan, 34, he attributes the start of his business, Keropok Lekor Pok Loh Kerteh, to Shopee. The company is currently generating an average of RM20,000 per month on the e-commerce platform.
He shares: “I started my business on Shopee, then started getting repeat orders. Now the customers who originally bought my product there are also buying from me offline.
“Since then, I have grown and launched a physical storefront due to the request I received from Shopee. It gave me the capital and confidence to start the offline store, which now generates as much revenue as the online store.
On top of that, a customer who found Ermie’s product on the e-commerce platform recently contacted him to stock keropok lekor in his supermarket’s frozen section.
As for the founder of clothing merchant Boronggolok Enterprise, Noraini Jalaludin, it was the First Movement Control Order (MCO) in March 2020 that forced her to close the doors of her physical store in Kelantan and disrupted her supply. daily in stock from Thailand, which had a negative impact on its revenue. .
Although the 36-year-old turned to tailoring and selling her own dresses on Shopee on her own, response was slow until she changed her product offering to cater for bridesmaid dresses. .
“Eventually I started to branch out into clothing types like tengkolok and tanjak, sampin and traditional Malaysian costumes. As such, I was still able to earn an average of RM 4000 per month during the MCO.
“Now I even get wholesale orders and orders from as far away as Singapore through the international Shopee platform which would play an important role as I would like to offer more variety to my customers and export more”, says- she.