Fintech’s virus silver lining

Fintech’s virus silver lining

From Covid-19, a digital-reliant economy will emerge

IN recent weeks, Covid-19 has taken over every headline, publication and conversation. Information of this contagion has rooted in the minds and hearts of every global citizen to the extent where some are bracing themselves for the onset of the Armageddon. Whilst leaders of every nation deliberate and weigh on the necessary measures to contain this contagion, the introduction of an interim semi standstill economy became the necessary evil to combat the spread of this outbreak. Indeed, this has translated to an impairment of economic growth. A prolonged adoption of such measures will indeed adversely impact the livelihood of many; where perhaps even future stimulus handouts will be insufficient to remedy its effects.

“Grief and resilience live together.” – Michelle Obama, Becoming

Despite the “doom and gloom”, the human race has historically proven to be most resilient. In managing this pandemic, it is evident that there is an influx in the adoption of digital technology. Young innovative businesses which were striving in the past, have begun to receive traction. The pandemic has become the invisible hand, which has forced an accelerated adoption of digital technology.

“If you’re going through hell, keep going.” – Winston Churchill

In the past, a digital economy was the agenda of many nations. The introduction of financial technology (fintech) in the region has sprouted much growth and provided numerous opportunities to both start-ups and the venture capital market. However, many brilliant ideas and proof of concepts were struggling to scale up, as the adoption rate of these innovations were too organic.

Thriving fintech companies largely premise on two key principles; finding a plausible problem statement and providing a user-friendly solution to it. Nonetheless, it remains apparent that in order to scale up, there is a significant need for upskilling, education and awareness for developing markets like South-East Asia. The challenge has always remained in the ability of businesses to accumulate sufficient “buy ins” from each market.

Fintech is the adoption of a digital lifestyle. From the adoption of electronic wallets, to e-hailing and online shopping, Fintech creates a new ecosystem where it changes the perspective of traditional views on consumerism, investment models as well as credit ratings. In the past, Fintech may have been treated more as a tool of disruption. However, drawing the silver lining from the Covid-19 pandemic, a new way of life is emerging. Social distancing may be the new norm and platform retailers may be the new access to provisions. Perhaps a pivot to a digital reliant economy is imminent.

“Resilience is very different than being numb. Resilience means you experience, you feel, you fail, you hurt. You fall. But, you keep going.” – Yasmin Mogahed

What does that mean to the private sector today? In these unprecedented times, it is clear that we are surrounded with much inconvenience. Whether it is payroll or delivery, banking or transactions, it is clear that such inconvenience could have been curbed or better managed if we had digitised most of our processes. Perhaps it is time to embark on a digital journey and pivot one’s business to embrace digitisation that provides market wide access as the new norm. There is no better time than yesterday, which would have changed today. Therefore, let us plan today for a better tomorrow. After all, an idle mind is the devil’s workshop.

Bank Negara has in recent years enacted various legal frameworks that govern respective digital verticals such as electronic money, digital remittance, merchant acquisitions as well as other payment instruments. Of recent, consultation papers and exposure drafts relating to digital banking as well as prudential related matters were further introduced. Traditional entrepreneurs need not be intimidated or estranged by the complexity that may seem to surround the digital market. Each of these guidelines merely sets out the legal requirements to formulate proper governance required prior to an approval. With proper advice, these guidelines will assist to ease the digital transformation embarked by traditional entrepreneurs.

It is clear that Bank Negara has invested much effort in embracing the digitisation of traditional markets. The change in the traditional economic landscape simply will mean that private sectors that are in these traditional ecosystems may now consider exploring these verticals to evolve or expand their businesses. Business models which find it a challenge to fit into any of the legal framework may consider exploring the “Sandbox” where Bank Negara will take the approach of an “Informal Steer” to provide guidance and advice to the financial institutions or fintech companies on the modifications that can be made to align proposed business models or solutions with prevailing laws and regulations.

Similarly, the Securities Commission has invested much effort in shaping the digital economy involving capital market products. Notably, the introduction of Recognised Market Operators, which regulate alternative trading platforms such as Equity Crowd Funding, Peer-to-Peer lending, Digital Asset Exchange as well as Property Crowd Funding, has indeed brought about much growth in our economy prior to the pandemic. The introduction of the Digital Asset Exchange, as well as the upcoming Initial Exchange Offering framework, will likely reshape the way fundraising will operate in the near future.

The Labuan International Business and Financial Centre has been equally active in promoting the digital agenda over the past years. Labuan has positioned itself as a strategic choice for funds, fund management companies, money broking applicants, and has introduced Digital Labuan where licenses are used to facilitate digital players including for digital currency trading platforms.

To quote Prime Minister Tan Sri Muhyiddin Yassin in his stimulus speech, “no one will be left behind”. The digital agenda aptly emulates the same, aiming to remove barriers to market and enable a further reach to the underserved and the unbanked. Tokenised fundraising or cluster sized Peer-to-Peer Lending and Crowdfunding will only translate to the provision of a larger scale of opportunity for growth. Platform industries with the adoption of data analytics will reshape the assessment of credit ratings and credit risk, which may change lending considerations in time to come. Citing some recent developments in the global market, consultancies have adopted webinars as the new norm in conducting training, and boutique gyms have utilised internet-based platforms to stream workout programmes to their members. On Feb 25, Dior live-streamed its catwalk show for its 2020 autumn/winter women’s collection in Paris.

It is undoubtedly as mentioned, unprecedented times. It is also undoubtedly that these are times clouded with much uncertainty. However, it also worth shifting our perspective to seize this opportunity to pivot our businesses and arise stronger than before when the storm is over.

“That which does not kill us makes us stronger.” – Friedrich Nietzsche

Jonathan Lim is a corporate partner of Zaid Ibrahim & Co (a member of ZICO Law), and helms the Fintech portfolio of the firm. He also serves as the secretary for the Fintech Association of Malaysia for the term 2019/2020. Views expressed here are his own.