My One Academy: Maybank’s Fintech Sandbox – Is this the beginning of fintech race among banks?

Friday, July 7, 2017

Maybank’s Fintech Sandbox – Is this the beginning of fintech race among banks?

Hojiakbar Mirzakulov, Consultant at UCSI Consulting Group

Malayan Banking Berhad (Maybank) has announced last week that it launched its Fintech Sandbox, which coincided with the announcement that BNM approved 4 fintech startups to participate in its regulatory fintech sandbox, which was launched in October 2016.

Regulatory bodies such as BNM, SC and MDEC are involved in fintech space for their own mandates. BNM’s Regulatory Fintech Sandbox will, for example, help the bank realize how to regulate this novelty. MDEC’s FinTech Space is intended to be an ecosystem and a launchpad for the fintech community.

As for the banks, CIMB, Hong Leong, Public Bank and Ambank also geared to join the movement. For instance, CIMB Bank has recently set up a completely new unit, specifically for fintech, "CIMB Fintech" to monitor and take advantage of the trends happening in the industry.

The 2nd half of 2017 and 2018 will most probably see the mushrooming of fintech initiatives such as sandboxes by other banks in fear of being left behind or to reap the benefits of collaborating with fintech firms, whatever the reason might be.

Is Islamic Finance industry reaching its pinnacle?

The year 2016 has marked another year of slowdown for Islamic Finance, as the industry’s impressive double-digit growth rate registered in previous years has not been the case for the past two years.

According to recent financial stability report (2017) by Islamic Financial Services Board (IFSB), even though Islamic banks improved their balance sheets and capital buffers, the total Islamic banking assets increased from USD 1.4 trillion in 2015 to USD 1.5 trillion in 2016, a single-digit (7%) increase. The asset quality is also on the downturn; net non-performing financing to capital ratio of surveyed (170 Islamic banks and 83 “Islamic windows”) banks increased to 25.6% at the end of September, up from 16.1% a year earlier.

According to other sources (CIMB), the industry is undergoing fast-growth period, where stiff competition and focus on market share & innovation is prevalent and where the industry is most vulnerable to financial turbulences.

It is generally claimed that Islamic Finance can weather financial turbulences, a native concept to a conventional financial system. However, recent economic and political developments such as US’s new monetary policy (increase in its interest rates), oil prices, geopolitical conflicts and a general uncertainty in an economic landscape have taken its toll on the industry after all.