Jessica Chew Cheng Lian: Malaysian banking industry challenges
and developments
Speech by Ms Jessica Chew Cheng Lian, Assistant Governor of the Central Bank of Malaysia
(Bank Negara Malaysia), at the Malaysian Association of Money Services Business Annual
Dinner 2017, Kuala Lumpur, 29 April 2017.
* * *
It is my great pleasure to be here with you this evening at the annual dinner of the Malaysian
Association of Money Services Business. I remember a time six or seven years ago when the
Bank gathered the industry together at the auditorium in the headquarters of Bank Negara
Malaysia to explain the new legislation that was being introduced for the industry. The industry
then, and the industry today, is almost unrecognisable. You would have heard this said a few
times now, and I think it keeps getting mentioned because the change has been so striking.
Tonight, the industry will recognise companies that are leading the way in terms of exemplary
customer service to the public, as judged independently by a global consulting firm. This is yet
another reminder of how far the industry has come.
In the last six years, the industry has almost doubled the value of money services transactions
conducted through licensed MSB companies. We estimate that this included about 43% of
worker remittances previously conducted through informal or illegal channels, that are now
captured within the formal system. On average, MSB companies have increased their turnovers
by more than 16%. More than half of the industry today is made up of MSB companies with
annual turnovers of at least RM50 million, compared to only a third of the industry operating at
this level 6 years ago. The public can conduct money changing and remittance transactions at
over 2,500 locations nationwide, more than double the number of access points in 2011. An
increasing number of companies are also offering online options for customers to conduct
remittance and money changing transactions.
The Bank is also happy to note that the industry received a positive assessment under the most
recent mutual evaluation exercise conducted on Malaysia by the Asia Pacific Group (APG) on
Money Laundering. As you know, the APG is an international organisation committed to the
implementation and enforcement of international standards against money laundering and the
financing of terrorism, working closely with organisations like the Financial Action Task Force, the
International Monetary Fund and the World Bank. The assessment is a rigorous process, so a
positive assessment is something that the industry can take great pride in.
In its most recent 2015 report, the APG specifically noted that mitigation of money laundering and
terrorist financing risks in the MSB sector has improved significantly in recent years, while
acknowledging that there are challenges among smaller companies that we are collaborating
together with the industry to address. One of the key steps that we are taking is to provide
compliance officers with appropriate training, and then supporting them to be professionally
accredited.
The MSB industry in Malaysia is also highly competitive, with among the lowest remittance costs
in comparison with other markets. I know that this has been an issue of some concern among
some players in the industry as margins have continued to narrow. As in any other industry, an
environment of healthy competition that delivers more choice, provides better service and
encourages innovation, generally benefits society. Tonight's awards are a good example of MSB
companies that have stepped up to deliver an outstanding customer experience in order to
attract and retain customers.
Many strategic partnerships between companies in the industry have also been formed over the
years in response to greater competition. This has unlocked value for the companies by opening
up new business opportunities and increasing cost efficiencies. Throughout history, whether in
an organisation, an industry or a nation, progress and development have always been achieved
through a process of creative destruction, adjustment and evolution.
The industry will continue to transform and evolve, and in the process, it become more efficient
and advanced in delivering superior products and services to the public. Bank Negara Malaysia
remains committed to ensuring that the market for money services continues to function
efficiently and sustainably in the best interests of consumers, and a competitive market is an
important part of this process.
The industry's remarkable development has not gone unnoticed. More than a few countries have
been interested to study and learn from Malaysia's experience. This prompted Bank Negara
Malaysia to document the industry's transformation in a box article that we published in our latest
edition of the Financial Stability and Payment Systems Report. Today, the industry stands
among the more developed money services markets in the world and our MSB companies have
a good reputation that will open doors for growth opportunities both within and outside Malaysia.
The industry's credibility has also avoided the negative impact from de-risking strategies by
banks that have been experienced in other countries.
We should not forget however that good reputations are hard to earn, and easily lost. So while
we have come a long way, a number of priorities must continue to stay in clear focus for the
industry to progress further.
Let me just mention three of these priorities.
First, we must continue to work at reducing transactions that are conducted through informal
channels - in particular, through education and enforcement activities. Since 2012, the Bank
has taken enforcement actions against 140 illegal MSB operators. This included criminal and
civil actions pursued against over 70 companies. We will continue to intensify our efforts on this
front.
Second, we must continue to raise compliance and professional standards across the industry,
regardless of size. Every company that holds a licence must be able to meet the expectations
that have been set to protect the integrity of the financial system and provide a high standard of
service to the public. Over the years, more companies have been given licences for longer
periods. This means that we have seen good improvements in the quality of compliance and
operations. Companies that continue to receive shorter-term licences need to take stronger
measures to address the issues that we have raised.
Third, we should expect that financial markets will continue to remain volatile in the period
ahead. It is therefore important for the industry to improve market arrangements to ensure that
MSB companies will be able to respond efficiently to changes in demand for currencies by
consumers and businesses. Such arrangements have to include better planning and
management of currency stocks as well as sourcing strategies to ensure the ready supply of
currencies at efficient market rates.
Tonight's MSB customer experience awards reflects an industry that aspires to place the
customer first. A price advantage can be lost easily to your competitors, but a strong customer
service culture is much harder to copy. Those of you that voluntarily took part in this process are
sending a clear signal that your company and this industry takes customer service excellence
seriously. The idea of customer service excellence is not only about the quality of service; it is
also about the industry conducting itself in a way that builds trust in the industry.
The Association therefore is to be commended for undertaking this initiative, as should all MSB
companies that have supported it.
I am also very happy to note the Association's launch of the MSB App this evening -- which will
provide consumers with convenient access to price comparisons, locations of MSB companies,
customer reviews, and avenues to lodge complaints and report illegal MSB activities.
This App reflects an increasingly digitalised society and business environment where demands
for greater transparency, convenience and consumer engagement have become the norm.
The MSB App is a great example of how financial technology, or fintech, is changing how
customers experience financial services. The possibilities are almost boundless as we are
discovering through Bank Negara Malaysia's recently launched "fintech hacks". This is a project
where we are inviting the public to submit ideas to improve financial services.
Let me mention some of the suggestions we have received in the area of money services.
Allow tourists to exchange their unused foreign currencies for e-money that can be used to
make purchases at any airport merchant worldwide.
Develop a peer-to-peer currency exchange app that will allow travellers to meet up and
exchange currencies.
Provide an app that will allow individuals to book and pay for foreign currencies using their
mobile phones, and have the currencies delivered directly to them.
And enable e-KYC for remittances.
These represent opportunities for MSB companies to innovate and continuously improve on
products and services that are meeting the needs of today's consumer. Companies can also
come forward and test their ideas in Bank Negara's Regulatory Sandbox, and we will facilitate a
safe environment for companies to develop viable solutions to identified problems.
This is the time for MSB companies to be forward-looking, not hold on to the past; to be agile and
responsive to change, not slow to evolve; to be bold and ambitious, not reactive; and to be
secure in strong professional and ethical standards for conducting business, and not exposed to
practices that can harm the industry's image and reputation.
The Bank has every confidence in the industry's ability to grow and develop further from strength
to strength, well supported by a dynamic Association that has had a key role in driving many of
the accomplishments that have brought the industry to this point.
On that note, thank you for having me here this evening. Congratulations to all the recipients of
the customer service excellence awards, and all MSB companies that are present here for
supporting the important work of the Association. On the part of the Bank, we look forward to the
implementation of the industry's five-year strategic blueprint up to 2020. Bank Negara Malaysia
will continue to engage constructively with the Association and industry on these initiatives to
develop a modern, dynamic and progressive industry.