This article first appeared in The Edge Financial Daily on June 19, 2019

KUALA LUMPUR: CIMB Group Holdings Bhd’s 52%-owned subsidiary Touch ‘n Go Sdn Bhd is looking at expanding its product line in the e-financial segment, said the banking group’s group chief executive officer Tengku Datuk Seri Zafrul Aziz.

“We partnered with Alibaba’s Ant Financial Group to launch the Touch ‘n Go e-wallet app. This is our foray into mobile payments and we are looking to expand. In the pipeline, we have Casa (current account, savings account) remittance, personal financing and wealth management,” he said at the MyFintech Week 2019 conference yesterday.

“Touch ‘n Go has more than four million users of the wallet which has grown in excess of 5,000% in the last 11 months,” he added.

The e-wallet can be used for retail, parking, transit for public transportation and expressways.

CIMB owns 52% of Touch ‘n Go, while MTD Capital Bhd and PLUS Expressways Bhd own 28% and 20% respectively.

Later on the sidelines of the event, Zafrul also revealed to reporters that CIMB is looking to double its spending on IT amounting to RM2 billion in total from 2019 to 2023.

“We need to invest more. All banks have to do the same. Customers are changing and they are getting more comfortable doing banking using technology. So banks also have to evolve and match what the customers want. If we don’t invest in this technology, we will not be able to service these customers,” he said.

Bank branches, Zafrul added, will still be relevant.

“What will change is the nature of the branches. People will not go to the branch to open accounts to make payments or transfer money. [Instead,] they will go to the branch for more value-added services,” he said, giving examples such as customers getting investment advice and SMEs (small and medium enterprises) going to branches to look into a more complicated loan structure.

“So the nature of the branch will change but people will still need to go to a branch,” he noted.

“Every year we look at the number of branches we have because the problem is that people are moving away from branches. Whether or not we will see a reduction in branches depends on many factors.

Ninetly-eight per cent of our banking transactions are happening outside the branches. Banks today will see less and less people going to the branches. It’s not just in Malaysia, [but] the whole region, but our commercial banking arm is looking to enhance utilisation of our branch network especially in SME-concentrated areas,” he added.

Zafrul hopes that Bank Negara Malaysia would allow the e-KYC (electronic know your customer) soon.

“The central bank has stated they are planning to announce the guidelines on digital banking by the end of the year; I think the e-KYC will have to come in before that and I know through the sandbox that they have created; a lot of work has been done. CIMB also participated in that discussion about e-KYC. That is very important because if you can open that account online and via mobile, that’s where you will really be a digital bank. Right now, even if you apply online, you still have to go to the branch to show your face,” he said.

“Another area, which I will take more time, is the ability for banks here to go into the cloud infrastructure. Even in Europe, people are already comfortable about the security of cloud infrastructure. All the fintech and non-banks are using cloud, so they are faster and can scale easier. We are not allowed to and we understand why because the customer data protection is very key. Banks and [the] central bank need to make sure this is secure — so we need to do a lot more testing and understanding of private versus public cloud,” he added.

Zafrul also shared his outlook on investment banking for the second half of this year.

“There are a lot of deals in the pipeline but the question is whether we can launch the deal or not because the market has to be conducive for our issuers to launch the deals. We thought this year would be better… but you see with what is happening in the whole market — the trade war and everything else — has sort of dampened the sentiment of investors regionally. This is not the right time to do the deals,” he said, adding that geopolitics is also creating quite a lot of uncertainties in the market.

Nevertheless, he believes that the moment the market turns, “all these deals will launch very fast because they are all ready” and waiting for the right moment to kick off.

“The trade war is one thing and there are other things happening. We need to look at how we, Asean, can come together as a region to mitigate this risk. We are all trading economies. There are other opportunities in the region,” he states.