Raising awareness of mobile app will be a challenge

The company is experiencing first-hand the headwinds faced by many fintech firms that disrupt the status quo. Last July, when Khoo was developing his mobile app, he had to write an explanation letter to Bank Negara following complaints from some industry players who had heard about the impending launch of GetCover.

GetCover is expected to change the way insurance products are distributed. Insurance agents may find that they no longer have a role to play. “Some of the insurance agents, who refuse to change and are afraid of losing their jobs, have made speculative allegations about the mobile app and have brought the issue up at their insurance association,” says Khoo.

The association then lodged a complaint with the central bank and he had to explain what the app was about. “We are getting a lot of interest from people who want to know more about our product and some are interested in using it. But there are also people resisting the change and there have been allegations that we are running a multi-level marketing scheme,” he says. 

Khoo is engaging with both industry players (via the association) and the central bank by providing an explanation of how the mobile app works. He believes the allegations of a multi-level marketing scheme came about because GetCover is planning to adopt a viral marketing strategy. 

How does it work?

According to Khoo, a person who downloads the GetCover app can share the app with his phone contacts by sending out a link via WhatsApp. Those who receive the link can download the app and the person who sends the link, termed as the referrer, enjoys a one-off promotion to buy an insurance product with better pricing. 

The purpose of viral marketing is to attract as many users as possible within a short period of time. This is how start-ups usually work.

Khoo points out that not all agents are against the app. Many insurance agents, he says, have approached him to have a better understanding of it. Financial advisory firms have also expressed interest in purchasing the app for their financial advisers. 

“You will be surprised that almost half of the insurers we are negotiating with actually knocked on our doors. We have signed non-disclosure agreements with some of them,” he says. 

Increasing public awareness of the mobile app is another challenge Khoo has anticipated as most insurance products are currently distributed through agents. GetCover will be undertaking various programmes to educate the public. 

Formation of a fintech alliance

On July 9, three dozen fintech founders, co-founders, entrepreneurs and enthusiasts gathered in Kuala Lumpur for a closed-door session. The event was hosted by GetCover Sdn Bhd and organised by Next Money Kuala Lumpur Chapter (part of a global network of fintech innovators, with the objective of bringing together fintech founders in the country to network and exchange ideas). 

Two more closed-door events were held in the same month, this time with venture capitalists and private equity firms coming in to know more about the developments in the fintech community.

Khoo says the events led to the decision to set up the Fintech Association of Malaysia and the formation of a special task force comprising fintech players, the management of financial institutions interested in embarking on the fintech initiative, venture capitalists and private equity firms. The main objective of the association and task force is to engage with regulators to advocate and advise on policy changes that support fintech innovation and growth. 

“This would also enable us to talk to the regulators with one voice, rather than for them to engage each of us independently,” he says. 

During the closed-door event on July 9, regulatory issues were among the top four challenges of the fintech industry, says Khoo. “In the tech industry, the only constant is change. Hence, new regulations should be innovative and effective in managing systemic risks.”

That is why it is important for regulators to adopt the sandbox regulatory approach and not over-regulate the fintech community and hinder innovation, he adds. The sandbox regulatory approach means providing more flexibility for fintech companies to legally operate and innovate as long as they follow the guidelines imposed by regulators to protect the public interest.

If fintech companies are regulated by the same laws that apply to financial institutions such as banks, insurance companies and financial advisory firms, it will make it difficult for them to get a licence to operate their highly innovative business. 

“This regulatory approach is like drawing a sandbox on the beach, which can be changed depending on the tide. In a nutshell, it means providing flexibility to ensure that fintech innovation is not impacted. This approach will also help the regulator be more familiar with us and what we are doing,” says Khoo. 

The Monetary Authority of Singapore (MAS) released a consultation paper in June on proposed guidelines for a “regulatory sandbox” that will enable financial institutions as well as non-financial players to experiment with fintech solutions. The Australia Securities and Investment Commission followed in MAS’ footsteps a few days later.

On July 29, Bank Negara Malaysia issued a discussion paper on a fintech regulatory sandbox to “further encourage innovation and improve the delivery of financial services”.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.