Fintech: Making it easy to compare and purchase financial products

This article first appeared in Personal Wealth, The Edge Malaysia Weekly, on September 14, 2020 - September 20, 2020.
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Financial comparison sites in Malaysia, many of which were launched in the past decade, allow their users to easily compare the rates and features of financial products on one website. Over the years, these sites have improved on their capabilities, allowing them to help consumers purchase products that are most suitable and affordable to them.

For instance, instead of just being able to compare the rates of personal loans, consumers can now apply and obtain approval for the loans offered by some of the banks entirely online. Instant credit evaluations are also available to help them gauge whether they qualify for home loans.

These improvements are made possible by the technology that these comparison site players have developed, as well as their collaborations with banks and insurers. As consumers become more accustomed to digital banking services, the role that financial comparison sites play could become more important, observe the players.

“We’ve seen an increase in the adoption and acceptance of digital applications for products. This has been especially pronounced amid the Covid-19 pandemic. To be frank, younger customers have accepted it from the beginning. But the banking and insurance industries have taken time to embrace it fully, although it has been accelerated by the pandemic,” says Jared Lim, co-founder of Loanstreet.

“Consumers have grown accustomed to instant gratification, thanks to the digital revolution. People are also used to shopping around, and many would not hesitate to switch brands if there is a better deal elsewhere,” he adds.

The difficulty in obtaining financial services during the Movement Control Order (MCO) period has amplified the need for digitisation, says Hann Liew, founder and executive director of RinggitPlus.

“Our mission is to enable any Malaysian to access financial products anytime, anywhere on any device. To this end, we’ve been working hard with our bank and insurance partners to help digitise their manual processes,” he says.

In fact, some players say traffic to their site doubled during the MCO. Credit cards were among the most popular searches then.

“That’s because a lot of people were shopping online at the time. Different credit cards offer different benefits when you transact with certain merchants,” says Benny Chee, country manager of CompareHero.my.

In the past few years, many of the comparison site players have been working to create a complete digital journey for consumers, from the application to the approval stage.  They have also introduced new products that can be compared and purchased online.

For example, Loanstreet introduced the first fully online motorcycle insurance and road tax renewal service last year. In addition, it has expanded its home loan eligibility tool to include 17 banks, allowing consumers to attain home loan pre-approvals during their digital application journey.

Meanwhile, CompareHero has built APIs (application programming interfaces) with its commercial partners to assist them in their marketing efforts, and launched a partner portal with banks. The latter allows them to transfer customers’ personally identifiable information from the site to the banks securely.

On another front, comparison site players are improving their customer engagement channels to provide personalised services. RinggitPlus has been working on the natural language processing capabilities of its chatbot. It is also exploring alternative credit scoring methods using digital, demographic and bureau data.

“We have our scoring capability powered by Experian PowerCurve that allows us to recommend the right products to individuals based on their credit profile,” says Liew.

Still not fully online

Despite the players’ goal of creating a completely digital journey for consumers, it is not available for products from all providers. Some still require an online-to-offline component to complete the process.

This could mean that after customers indicate that they want to buy a product, they would be required to input their information and then have to wait for a call from the relevant financial institution. For some loan or credit card products, the know-your-customer (KYC) process still needs to be done in person. The exception is for general insurance products, where most can be bought entirely online.

“Financial comparison sites have always been in an awkward position. The potential of the industry — which is to provide comparisons that segue into digital onboarding and applications — has not yet been fully realised,” says Lim.

“It all comes down to the readiness and willingness of our partner banks and insurers to adopt new processes supported by technology … we still have a long journey ahead. [In fact,] there has been an exit of a number of internationally backed comparison sites in Malaysia [over the past two years].” Many of the existing players are part of a larger group that have regional presence and thriving business-to-business (B2B) technology arms.

Photo by Haris Hassan/The Edge

For RinggitPlus, CompareHero and Loanstreet, some of the personal loan, mortgage and credit card products on their site can be applied for and approved entirely online, depending on the bank’s or insurer’s requirements. Some financial institutions still require personal loan applicants to go to the bank for the KYC check before the disbursement of the funds.

The three players are working with different partners to further extend the digital journey for various products.

“The situation is already better compared to three or four years ago, when this (buying products entirely online) was not available at all,” says Liew. 

“The technology and processes [of many of] these incumbent players were built for a non-digital age and it takes significant investment to digitalise it,” says Liew.

The requirements of each bank are different. Thus, whether a customer can enjoy a completely digital journey on these sites is product dependent.

“In-person KYC checks are needed for account opening and mortgages but actually not for credit card and personal loan applications. However, there are banks that do impose more stringent requirements for KYC,” says Chee.

From the customer’s perspective, the challenge could lie in the application process. When applying for a credit card or personal loan, the bank needs to validate the customer’s income through an Employees Provident Fund statement or an income payslip. Chee observes that many customers give up halfway through the process because they find it too cumbersome.

“All these documents can be digitally downloaded but do not come from a central depository. The process to download and upload the individual files is cumbersome,” he explains.

What will it take?

The players foresee that more banks and insurers will start working with financial comparison sites to enable the digital end-to-end process owing to the introduction of new regulations and technology. For example, Bank Negara Malaysia’s new policy document on electronic KYC (e-KYC), released in June, could reduce the need for in-person KYC.

“A major reason why some banks cannot offer end-to-end digital application and approval processes is because of the KYC process, which requires applicants to be physically present. The introduction of the framework has changed it from a regulatory hurdle to a technology one,” says Lim.

Digital IDs could make the end-to-end digital process easier for customers. An example that Chee provides is Singapore’s MyInfo platform, which helps Singaporeans save time by automatically filling out government e-forms.

“MyInfo is a digital ID that everyone has. After a customer gives consent during an application of a product [like for flats or polytechnics], the service provider can extract the relevant personal data through a central depository. That would be our end goal of creating a seamless experience for customers who purchase financial products online,” says Chee.

In addition, the advent of digital banks in Malaysia could be positive for financial comparison sites, as consumers will need more information to help them choose the best product from a wide range of choices.

“It becomes more important for us to ensure that we stay closer to consumers’ needs and help them not only compare but also to apply for and acquire the right products. [Platforms like ours can do this] by using the breadth of customer data that we have and behaving almost like online financial managers or advisers to consumers [with their consent],” says Liew.