Alliance Bank Malaysia entered 2025 facing a familiar yet intensifying set of pressures in consumer banking. Growth in banking products such as credit cards and personal loans remained highly competitive, driving up acquisition costs and compressing returns, while fraud risks continued to rise alongside greater reliance on digital onboarding. At the same time, customer behaviour was undergoing a structural shift — with financial interactions increasingly taking place within non-bank platforms including e-wallets, e-commerce marketplaces, and lifestyle ecosystems, rather than originating directly from bank-owned channels. Recognising that traditional, campaign-led direct-to-consumer acquisition models are becoming less efficient and harder to scale, the bank recalibrated its growth approach. Greater emphasis is placed on embedded finance, integrating banking such as lending and payment capabilities directly into partner ecosystems where customers are already transacting and spending, and where intent, context, and frequency of engagement are inherently stronger. This approach enables the Bank to reach scale more economically, improve targeting relevance, and reduce reliance on high-cost outbound acquisition methods. This strategic pivot was accompanied by a deliberate redesign of the Bank’s underlying operating, credit, and risk architecture. As distribution expanded beyond owned channels, the bank strengthened its decisioning frameworks, controls, and monitoring to ensure that growth remained disciplined — balancing speed and convenience with credit quality, fraud resilience, and sustainable unit economics. The objective was clear: to enable scalable digital growth without sacrificing portfolio quality, risk governance, or cost discipline. John Lau, head of business optimisation strategy and solutions, group consumer banking, explained the economics underpinning the bank’s virtual credit card strategy, its approach to embedded personal lending, and the role of a new unified Retail Loan Origination System (RLOS) in managing the end-to-end credit lifecycle across risk, fraud, and productivity. John Lau, Head of Business Optimisation Strategy and Solutions, Group Consumer Banking at Alliance Bank Malaysia Ken Yong, Senior Vice President and Head of Group Digital Transformation at Alliance Bank Malaysia Rebalancing growth: embedded distribution as the primary engine Lau described Alliance Bank’s digital lending strategy as a deliberate shift from primarily bank-led direct acquisition towards embedded distribution as a scalable growth model. He explained that credit offers should be integrated into relevant customer journeys — where day-to-day transactions naturally take place — such as payments, travel bookings and digital wallet usage. This approach has led the bank to prioritise partnerships with platforms that already have scale, frequent transaction activity, and strong customer engagement. To date, Alliance Bank has onboarded eight e-commerce and ecosystem partners, with several more in the pipeline, enabling the bank’s lending products to be embedded directly within customer journeys. Lau emphasised that this is not just a branding or outreach initiative, but a commercially-driven model to improve acquisition efficiency and scale. Embedded distribution supports broader reach and better conversion by placing offers in context, while reducing reliance on traditional acquisition methods that often come with higher customer acquisition costs. He added that partners also bring valuable contextual and lifestyle insights, creating opportunities to enhance targeting and leverage additional data signals to complement the bank’s credit scoring and decisioning. He positioned embedded lending as a structural response to evolving customer behaviour, rather than a short-term channel experiment. The bank’s objective, he said, is to build a repeatable origination capability across multiple ecosystems, enabling consistent growth without dependence on isolated, one-off partnerships. Virtual credit cards as the anchor product for digital-first lending The virtual credit card was described by Lau as the anchor product around which Alliance Bank’s embedded lending strategy was built. He said the bank deliberately started with virtual cards because they allowed tighter control over fraud, faster issuance and clearer linkage between customer intent and usage. Ken Yong, senior vice president and head of group digital transformation, explained that the virtual credit card used dynamic credentials rather than static card numbers, which significantly reduced exposure in the event of data compromise. He said this design feature allowed the bank to isolate fraud risks at the transaction level rather than at the account level. Lau said that in 2025, the bank recorded zero fraud incidents on its virtual credit card portfolio, which he attributed to both the dynamic credential structure and the way the cards were distributed. He also noted that virtual cards enabled faster customer onboarding, since cards could be issued instantly. This supported the bank’s objective of reducing friction while maintaining control over credit limits and usage patterns. David Lim, head of credit card and personal loan product development, added that the bank treated virtual cards not as a replacement for physical cards but as an entry point. He said customers who demonstrated responsible usage on virtual cards could later be offered physical cards or higher limits, allowing the bank to manage credit progression based on observed behaviour rather than upfront assumptions. David Lim, Head of Credit Card and Personal Loan Product Development at Alliance Bank Malaysia Personal loans and physical cards within the same embedded architecture While virtual credit cards served as the initial entry product, Lau explained that Alliance Bank’s embedded distribution strategy has since expanded to include personal loans and physical credit cards — all originated through the same loan origination and risk infrastructure. He added that more products are planned, in line with the open finance roadmap to enable secure, customer-consented data sharing and stronger ecosystem connectivity. David shared that the bank embedded personal loan offers within partner platforms where customer needs were already evident, supporting a more contextual and responsible selling approach. Today, approximately 20% of loan origination is onboarded through digital channels and ecosystem partners, and the Bank expects approved credit card volumes to double in 2026. Lau emphasised that this growth was achieved without loosening credit policies — instead, the bank leverages contextual data from partners to improve targeting and pre-screening, while final underwriting decisions remain governed by the bank’s internal credit rules. David Lim also noted that physical credit cards continued to play an important role, particularly for customers who preferred traditional form factors or required broader acceptance. He said the bank focused on migrating suitable customers from physical cards to virtual-first usage over time, rather than forcing an abrupt transition. The integrated architecture connects these products and data within a single platform. Lau said this helps the bank run operations more efficiently and serve customers better, by giving clearer visibility on how customers use different products and channels over time. This, in turn, supports better decisions on what to improve in products, processes, and customer communications. Retail loan origination system as the control backbone A recurring theme in Lau’s explanation was the role of the RLOS as the backbone of Alliance Bank’s digital lending strategy. He said the bank invested in a unified origination platform designed to support multiple products, channels and partners. The platform enables an end-to-end credit origination lifecycle — from lead management and digital onboarding, to credit approval and disbursement, as well as document management and other supporting processes — while maintaining consistent risk oversight and enabling straight-through approvals where eligible. He added that RLOS allows the bank to apply dynamic credit rules, fraud checks and approval workflows consistently across all channels, whether customers apply through partner platforms or the bank’s own channels. By managing everything within a single platform, the bank reduces operational complexity and ensures partner-driven growth does not bypass internal controls. With the new RLOS, loan application turnaround time has been reduced by more than 50%, and the bank is targeting a staff productivity improvement of over 30% to support the long-term growth of the lending business. Today, the platform supports three key products — personal loans, credit cards, and mortgages — with share margin financing planned as the next product onboarded. The bank is also in the proof-of-concept stage of leveraging agentic AI to further enhance RLOS capabilities. Lau emphasised that RLOS enables consistent monitoring and governance across both digital and partner-led origination. Beyond volumes, the bank tracks a range of indicators — including application abandonment, approval and acceptance rates, early delinquency trends, utilisation behaviour, fraud signals and overall portfolio quality — to ensure faster processing remains balanced with strong risk control. The platform also provides visibility into channel performance, helping the bank manage growth across different distribution channels more effectively. Evaluating strengths, constraints and scaling risks Alliance Bank’s digital lending model has shown clear advantages through strong fraud control and a focus on embedded distribution, reducing reliance on high-cost direct acquisition methods. At the same time, Lau acknowledged structural constraints: concentrating volumes through partners increases dependency risk, and scaling embedded lending requires ongoing alignment on partner roadmaps, commercial terms, and data-sharing arrangements. As such, the bank will continue to maintain a balanced distribution approach. He also noted that customers onboarded through digital channels often start with lower balances and credit limits, which means revenue per customer may be lower in the early stages. In a market where switching banks is increasingly easy, the bank must therefore focus on managing the full customer lifecycle — improving retention, increasing usage, and building long-term trust — so that profitability grows over time through deeper relationships and higher product holding. To support this, the bank is progressing key customer experience improvements, including a new mobile app and an AI-enabled contact centre platform intended to improve service capability and 24/7 availability for customers. In parallel, branches will continue to play a key role as advisory touchpoints, especially for wealth management and community relationship banking. From an operational perspective in the consumer lending business, Lau said the bank will maintain discipline by keeping the customer journey simple and approvals fast, while managing credit risk exposure to support sustainable growth at scale. This increases the importance of robust end-to-end automation and controls, alongside continuous improvements to credit scoring and underwriting criteria. He added that incorporating additional data points — including stronger identity and employment verification, and better visibility of customer exposures will be key to supporting responsible growth. Embedding lending economics without surrendering control Alliance Bank’s experience in 2025 illustrated a deliberate attempt to reconcile digital growth with credit discipline. Lau described a model that embedded lending products into partner ecosystems while retaining centralised control over risk, pricing and lifecycle management. The virtual credit card emerged as a practical starting point, offering fraud containment and rapid issuance, while personal loans and physical cards were integrated into the same operating architecture. Underpinning this was a unified loan origination system designed to deliver operating leverage without fragmenting oversight. The strategy’s strengths lay in its structural approach to fraud prevention, cost management and customer self-selection. Its constraints were equally clear, particularly around partner concentration and the need to scale without diluting controls. Whether the model can evolve from a high-performing embedded engine into a primary driver of consumer lending growth will depend on execution, partner dynamics and the bank’s ability to sustain discipline as volumes increase. For now, Alliance Bank’s approach offers a grounded case study in how digital lending economics can be reshaped through design choices rather than distribution alone.
