Friday,21 June 2024

Boost to retain focus on MSME after transition from e-wallet to digital bank

5 min read

Interviewed By Foo Boon Ping

The fintech’s shift to a full-fledged digital bank in Malaysia reflects its focus on regional expansion and the ethos of financial inclusion, backed by a partnership with RHB Bank and cyber security strength from parent company Axiata

Boost will continue to focus on the financial needs of small businesses in the country after its transition from an e-wallet provider to a full-fledged digital bank in Malaysia. Group CEO Sheyantha Abeykoon said that while people talk about inclusion, and everyone says they do it, Boost has proof of success, evidenced by a substantial client base in Indonesia and Malaysia, primarily in the micro, small and medium-sized enterprises (MSME) segment.

Abeykoon explained: “We’ve been doing micro-SME lending for four years, and we’ve disbursed about MYR 3 billion ($645.7 million) worth of loans, or maybe MYR 3.5 billion ($753 million). About 50% of those loans were disbursed to what we call ‘new-to-credit’ customers.” These are people who have never taken a loan before, who were able to get one from Boost.

Most Boost clients are financed in cycles, with a maximum of 12- to 15-month tenure. The average duration of its loan portfolio is three months. Abeykoon observed: “We don’t have a maturity mismatch that would typically affect our ability to absorb shocks. We tend to operate them at much higher margins than traditional banks, especially when we get access to deposits, which will even go higher.”

Boost’s journey in Malaysia began as a payment platform in 2017, and became a pioneer in e-wallets in Malaysia, adding popular features such as receiving rewards by simply shaking the cell phone. This fintech has set its sights on regional expansion in Cambodia, leveraging its financing model in Indonesia. Abeykoon said: “Our model is replicable across multiple markets.” The company tailors its products to suit each market’s regulatory environment and establishes local partnerships for regional growth.

The business is a proven model in financial inclusion, fintech services, and other financial products for underserved sectors. The company’s approach involves leveraging credit evaluation methods to bridge the gap between small businesses and the wider economy. Boost continued to extend loans to the MSME sector even during the pandemic, keeping micro-economies afloat in a crisis that devastated small businesses around the world.

Abeykoon said: “We will be a lending-focused player. We really don’t need to own the ecosystem. We can partner with a lot of ecosystem players.”

Nevertheless, Boost’s partnership with RHB Bank signals aspirations to be a challenger digital bank, combining digital-first culture with traditional banking expertise. Boost’s strong micro-SME lending position secured a much sought-after digital banking licence in Malaysia in 2022. Only five applicants out of 29 were awarded a digital banking licence by the Malaysian central bank.

Boost prioritises cybersecurity and benefits from parent company Axiata’s resources for a secure operational environment. It deploys a mobile-first approach with robust security measures within a digital-native architecture.

While there is strong competition in digital banking, Boost anticipates a gradual approach, aligning resources with expansion plans. Abeykoon said that while the playbook for financial inclusion has proven scalable across Southeast Asian markets, he is cautious about not stretching management bandwidth, and aims to ensure the right resources are in place to support expansion.

Abeykoon said: “We are on the cusp of a very exciting journey where we take what we’ve done in two markets and replicate those while we strengthen our position in those markets. We’ll really take the story regional as well.”

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