Alliance Bank: Digital banking solutions for Malaysian SMEs in need

Ernest Kwong Kah Wah, Group Chief SME Banking Officer at Alliance Bank Malaysia, spoke with Efma’s Lukas Dzuroska about his bank’s wide range of digital tools that have helped serve business customers this year.

2020 has been a significant year in which many financial institutions have shown proactiveness in providing fast relief packages to their SME clients who were hit hardest by the pandemic. Through a series of articles in the coming months, Efma is highlighting some best practices from banks in different geographies showing how they have supported SMEs in a time of crisis. Alliance Bank Malaysia is an excellent example of this. In this interview, we spoke with Ernest Kwong,  the Bank’s Group Chief SME Banking Officer to better understand how they have met this year‘s challenges.

Recent reports show that SMEs are considerably weakened by the Covid-19 crisis. What has the situation been like in your country?

We know that individuals and business owners are struggling to sustain their cash flow due to the on-going Covid-19 pandemic. According to the Entrepreneurship Development and Cooperatives Ministry of Malaysia, over 32,000 Malaysian SMEs have ceased operations between March and September this year due to the Movement Control Order (“MCO”) imposed for the sake of public health and safety. Retail Group Malaysia, an independent retail research firm, estimates that over 51,000 retail stores will close for good within the next four to five months.

Malaysia’s tourism has been significantly impacted by the pandemic because of strict lockdown which started back in March. Retail segment is another sector which was notably hit by the crisis as the Malaysian Retail industry recorded a poorer-than-expected growth at -9.7%, compared to the same period in 2019.[1] Despite the fact that demand for certain products like home appliances increased as people had to stay home, the restrictions imposed by the government have had a significant impact on the volume of production.

Despite this, Malaysia’s employment rate rose marginally by 0.3% to 15.19 million persons in September 2020.

What were the immediate first steps that you have taken as a bank internally to cope with the crisis and faster respond to clients?

At the onset of the pandemic crisis, and the subsequent Movement Control Order (“MCO”), we were quick to organize a taskforce comprising representatives from key business units (e.g. consumer, SME, corporate and commercial) and support units such as Treasury, Risk, Legal, and Compliance. The taskforce met daily either physically or via video call in the first three months of the MCO to organize, decide, and implement actions to help our customers and keep the bank safe.

We quickly established a daily Covid dashboard with key risk indicators such as liquidity, cash availability, media monitoring, contact center service levels, and progress of our loan modifications, among others. This dashboard helps us to remain focused and disciplined in our actions.

We revised our customer approach to be more empathetic and offer a variety of payment relief assistance programs to help alleviate some of our customers’ financial stresses.

During this time, we also re-deployed some of our branch resources to the contact center to help our customers with their loan modifications. All our officers at the contact center and branches, as well as our relationship managers, are trained to address our clients’ questions about their loans.

Our bank’s relationship managers have also been proactively engaging with our customers from key industry sectors affected by the Covid-19 pandemic to understand their challenges and offer the right solutions.

When the government announced the lockdown, Bank Negara Malaysia announced an automatic six-month moratorium on all bank loans - except for credit card balances – for those affected by COVID-19 pandemic. At the same time, we set up an internal committee to devise helpful repayment solutions for our customers in view of their financial difficulties. We built a model based on their behavior score and industry they belong to, and stratified our customers to three main groups of ‘Help’, ‘Watch’ or ‘Grow’. Relationship managers then engaged with our clients to understand how their business is doing and how they are impacted by Covid-19. If they could not resume their business, we offered them payment relief options most suited to their situation and their payment instalments were adjusted accordingly.

How are you helping your SME customers face the impact of the Covid-19 crisis?

We have been providing assistance in the form of loan moratoria and loan modifications,  as well as Bank Negara Malaysia’s (central bank) Special Assistance Funds to SMEs where we have disbursed over RM600 million. We are now extending payment relief assistance to help ease our customers’ financial commitments.

In terms of non-financial assistance, we started the #SupportLokal initiative to help local businesses widen their customer reach by taking their businesses online. We provide free digital marketing and branding for local businesses to showcase their products and services on our corporate website at #SupportLokal Online Bazaar and our social media channels.  We also help to fast track the listing of their products and services on popular e-commerce sites, through our partnerships with companies such as Shopee, Air Asia OURSHOP, and Pybli. In addition, we offer local business owners e-learning tools such as webinars, and access to subject matter experts so they can upskill, scale up, and sustain their online business.

We have also developed a business-to-business online platform called the BizSmart® Solution portal, where business owners can gain access to relevant business solutions and resources to digitize their business.

We continue to facilitate applications for government relief funds such as the All Economic Sector facility and the Working Capital Guarantee Scheme on behalf of our customers.

We also perform our regular check-ins with our customers, especially those in the high-risk sectors such as tour operators, hotels, aviation and F&B, to see if they need any financial assistance. This may come in the form of loan moratoria, temporary interest-only servicing payments, or extensions of loan tenure to sustain as well as to improve their company’s cash flow.

Did Covid-19 have an impact on your SME customers’ move towards digital banking? Do you have any figures that might demonstrate this?

The Covid-19 pandemic has changed consumer behavior. Public health concerns because of the pandemic have resulted in a shift in customer preferences for remote interactions through digital platforms.

Based on our customer survey conducted during the first phase of the Movement Control Order period, two-thirds of our customers prefer using online channels for account openings, while 60% indicated that they are less inclined to visit the branch to perform their banking transactions given the current pandemic.

The bank’s online transactions increased by approximately 30-40% and customers were more willing to sign up for online banking to perform their transactions. For example, our sign up rates for business online banking doubled compared to the year before.

For us, this has certainly provided the impetus to accelerate our digitization aspirations and branch transformation efforts. We want to ensure that we give our customers various options to interact with us and digitization allows customers to perform banking in a simple and convenient manner.

In June 2020, we introduced the BizSmart® Mobile app to enable business owners to conveniently manage their account, payments, and collections, and approve transactions from anywhere. We also launched the Alliance BizSmart® eTrade, Malaysia’s first mobile trade financing solution that enables business owners to submit Bankers’ Acceptance or Trust Receipts electronically via their mobile phones.

Today, half of our business clients are actively using our online banking and mobile BizSmart® platform. We aim to on-board an additional 25% of our clients to adopt these digital platforms over the next three years.

We have also launched a Digital Loan solution for SMEs. The Digital SME Loan is a simple, convenient, fast, and paperless solution for businesses to apply for financing online.

How have your relationship managers served SME customers during the pandemic? Did you have to change your way of working and do more remote work? Has it been a smooth transition?

Our bank’s relationship managers have been proactively engaging with our customers from key industry sectors affected by the Covid-19 pandemic to understand their challenges and offer the right solutions.

Very early on, we recognized that not all customers are affected by the pandemic in the same way. It was important for us to segment our customers so we can concentrate our efforts on those who need our assistance the most.

We did this in three phases:

i. Assess their risk level (on the basis of known information such as the industry in which they work or operate a business) and credit bureau

ii. Contact all customers, starting with the higher risk segments, to validate or correct our assumptions

iii. Classify all customers by risk levels based on the best information we could get from those interviews and by asking customers if they need help.

We then designed solutions that are appropriate to the customer’s situation. At every step in the process, we adopted an empathetic approach centered on addressing the needs of the customers. We call this the Alliance Way. Through this approach, we have approved loan modifications amounting to RM2.7 billion for businesses.

We enhanced our technology to enable our employees to work from home effectively. Our employees used encrypted VPN access to access the files they need to perform their roles. We also conducted all our internal and external meetings via video conferencing during the MCO. We improved the bandwidth at the bank, configured over 300 notebooks, and purchased over 1,000 VPN licences for our employees’ use.

As a testament to the effectiveness of our customer engagement approach, our Net Promoter Score (NPS) has shown marked improvements post the Movement Control Order (MCO) period from June to October 2020.

More and more banks are launching online tools to help their SME customers to manage their business, transform digitally, and grow. Where do you stand on this point?

According to the Department of Statistics Malaysia, SMEs contributed 38.9% to Malaysia’s gross domestic product (GDP) in 2019. A recent McKinsey report stated that digital adoption by Malaysia’s SMEs could boost the country’s gross domestic product growth by 1%.

Understanding that digitization is key for businesses to sustain and thrive during the pandemic, we launched the BizSmart® Solution portal late last year. This online ecosystem provides businesses with a relevant range of solutions such as digital marketing, business administration, logistics, inventory management, demand generation and conversion, as well as digital banking services.

Since then, the BizSmart® Solution portal has helped over 100 businesses accelerate growth via green lane access to popular e-commerce platforms such as Shopee and webinars with various subject matters with the bank’s partners.

We also help our customers grow their business by providing them access to new market segments such as the halal market through the BizSmart® Solution portal. Through our Halal-in-One program, businesses with ambitions to venture into the halal space are provided end-to-end solutions including business advisory, business matching services, and shariah-compliant financing.

We recently signed a Memorandum of Understanding with a local university to provide online training programs on digitization to help upskill business owners and their employees especially in the areas of industrial revolution 4.0 (IR4.0) and artificial intelligence, among others.

This year, we introduced our digital financial health check program for SMEs that helps business owners identify opportunities to optimize their business financials.

One other digital solution that the bank has launched is the Digital SME Lending solution. It enables our business clients to apply for loans of up to RM100,000 online without needing to be physically present at the bank or meet with a bank officer. For business loans of up to RM1 million, our relationship managers will help our clients to apply for the loan using our award-winning Branch-in-a-Tablet solution. Using this solution, clients can receive approval-in-principle almost immediately. We are also helping our merchants manage their payment transactions more efficiently and effectively.