By | Sharifah Nurul Asyikin Binti Syed Abdullah, Sarah Khadijah Taylor, Akmal Suriani Binti Mohamed Rakof, Ummu Ruzanna Binti Abdul Razak, Nur Syahirah Binti Azhar
With the recent technological developments and advancements, we would like to provide an overview on Financial Technology to all readers, with the aim of addressing an increasing number of cybercrimes in Malaysia.
What is Financial Technology? Financial Technology, also known as “Fintech”, refers to the integration of technology in offerings by financial services companies. Over the years, Fintech has revolutionized traditional financial services, products and services. It involves alternative financial services built by startups that would eventually disrupt the existing, traditional financial system.
In today’s technology, Fintech is easily and readily accessible via smartphone, through the Internet and various applications. Following are several Fintech services that are extensively used globally.
1. Mobile Payment
Due to its convenience and user-friendliness, mobile payment is the favourite among users. e-Wallets such as Touch and Go, Boost and Shopee coin is an examples of mobile payment. It provides the user's options to either pay over the counter or online using such applications By using such mobile applications, users no longer need to carry a lot of cash with them. At the same time, there are also features to collect points and redeem rewards when they transact using mobile payment.
2. Crowdsourcing
Crowdsourcing such as Kickstarter, Patreon and GoFundMe are platforms used by stakeholders to collect funds for investments in various projects. This mostly benefits startups or founders as they are only required to upload their proposal and projects on the platform and launch it to gain interest.
3. Cryptocurrency
Internet users by leveraging cryptography technology. Its transactions are transparent, and the integrity of the transactional data are publicly visible among blockchain explorers. However, the identity of the senders and receivers remain private, which distinguishes it from traditional currency.
4. Stock Trading and InsurTech
Stock trading such as Robinhood, Binance and TradeStation is another form of Fintech platform for services to trade stocks without paying any commission. It provides RoboAdvisor services for users to request free consultancy according to individual risk appetite.
InsurTech such as ChatBots, Mobile Apps, iMoney and FatBerry is an innovation that can enhance user experience in the insurance industry. Insurance company leverages technology such as artificial intelligence, wearable device, and smartphone applications to facilitate insurance operations which eventually reduces operational cost. Fatberry for instance, enable users to compare insurance prices.
What are the advantages of Fintech?
Cryptocurrencies such as Bitcoin, Ethereum and Tether are unique and highly secured Fintech. It is a digital or virtual currency managed by Fintech that provides similar services as the banks through a different platform. Users can easily download various Fintech applications and use it like a bank account where all transactional activities take place. It is also an alternative financial service which benefits individuals without a permanent address or individuals that have lost access to financial institutions due to bankruptcy.
Cryptocurrency platforms such as Binance and Huabi provides cryptocurrency loan services to borrowers without a fixed income who previously faced difficulties applying for loan from banks.
In Kenya, M-Pesa, a mobile payment application, enables small businesses with limited access to financial institutions, to send and receive money. It also accommodates users without transport, and facilities and staying in remote areas to continue doing business by performing transactions through the application.
In addition, Fintech offers reward points that can be redeemed through applications such as Shopee coins and Setel Petronas.
What is the RISK when using Fintech?
The three main risks using Fintech: losing money, data breach and product or services
that do not meet expectations.
a. Loss of Money
According to recent statistics by Royal Malaysian Police (PDRM), from 2017 to June 2020, cryptocurrencies reported RM400 millions loss with the highest 32%, related to illegal investments which involved BitKingdom and Bitcoin Actionnode. Other cases include ransomware, crypto wallets hack and illegal cryptos trading.
BitKingdom is a platform to invest in Bitcoin. Initially, investors are guaranteed a high return in investment. However, once they have invested through the platform, the provider would convert Bitcoin to Aereus currency of no value. Over 100 investors were scammed by the provider with a total loss of RM30 million. Next is Fintech Gold, which was another platform investing in cryptocurrencies that started its operation in April 2020. Investors were promised a 10-15% return monthly, which can be monitored via the platform. In December 2020, investors had reported they were unable to access the platform. An estimated RM2.8 million was lost to this scam.
b. Risk of Data Breach
A data breach happens when an irresponsible site or application providers share or exposes personal information such as username, password, transactional record, house address, IC number or even personal photos to the public without an individual’s consent. Such action leads to an increase in phishing emails or spam messages, causing the social media or mobile applications that are storing sensitive information to be susceptible to cyber-attacks.
c. Risk of Product or Services Not Meeting Expectation
Today, online shopping has revolutionized the way we shop. It is convenient and saves a lot of time. Yet, users need to be cautious when registering on these online platforms. Buyers should avoid buying from unregistered platforms or unauthorized sellers to avoid being scammed as they are not monitored by any regulated bodies, so they are not obligated to fulfil users’ expectations leading to an unsatisfactory experience.
Fintech Safety Steps – Do’s & Don’ts
a. Applications
-
Use Legitimate & Regulated Platform
- Download legitimate applications. For iPhone users, the automatic filters in the Apple Store can identify the illegitimate application. For Android users, read reviews and application ratings before downloading.
- Use regulated platforms like Luno, T&G Wallet, Setel Petronas, Alipay and iPay88.
- Conduct thorough research before using any unregulated platform.
- Ensure service providers are registered with Suruhanjaya Syarikat Malaysia.
- Ensure customer service and support are trustworthy.
- Be prudent and vigilant in investment to avoid the risk of losing money.
- Be wary of scammers.
-
Use Application with Multi-Factor Authentication (MFA)
- When launching an application, ensure a password request.
- When making transactions, ensure a pin code is requested for security purposes.
- Account verification is critical to verify any transactions.
- MFA provides another security layer if the platform is hacked. With an additional security pin code, hackers are restricted from accessing the account.
b. Smartphone
-
Ensure smartphone is free from virus
- A smartphone is similar to a computer, which is susceptible and vulnerable to viruses.
- When the smartphone is infected by a virus, users’ details such as credit card information is modified and shared discreetly with other parties without consent.
- Spyware is malware installed on a computing device without a user's knowledge. It steals sensitive information and Internet usage data, and relays it to advertisers, data firms or external users.
- To prevent virus threats on smartphones, CyberSecurity Malaysia developed a security application called MASSA, specifically for Android smartphones. It is capable to scan, detect and report any data breach on smartphones.
c. Internet
-
Do not use public WiFi to communicate confidential information and conduct transaction
- Public WiFi is not secure as it is widely accessible to the public including hackers.
- Hackers are able to monitor and steal confidential information transmitted via public WiFi on devices.to other parties without consent.
What is Our Readiness Level to Face the Risks?
a.Malaysia Government and Law
The Malaysian government under the Ministry of Communications and Multimedia Malaysia (MCMM) has introduced various incentives under the Malaysia Digital Economy Blueprint to drive the Fintech industry. The eRezeki program under Malaysia Digital Economy Corporation (MDEC) has enabled citizens, especially low-income groups, to generate additional income by doing digital work via an online crowdsourcing platform. eRezeki participants are matched with digital work in line with their respective skills.
Fintech Booster, on the other hand, is a capacity-building program by MDEC, in collaboration with Bank Negara Malaysia (BNM) to assist Fintech companies, local and foreign, to develop products and services via three strategically crafted modules, Legal & Compliance, Business Model, and Technology. This one-of-a-kind initiative is able to assist regulatory sandbox preparation for Malaysia. CyberSecurity Malaysia recently introduced Digital Upskilling Programme to Law Enforcement Agencies as well as universities students by offering certification training and capability program module to increase awareness and strengthen skills to participate in the Digital Economy.
From an investigation perspective, Royal Malaysia Police (PDRM) has developed its own Cryptocurrency Unit to focus on cases involving Fintech. This unit has since actively investigated all cryptocurrency cases in Malaysia and several cases have progressed to legal proceedings.
Through these new platforms and initiatives introduced by the government, Malaysia is committed to expand and strengthen its competencies to ensure a healthier digital economy.
b. Users
Malaysians require more awareness programs to understand financial technology. Generally, we should keep abreast with local news and cyber security trends to learn about Fintech before enrolling, to avoid falling victim to scammers.
What is the Outlook for Fintech?
Fintech is a new technology that is being accepted globally. It leverages artificial intelligence (AI) and data analytics making it a user-centric system. We believe that Fintech will continue to evolve over the years. However, users are advised to be cautious about Fintech trade-off risks and constantly learn about new technology. We hope this article provides an overview of financial technology to help users better understand its pros and cons.
