BNM-AFI MEMBER TRAINING ON

PLATFORM ECONOMY &

ITS PROMISE FOR FINANCIAL

INCLUSION

KUALA LUMPUR, MALAYSIA

1 – 3 JULY 2019

SESSION #: WHAT'S IN A NAME?

PLATFORM VS. GIG VS. API:

TRANSITION FROM SERVICES TO PLATFORM

LING KAY YEOW, PARTNER, EY

KUALA LUMPUR, MALAYSIA

1 – 3 JULY 2019

Gig vs Platform vs API. What is the difference?

Gig Economy*

API

Platform

Buyers/Sellers** Banks

Regulators

Others (e.g.

insurers,

authorities)

Gig

Platform

API

Key Characteristics

► New economic model facilitated by

digital platforms

► Users work whenever they want and rate

is paid for a specific tasks completed

► The payment is intermediated by the

platform provider

► Creates value by facilitating exchange of

goods or services between two or more

actors

► Platforms harness and create large,

scalable networks of actors and resources

that can be accessed on demand

► Provides automated communication

mechanism among different

platforms/applications and key actors in

the gig economy

► Enables actors in the gig economy to

interact & transact in the ecosystem in

efficient & secure manner*Note: include gig employees/workers

API

APIAPI

API

API

API

API

*Gig economy is a by product of economic activity created via platforms

to facilitate connections between customers and providers

Gig economy is fueled by increasing internet penetration while promoting economic development

61.367.7

75.681.0

14.5

23.4

32.4

41.3

23.1

31.3

39.9

48.0

2008 2011 2014 2017E

Developed Countries Developing Countries World

Individuals using the Internet per 100 inhabitants (%)

48% of the global population uses internet

70% of the users aged 15-24 years

3.5b2017

4.0b2021

3.4%CAGR (2017-21)

Rise in global internet users

43%2017

61%2025

Rising mobile internet penetration to drive growth

Source: EY Analysis, MDEC, MasterCard

Globally, the size of gig economy transactions is projected to grow by a 17% CAGR with a gross volume of ~$455B

by 2023

Global gig economy marketUS$204

billion2018

US$455 billion

2023CAGR of 17.4% of the working population in

Malaysia is self employed in

the gig-economy

with transportation-based services (e.g.,

ride-sharing) comprising 58% of 2018 gross

volume 58%

~26%

We see a emerging trends of new platform models and innovative platforms fueling gig economy development

Peer-to-peer

FinanceHospitality Ride Hailing

Talent

MarketplaceMedia Sharing

200m

Total number of bookings on Airbnb

since its launch in 2008

235 cities

Grab operates globally in 235 cities, with 2.5 billion

rides in 8 countries

53%

Global peer to peer lending market CAGR

during 2016 - 2020

US$39.2m

FY17 revenues of online staffing platform Freelancer Ltd.

Popular platform models of gig economy

90%

Video streaming sites to offload up to 90% of

content delivery network traffic and reduce costs

Source: EY Analysis

Air-transport

RentingEducation

On-demand

ServiceCare Provider Home Equity

Marketplace for care providers for children,

old folks, pets etc.

Marketplace for tutoring, knowledge

sharing, exam tips etc.

Marketplace for on-demand services such as cleaning, massage,

stylist, doctor etc.

Marketplace for sell of house equity to

investors that want exposure to real-estate

Other emerging platform models

Marketplace renting of airplane and helicopter

These are some of the key characteristics of gig economy

Connected and

complex data

ecosystem

Increased customer

control and

centricity

Enhanced insight on

and for customers

Increased flexibility

for workers

Shift in customer

relationship

ownership model

Increased choice &

competitionData as an asset

Evolution of

the role of a FI

Platform & API has the potential to contribute to the financial inclusion agenda

Why are they excluded?

Inadequate

education

No credithistory

No valididentification

Geographic

challenges

Financial

products tooexpensive

World’s population

Unbanked individuals

200+ mil micro, small and medium enterprises

without access to banking services

7.6b 1.6b

Who are the financially excluded?

Platform & API drivers

Open access to data from platform providers

Innovative use of data sources (e.g. social media

profiles) provide greater behavioral analysis that

can provide financial inclusion

Open application programming interfaces (APIs)

Allow Fis to collaborate with FinTechs,

governments etc. on innovative and inclusive

solutions

National digital identity (ID) system

Banks could leverage biometric ID programs

to verify customers at channels and widen

access to financial services

Additionally many of the financial challenges faced by gig workers are being solved with more inclusive solutions

Unpredictable

pay

Desire for

new methods

to accept

and transfer

money

Inability to

borrow

money/

take loan

Need for fast

access to

earnings

Financial

product not

suitable to their

needs

Increase in

cost of living,

especially in

large cities

Pain points of gig workers

Work multiple

assignments/

jobs at any

time

Benefits such

as paid time

off, insurance,

& retirement

are absent

Have periods of

high and low

activity with

irregular jobs

New solutions & innovations

Payments are made faster to gig workers

when assignment completed instead of

waiting for entire pay period

Alternate credit reports are now available

based on payment of rent, utilities, social

media records, telematics, asset ownership

Insurance are made more affordable and

accessible with pay-as-you-go insurance

coverage for gig-workers

Peer-to-peer lending platform has become

common place for short-term loans

Major gig employers have begun to partner

with tax and software providers to create

necessary tools to enable tax compliance

Financial planners & advisors have

partnered with major gig employers to

provide retirement plan & investment

Case study #2: Two leading markets are adopting two different approaches to enable open banking/API

UK

► A prescriptive model

► Banks mandated to use open APIs

► Mandatory API specifications and standardized formats

► Strong innovation environment and adoption potential

► Consumers cautious about sharing financial data

Mainland China

► An organic model

► Open banking not mandated by legislation

► No mandatory API specifications, but FS industry using open APIs

► Strong adoption potential and innovation environment

► Less data protection, but consumers comfortable sharing

1Regulatory action is highly diverse

► The level of open bankingregulation differs greatly acrosscountries

► UK adopts highly targetedgovernment intervention whileMainland China regulator is inactive

2

Security risks may derail open banking growth

► Data protection and cybersecurityare consumer’s key concerns

► Countries with a more regulatedopen banking such as the UK andGermany showed a low onlinesentiment score for security riskconcerns

3

Performance on innovation may widen the divide

► Mainland China, the UK and the USare leading in fintech innovationand their uptake of open bankingwill only accelerate further in thefuture

Key FindingsTwo leaders, two different approaches

Source: EY Open Banking Opportunity Index, 2019

Paradigm shift in strategy and mindset is required from financial institution to reap the benefit of gig-economy

In the Past In the Future

Customer Acquisition ► Branch and online ► Mobile-first

Customer Experience ► Branch-focused, with online and mobile ► Mobile and online

Customer Service ► Branch, contact center, self-service ► Self-service, investment in chatbots

Customer Demographic

► Primary Gen X ► Primary millennials

Product Approach ► Product-centric, one-size-fits-all ► Customer-centric, personalized

Operating Model ► Vertically oriented, centralized ► Service-oriented, decentralized

Data and Analytics ► Single-source, based on internal data► Multi-source, including customer interactions,

social sharing, insights form partners

Development Approach

► Waterfall, with in-house R&D and computing resources

► Agile, with maximum use of mobile, cloud and application programming interfaces (APIs)

Development Cycle Times

► Slow due to red tape, long approval times and budget cycles

► Fast due to smaller organizational chart, R&D partners, clear metrics and direct investor oversight

Risk and Compliance► Extensive internal focus on regulation and

compliance ► Managed through partners

Hence, there is a need to transform from service-based to platform-based models

Innovation Competition Choice

Why platform banking?

• Catalyse innovation

by providing

innovators and

developers with

reliable access to

new data sources

• New functionality –

from which to build

to enhance products

and services

• Incentivize greater

competition from a

broader range of

participants including

new entrants,

incumbents and

adjacent industries

• Reducing information

asymmetries and

frictions to switching

• Support further

development of the

financial services

sector which is

expected to deliver:

• greater financial

inclusion

• greater financial

engagement

• more profitable

business

practices

• Promote competition

across non-

traditional

dimensions (e.g., UX,

intermediary

offerings)

• Advances further

unbundling of

financial services

• Increase consumer

choice across

products and

providers

Financial

Inclusion

THANK YOU