PayNet: Innovating with Purpose by Marrying Strategy and ESG

Azleena Idris, Senior Director, Strategy and ESG, Payments Network Malaysia Sdn Bhd (PayNet)

In this episode, we are joined by Azleena Idris, Senior Director, Strategy and ESG at PayNet. With her wealth of knowledge and experience, we delve into crucial topics such as harmonising strategy and ESG, and defining innovation and quantifying innovation to measure what truly matters. As Malaysia strives to be a cashless society, Azleena also shares her enthusiasm for the factors propelling growth within the dynamic and promising payments (and financial services) landscape of Malaysia. 

PayNet is the national payments network and shared central infrastructure for Malaysia’s financial markets. Since the merger of MyClear and MEPS to form PayNet on 1 Aug 2017, PayNet aims to build inclusive, accessible and efficient payments and financial eco-systems for Malaysia.

Transcript

Voice Over: 0:02

The AIBP ASEAN B2B growth podcast is a series of fireside chats with business leaders in Southeast Asia focused on growth in the region. topics discussed include business strategy, sales and marketing, enterprise technology and innovation.

YY - AIBP: 0:28

Hello, and welcome to the ASEAN B2B Growth Podcast where we sit down with individuals responsible for driving growth within their organizations here in Southeast Asia. My name is YY, and I'll be your host for today. Today, we have a very special guest joining us, Ms. Azleena Idris, the Senior Director of Strategy and ESG at Paynet, the Payments Network Malaysia. Payments Network Malaysia, is the national payments network and shared central infrastructure for Malaysia's financial markets. Without further ado, may invite Azleena to give us a brief introduction of yourself, and an idea about your background, and perhaps some personal hobbies of yours.

Azleena - PayNet: 1:11

Thank you very much, YY. And just to give you a bit of background. I actually am trained as a lawyer. And I'm born and raised in the country. But my university education is actually in the UK, US and France. Now, work alone has taken me many places, I've traveled over 40 countries in the span of my career. In my spare time, I love reading, I love traveling, I like driving, swimming. And, you know, I love adventures. So in adventures, you know, I love solving stuff. And therefore, you know, I do a lot of DIY, gives me kind of like, you know, a good distraction. And if I wasn't doing what I'm doing today, I will have become an architect. Right. So love buildings, love structures, love works of BPs(building plans). Now, at a personal front, I'm always curious, I always want to know things. I can't stand not knowing how things work. But I also get bored very easily with routines, right? So basically, because of that I pivot a lot. Throughout my career, I was like from a lawyer, to a company secretary, to compliance person, to corporate finance, to Islamic finance, to internationalization of Islamic finance, to FinTech and now to digital payments. So yeah, that's where I am today.

YY - AIBP: 2:39

Now, that gives me a very good background. And perhaps that's why you have taken on this challenge to keep you on your toes, right? Having this dual role driving both strategy, and also this emerging field of ESG at PayNet. Can you tell us a little bit more about what this means within PayNet itself?

Azleena - PayNet: 2:57

Okay, so here's the thing, a lot of people asking me, Don't strategy and ESG collide? You know. So the lucky thing about it is that, because I head up strategy, and before that we never had ESG, in our considerations, during the formulation, we kind of like, got to thinking as it were, where do we embed ESG? Right. And as you mentioned, during, you know, your introduction just now, PayNet that is actually a utility, national payments infrastructure provider. So even though we do make profits, but we are actually a for purpose company, and because of that, the strong tendency is actually to actually serve the nation in an inclusive manner. Right. So at the foundation of our strategy is actually ESG. So that is together with, you know, making sure that our technology has the reliability and sovereignty, the people and the workplace has got good culture, and, you know, it drives diversity of the ecosystem, and as well as values. So that's inbuilt into our strategy. And we actually, you know, formulated instead of a voluminous document, is just on a single page. Right? At the very core, we see ESG must be embedded within all aspects of our five year strategic plan. Why do we want to do that is actually to future proof the ecosystem as well as for the nation's benefit. And then that kind of like induce into improving our core services by upskilling our core capabilities. And from there, we want to introduce our new value added services so that we can, you know, accelerate and capture new payment flows. So, in essence, you know, that's the way we want to structure and approach ESG. Yep.

YY - AIBP: 4:49

Understand. Azleena, when we talk about ESG, I remember during the conference itself is you spoke very clearly about the role of SMEs and MSMEs enablement. Does that also fit into the total ESG strategy that PayNet has?

Azleena - PayNet: 5:08

Absolutely. So the thing is this, I mentioned that because despite many, many years of, you know, recognizing SMEs, even the country, we're quite fortunate we have SME Corporation that looks into the development of SMEs. Being the backbone of the economy, they still quite excluded from the financial, you know, kind of like financial space, especially the ones that are under kind of like the lower tier. The medium and the small ones, yes, to a significant extent, you know, our banks and development financial Institutions has done a good job. But when it comes to the micro and the nano SMEs, this is where the gap lies, right? So, within the ESG sphere, where we want to be is actually to prepare these guys as part of our community upliftment, to be ready for the banks and the financial services to actually serve them. And in that sense, you know, getting them literate, getting them savvy in terms of digital payments, and providing the leg up by either, you know, providing some kind of financial support as well as technical and, you know, payment integration support is actually where we focus that within the ESG space. Yeah.

YY - AIBP: 6:26

Understand, I like that very much. This very big focus onto this financial inclusion, digital inclusion piece that PayNet is facilitating in Malaysia itself. We always have this complaint, especially when we talk about MSME enablement. A lot of the stakeholders that we speak with in Southeast Asia mentioned that in order to get MSME to change their habits, it is not very easy to do so. And then when we talk about ESG, you know, when the bread and butter issues are on the table, ESG may not be of a high priority to them, how do you then communicate what PayNet is looking to do with your strategy and ESG, and align it to maybe the MSME segment better?

Azleena - PayNet: 7:13

One of the common things about understanding MSMEs and SMEs is that we are not looking at it from their lens, right. So understanding what are their problems and their pain points is actually the most important aspect. And from there, you need to see how ESG can actually help uplift them as a as a total community. Now, a case in point is actually, you know, certain habits where they're not getting credit, right, and having the right discipline to actually ensure that, you know, when it comes to credit worthiness, they are able to, you know, display sufficient information, sufficient track record. And by doing that, the benefit of that is actually to get credit. So when you educate them to do that, then they will become more inclined to want to do that. The second aspect of it is actually to make sure that when they provide the information, it has to be as seamless and as painless as possible. It doesn't, it doesn't result in additional headcount, additional work or additional resource. So automating is actually quite key, which is where technology will come into play. And it becomes very important for us to actually innovate in such a way that you can actually fetch the technology for them and for is only for them to give consent. Right. So and they are technologies, and they are fintechs that we are working with, that actually has the ability and all that's needed is your consent, and for them to populate and having in such a way in such a manner that is acceptable to banks. So hence, how we sort of, you know, pinpoints problems of MSMEs and SMEs via technology, and using ESG as the compass. Yep.

YY - AIBP: 9:03

Thank you very much for that. Well, I like what you've mentioned about using innovation, right, and to kind of convince the MSME that with by applying all of this new innovation technology, you're able to establish a credit history and then you can get loans that can help you grow your business. So applying it to their pain points. One of the things that you mentioned was about how to make it easy for the users to actually adopt innovation and technology right for yourself. I think one of the interesting ways that we see pain that has grown as from you know, ATM cards to now do it now QR payments, right? In terms of innovation, how do you balance maintaining stability, reliability of a national payments network, while also be up to date with new and cutting edge technology developments in this payments, (at the) national payment space?

Azleena - PayNet: 10:02

So how we approach innovation is actually to have that common understanding with everyone. We actually approach it two ways. One is to have a common understanding with everyone, that there's actually a pain point that's waiting to be solved. And we have everybody's consensus that yes, it needs to be solved. And it needs to be solved urgently. And on a concerted manner, we will proceed with the innovation, right? So, for instance, when we do fraud, and mule, right, mule databases, so the urgency in establishing a common database for mule accounts is actually there. And therefore, you know, we kind of innovated by coming up with the industry for portal where everybody can access and actually, you know, detect mules right? Now, that's one way there's actually a collaborative approach to innovation. The other one is actually when you want to go on, you know, moonshot VCs. And as you correctly pointed out, DuitNow QR is actually one of it. Right? From that point of view, where we were coming from is that we were asking the industry at that point in time, it was before my time when I joined PayNet. So it was at a point of time where the central bank is seeing the lack of involvement of MSMEs and SMEs in digital payments. And one of the key pain points, there was actually the costs of merchant acquiring, meaning card payments. Right. So they wanted to find a low cost, no frills, you know, machine free solution, which enables these people to use digital payments in a safe, reliable, and affordable way. Yeah. Hence, you know, when we kind of like, syndicated with the industry. The bigger picture is actually painted. And they say that, yes, there is this QR technology from China that we see that's proliferating, and how about giving it a try? So which is where we started with the gradual and free support, not rushed, did a POC. It did well, and then we scaled it, right? But then we do an iterative approach as well. Because right now, we are still continuously solving the issues of, you know, latency, connectivity. And we are also, you know, going through the phases where the merchants are saying that, Oh, I need an integrated statement. And we doing all these value added services as we go along. So, yeah, three things. I mean, two things. One is very clear pain point, and we just solve it together. The other one is that when there is a pain point, and there's no solution, let's go on kind of like moonshot basis, via the QuitNow QR. Yeah.

YY - AIBP: 12:52

I like the DuitNow QR and the starting point of that, right? Is that a roadmap for doing now Q maybe percentage of payments to be done via digital methods? Is that such a goal for Malaysia?

Azleena - PayNet: 13:07

Well, the thing is, our goal is actually to be as fully cashless as possible, right? So that's, that's the end game. But then we do understand that some cash or some usage of cheques is actually inevitable, right. But then we want to, we want to stretch the limits, so that it becomes as proliferated as possible. But for us, we have, since you know, kind of like, reduced it instead of a product as approach we are going on, you know, contextualized approach, meaning. If you're looking at experience, there's actually three experiences that we look at. One is when it comes to online payments, right? So we have products for online payments, like JomPAY and FPX. And we actually have a roadmap on, you know, how do you want to serve online customers more effectively, securely, safely, and affordably? Right. And we also have Card-Not-Present (CNP) now coming on to the online payments space, right. So the second part is actually in-store payments. So there's actually a combination between DuitNow QR and card payments. And we do understand that, you know, QR payments is not for all, when in areas where there are no connectivity or limited connectivity QR can be a challenge, POS can be the more preferred choice. But then there's always the acquiring costs and interchange fee to think about. So we're now thinking of maybe another solution that looks into offline payments, right? Where there is no connectivity, how do you do digital payments in an offline manner, and yet, you know, you will transfer funds. Now the third one that we'll look at is actually in terms of you know, what are the other things that will connect people in terms of value adding or in terms of you know, enhancing their business opportunities. This is where things like, you know, ensuring transactions are safe and secure, one click checkout, you know, making sure that you have a single sign on and as well as, you know, open banking and embedded finance. So, if you look at this three pronged strategy, then you will have a clearer picture that at the end of the day, the outcome must be achieving cashless society for the Malaysian public.

YY - AIBP: 15:31

And is that in Singapore? I think they are phasing out the corporate cheques by 2025. Do you see that also happening in Malaysia in the near term?

Azleena - PayNet: 15:41

I think so. Because the thing is, if you look at the bigger picture, there's no goal being set by the central bank, but there is a cheque reduction target, yeah, that they actually set an annual cheque reduction target. Now, the banks are actually meeting that quite admirably. I think there were one or two years during the pandemic, where that was, wasn't so great. But then overall, we actually did achieve it, you know, we kind of like met the requirement. But I think, moving forward, as we offer more facilities, more convenience. And now as we, you know, attack the market of those who actually use a lot of checks, you know, the large corporates, the government, eventually you will, you will be looking at something like what Singapore is doing, I think you're now doing e-cheques, right. So that particular product is now being considered. Yes.

YY - AIBP: 16:41

I remember also, during the conference, you talked a little bit about the digital identity. I like to dive a bit into that, because I think that is the foundation behind really facilitating more digital payments.

Azleena - PayNet: 16:54

Yeah. Yeah. So that's the thing, I mean, I would differentiate digital identity with national digital

YY - AIBP: 16:57

I like what you've mentioned, seamless digital identity, right? Because I mean, as you know, I explore other countries and I look at at, you know, what are the developments, there are actually many ways of approaching digital identity. Some actually do have national digital identity like Singapore, and, you know, India, you know. So but the thing is, there are certain countries that actually have it on privately-owned, privately-driven manner. Now, but I think it's one thing is for sure, there is actually a need to have some kind of security over "I am who I am" online, right. And that is actually the catalyst for seamless payment experience and a seamless experience right throughout. Now, for me, a digital identity is needed, because of the fact that if you put customer in the middle, and you're looking at it from his lens, it's not funny for him to keep on signing on over and over again, authenticating himself, going through eKYC, especially for you know, the same sector, which is financial services or banking, right. So also for, you know, other sectors, like if you want to go to another hospital, you got to sign on again, you know, and if you want to avail yourself to other services, like education again. So it only makes sense for you to have this ID system where you can actually leverage on that and all the information that you need to store and expose is actually available at your request at your control. Right. So I think you must be able to actually achieve that particular outcome in order to make, you know, seamless digital experience happen. Yeah. experience. And I think on the back end, there's going to be many projects that kind of link everything together to create an entire ecosystem. How do you see this players collaborating together? So when we talk about just now, you mentioned the open banking, you talked about, like, say healthcare, but I think even in the payment space, you have digital banks, fintechs, traditional banks, in order to facilitate the entire eKYC of what you've mentioned just now, the mule accounts, that takes collaboration on a wide scale, how do you facilitate that?

Azleena - PayNet: 19:32

So here's the thing, the very first fundamental aspect in collaborating and ensuring that becomes a reality is number one, don't compete when you don't have to, right, and don't compete over areas that doesn't really make sense. Right. So for me, one area that doesn't make sense is actually customer information. Right? So have the understanding that customer data belongs to the customer, and the customer actually has the right to dictate whether or not to share. That's the first fundamental starting point. And that's the that's the starting block. It's a non starter if a provider, anyone for that matter says that no, is your information, but it belongs to me. Yeah, so that doesn't really make sense. That's the fundamental key principle. The second one is that to have a good self realization and self actualization, that what are you good at? What are you not good at? What should you be good at? Right? So, in order to do that, you need to be able to understand who your customers are, now, and in the future, right? And how do you want to address or how do and serve that customer? Now, so again, if you have that customer centered approach, you will then immediately know that there are not a plethora of, in fact, you cannot be the full service provider for anything and everything for the customer that you want to serve. Right? So in that sense, you need to be able to take a cold hard look at yourself that, you know, in areas where you don't really do well. That's where you're gonna need to collaborate. Right. And in countries where that happens, we see a very thriving innovative banking and financial services. Case in point is India. I was back from from the G 20. meeting that I was quite impressed by how the banks are organizing themselves versus the fintech. I don't see any friction at all. Because the thing is, the banks know what they are good at - compliance, security, customer deposits, right, and regulatory record requirements. So they actually form a very strong foundation at the base layer. And they can they collaborate with fintechs and fintechs know what they're good at - innovating, tech enablement, making sure customer experience is good. And attacking areas where, you know, there's actually underserved or unserved communities in a way that's agile and iterative, right? They can, they can pivot very quickly. So they kind of have this connective tissue with each other, and then you kind of like, collaborate together, right? And nobody loses anything. Because when it comes to the fintech, they don't pretend to be banks, and therefore, there is lesser compliance costs and lighter burden on their regulation. And when it comes to the banks, they say, Okay, I'll concentrate on what I do best, but then I will expose information to you. But there's actually a cost to it for me. Right. And there's something in it for me. And therefore they there is this core existence of financial services together. And there's this a few countries that is already organized themselves that way. And I think Malaysia is soon converging into that particular space as well. Yeah.

YY - AIBP: 22:56

I like that. I think when you approach it from a consumer centric perspective, where all your actions focuses on what is the outcome you want to deliver for your customers becomes a lot clearer, right? No one company can be everything to the customer. It's about understanding your value proposition. Yeah, I think I would like to end off today's discussion by going back to where we started, right, looking at ESG and strategy. When you talk about your focus on ESG, has it been translated into increased productivity, cost reduction, or perhaps helping you get closer to the customers?

Azleena - PayNet: 23:38

There's a few things that is going on, that I hate to say this, but Malaysia is lagging behind. Right? So we were talking about ESG and SDG. This is something that's considered new in this country, whereas in other countries, it's been going on for, I think, a good decade, right? So in other words, the large corporates, there's actually a strong movement by our, you know, stock market, our Bursa, to actually become green. And there's actually a strong latent demand for impact investing, green investing, green economy, right? So in that sense, because when you look at, you know, ESG, and the sustainable aspects of ESG, the "E" side, there's actually this GHG Protocol, and you want to ensure when it comes to scope, one, two, and three, you're not only sustainable, as an organization, in woodworking, or with your, you know, ecosystem but also with your suppliers, right. So therein lies the benefit of the value chain to be entirely ESG compliant. And therefore, there's actually a strong push because as companies, bigger companies, that own supply chains, want to make sure that the supply chain is also green. and they will want to have SMEs and MSMEs who are suppliers to also have some kind of green or impact investing or some kind of ESG barometer, to say that they are also complying. Right. So that's where the benefit of additional business comes in. Now, the second part of it is that, as we embrace what you call circularity of the economy, because one aspect and the spillover of ESG is actually circular economy. And circular economy means very simple zero waste, right? So the moment you reduce or have no wastage, there's already immediate savings in that sense. And when you when you look at activities, where, you know, you go for green energy, and you go for, you know, carbon free type of investing, the more you do it, the lesser the cost becomes. Right now, there's actually a premium, I must say, you know, for PayNet, we actually subscribe to the green electricity tariffs, slightly at a premium, but I think it's the more people join on board, economies of scale will start happening, and then we will bring down the costs, right? So as we go along that chain, more and more fintechs are actually already consciously become ESG and SDG compliant. And then now going into the space of openly and saying it, you know, in a very assertive manner that, yes, I am ESG aligned, and we are working with them. I'm happy to say that we are working with one, you know, 0% micro lending platform, that's SDG aligned, because they go for inclusivity. There's another one that walks into sustainable fashion, where they actually focus on zero waste. And then the third one is actually on food security, where they're producing Agrotech, using IoT as well as AI, to actually automate farming, and do co-farming, and therefore increase productivity in that sense. And these guys are actually, you know, making inroads in the local economy.

YY - AIBP: 27:00

That's great to know. And like we've mentioned about how in the bigger value chain, being able to measure your scope one, scope two, scope three kinds of emissions, will help you become more valuable in the ecosystem itself. But what does that mean to PayNet as a payments company? Because we usually have those conversations with more like manufacturers, but in PayNet, the "E" part of ESG, how do you measure that internally?

Azleena - PayNet: 27:32

So we have gone on our scope one measurement, right, so now 76% of our power is green, we are looking at ways and means to do zero wastage. And by that, you know, our server racks our, you know, hardware, we kind of like repurpose it, we don't we don't throw it to the bin, right. So E waste management is actually quite key. And then there's also the aspect of sustainable procurement, right, where we only source and we now making it practice. But now, soon, we are actually going to look at making it a policy, right? We do sustainable procurement. And what we mean by that is that for gifts or for you know, all these corporate items, we look for social enterprises that we support, right, that gives an impact to the community providing jobs or promoting zero waste, right. So within PayNet, that's what we do. But then in influencing the sustainable value chain, what we would want to do and we are doing right now, as we speak is that, I work with our participants, our participants belong to our ecosystem. So that will be a scope two scope three type of activity, and we actually bring our suppliers and our ecosystem together to go into ESG initiatives together with us. Now case in point right now, we are working with an island community, we are changing that island community to become fully cashless is actually a community you know, kind of like classroom type of approach. I don't want to let too much out of the bag because the announcement is only coming in October. But you know, the essence of it is that we are marrying cashless enablement with environmentally sustainable purchasing, buying, as an industry. So we starting that with an island community. And let's see how it goes. And that is actually together with PayNet

YY - AIBP: 29:37

Wow Azleena, I always thought PayNet is just the participants. payments network, but it seems like it's a lot more than that. Well, on an ending note, can you just give us a single line on what are you most excited about for the ASEAN banking and payments industry?

Azleena - PayNet: 29:57

So one thing that I look forward to and I think it's already happening naturally is platformization of the entire industry. So if you look at the way things are moving right now, is no longer banker-customer type relationship. Yeah, the convergence is actually towards some kind of networks and some kind of ecosystem that connects to a platform. Right? So, in essence, when you have a platform, the bigger picture is actually how you can actually automatically connect and interact and converge with other industries. Right, so so that's what I'm looking forward to. The moment you converge that, then digital economy will proliferate, will grow at, you know, an optimal level.

YY - AIBP: 30:48

So the open banking, API banking ecosystem where every player is connected to one another, and yes, you can use that to drive a customer centric banking experience. Yeah. Thank you very much Azleena for your time today. Well, I learned a lot more about PayNet. And I hope our audience feels the same way too. Appreciate your time and we look forward to seeing you more in our future activities.

Azleena - PayNet: 31:14

Yep. Thank you so much.

YY - AIBP: 31:16

Thank you.

Voice Over: 31:18

We hope you've enjoyed the episode. For more information about business growth in the ASEAN region, please visit our website www.iotbusiness-platform.com.