KUALA LUMPUR (April 15): Online banking, stock trading, bill payments and shopping are things that we take for granted today. 

But there was a time, less than 30 years ago, when these were unheard of in Malaysia. That is, until a small bank, a new kid on the block, came along and shook up the banking and stockbroking industries with a slew of innovative products that introduced these services to the Malaysian public.

And, in the process, raised not just a few eyebrows but also hackles.

The story of these innovations by the Phileo Group will be the subject of a talk by lawyer Philip Koh, who was appointed adjunct professor at Monash University Malaysia earlier this year. Titled “The Story of Innovation in Malaysia’s Financial and Capital Markets: The Rise and Demise of Phileo Group”, the April 22 webinar is organised by the Business Law and Taxation Department of Monash. 

“After having read The Phileo Story, I am truly convinced that Philip could not have chosen a more appropriate topic than this,” said Associate Professor Dr Adnan Trakic in an email interview. Adnan is head of the Business Law and Taxation Department, School of Business, Monash University Malaysia.

“The Phileo story is about innovation and creativity. But it is also about hard work and dedication. It is about treating your employees and customers with the utmost respect. Perhaps the central message is one of the need to be good and excel at whatever it is you do. This is a useful message to not only individuals and businesses aspiring to succeed in their endeavours but also to authorities and regulators when dealing with economic and regulatory challenges,” added Adnan. 

Koh was a corporate lawyer when he was introduced to two young men, Tong Kooi Ong (now Tan Sri) and Rudy Koh, who were embarking on the formation of a financial services group called PhileoAllied Group. Tong, who was group CEO of Phileo, is chairman of The Edge Media Group which includes The Edge Communications Sdn Bhd, publisher of The Edge and CEO Morning Brief.

Koh, who had then spent five years in academia at the University of Malaya and a decade in legal practice during which he was involved in several celebrated public law cases, later joined the Phileo Group as an executive director. “I wanted to experience corporate life from within to see for myself the dynamics and management and board room practices which can either destroy or enhance shareholder value,” he said in an email interview.

Phileo grew from a stockbroking outfit at its launch in 1992 into a financial services group offering a suite of services. Its ultimate business vision was to provide universal banking — credit/lending facilities, asset management and investment advisory, payment transactions, deposits, stock exchange transactions, underwriting and financial analyses, corporate advisory and so on, all under one roof. As the book The Phileo Story: A Triumph of the Spirit notes, it “was already getting there”, until its demise less than 10 years later put an end to all that.

Phileo used IT to compete with larger and more established players in the financial services industry. PALDIRECT, launched in June 1995, was a first in the banking/stockbroking industry. By using a basic terminal and keyboard that they could buy from the bank (a hire purchase scheme was available for this), customers would be connected to the bank’s own system and be able to conduct banking transactions such as obtaining up-to-date information on their accounts and placing fixed deposits, access KLSE stock prices and place buy or sell orders, and pay some utility bills. 

PALDIRECT later developed a web-based option that was made accessible on computers, a precursor to online trading that other banks eventually adopted. 

But in its efforts to better serve customers, PALDIRECT ruffled feathers. Koh noted that bringing about convergence between banking and securities dealing on a web platform “disintermediated market players and also lowered transaction costs”.  

By bypassing the middlemen, Phileo was able to give its trading customers a rebate of up to 20% which would have gone towards brokers’ fees, leading to claims of undercutting, and a battle between Phileo and the KLSE. 

Building on the PALDIRECT template, Phileo launched PALWORLD in August 1996. A PC-based product, PALWORLD offered the same range of services as its predecessor but with additional features such as electronic shopping. 

PALWORLD was followed a month later by oneACCOUNT which combined the features of both current and savings accounts and the interest rates of a fixed deposit account. 

It was a simple idea but a ground-breaking one. The book quotes then-CIMB CEO Tan Sri Nazir Razak as saying: “Services that Phileo provided were based on very, very simple ideas… Until Phileo, nobody had bothered to upgrade their technological systems to achieve something like oneACCOUNT.”

oneACCOUNT was followed by PALVIRTUAL KIOSK (readers may remember the one at 1Utama Shopping Centre) in June 1997, PALTELLER, the first PALVIRTUAL KIOSK at a McDonald’s called PAL@McDonald’s, and “lifestyle banking” via arrangements with a bookshop and café in Bangsar. According to The Phileo Story, “The PhileoAllied Bank in Greenlane, Penang, was perhaps the first bank branch in the country to boast its own little café.”

Night banking had been introduced at PhileoAllied Bank’s SS2 branch in 1995 and was later extended to the USJ Subang and Pulau Tikus, Penang, branches. 

“So innovative were many such initiatives that the then dynamic CEO of Citibank was quoted in local media (The Star) that Citi watches Phileo as Phileo understood the power of technology innovations… Before there was Lazada and Shopee, Phileo had also embarked on building a consumer product platform. All these were achieved through a very capable team that the CEO assembled and drove internally,” said Koh. 

“In the webinar, I hope to explore how a group with entrepreneurial energies pushed the boundaries of financial and capital markets competitiveness for Malaysia, shook up the oligopolistic players and caught the attention of even regional and international players,” said Koh. He added that he would also explore why Phileo was not permitted to continue its journey.

PhileoAllied Bank and PhileoAllied Securities were merged with Maybank in January 2001. In 1999, the group achieved profit after tax of RM214 million, the best in its short history. For the financial year ended Jan 31, 2000, it recorded pre-tax profit of RM211 million on turnover of RM902 million, its highest ever.

(The Phileo Story: A Triumph of the Spirit can be downloaded for free at https://books.theedgemarkets.com. Zoom link for the talk on April 22 from 10-11am: monashmalaysia.info/BLT. Meeting ID: 817 1144 0847 Passcode: 254304.)