5 new digital banks for Malaysians to love

5 new digital banks for Malaysians to love

Bidding does not mean winning

Many months ago, a close friend told me that his company is bidding for a digital banking license. His company is a listed entity. I told him that there are just 5 licenses up for grab and the winners are likely to be people with the banking experience and backed by a super huge partner with financial muscle. Without at least one or two of these combinations, winning a license may still be an uphill battle.

It’s not sure-success even for the winners

Please remember, digital bank does not mean they immediately become successful. The current banks already have digital services and they have the support of branches and also the experience as well as financial power. With their current profits, they could continue investing to ‘fight’ with new competitors even if the new ones are digital banks and looked upon positively.

Lots of investment may be needed

Thus, without industry experience, this new company will have to hire people from the banks (if they are rich, it’s easier. Else paying the same salary will be hard to do it) and later on will need to invest a lot of money to get people to know them, trust them and use them. Here are the 5 winners. (nope, my close friend’s company were not within the 5 winners)

Press Release from Bank Negara Malaysia here.

Bank Negara Malaysia (BNM) wishes to announce the five successful applicants for the digital bank licences as approved by the Minister of Finance Malaysia.

A. The following applicants are to be licensed under the Financial Services Act 2013 (FSA):

  • a consortium of Boost Holdings Sdn. Bhd. and RHB Bank Berhad;
  • a consortium led by GXS Bank Pte. Ltd. and Kuok Brothers Sdn. Bhd; and
  • a consortium led by Sea Limited and YTL Digital Capital Sdn Bhd.

B. The following applicants are to be licensed under the Islamic Financial Services Act 2013 (IFSA):

  • a consortium of AEON Financial Service Co., Ltd., AEON Credit Service (M) Berhad and MoneyLion Inc.; and
  • a consortium led by KAF Investment Bank Sdn. Bhd.

Three out of the five consortiums are majority-owned by Malaysians namely Boost Holdings and RHB Bank Berhad, Sea Limited and YTL Digital Capital Sdn. Bhd. and KAF Investment Bank Sdn. Bhd.

All 29 applications received were thoroughly assessed pursuant to section 10 (1) of FSA, and IFSA[1], which require BNM to consider all the factors in Schedule 5 of the Acts and other relevant policy requirements. The assessment criteria cover the character and integrity of applicants, nature and sufficiency of financial resources, soundness and feasibility of business and technology plans as well as ability to meaningfully address financial inclusion gaps. Applications were assessed on their individual merits, as well as relative to other applications based on consistent evaluations of each assessment criteria. This horizontal review is based on the assessment criteria applied across all applicants to determine the relative strength of each application and identify successful applicants.

Throughout the assessment process, BNM instituted strict governance and evaluation procedures to ensure robust, objective and consistent assessments across all 29 applications received. Four levels of assessment were carried out, supported by a cross-functional technical team, a review team and internal independent observers from BNM’s risk and legal departments. The final recommendations to the Minister were deliberated and endorsed by BNM’s Management Committee.

Bank Negara Malaysia Governor Tan Sri Nor Shamsiah said, “Digital banks are expected to further advance financial inclusion. By adopting digital technology more widely for everyday transactions, we can significantly increase opportunities for our society to participate in the economy – by overcoming geographical barriers, reducing transaction costs and promoting better financial management.”

“Digital banks can help individuals and businesses gain better access to more personalised solutions backed by data analytics. As businesses move online, digital banking also provides a safer and a more convenient way to transact,” she added.

Following this announcement, the successful applicants will undergo a period of operational readiness that will be validated by BNM through an audit before they can commence operations. This process may take between 12 to 24 months.

In line with the 5 strategic thrusts stated in the Financial Sector Blueprint 2022-2026, BNM will continue to work with the financial and fintech industries and relevant stakeholders to continuously enhance access to financial services throughout the country and across all segments of society.

[1] FSA and IFSA: Section 10. (1) In assessing an application duly made under section 9 to carry on any licensed business, BNM shall have regard to all the factors set out in part 1 and Part 2 of Schedule 5 and such other matters that BNM considers relevant.

Bank Negara Malaysia
29 April 2022

— end of press release —

Yes, I would definitely be a customer to some of these digital banks

I have been a CIMB Preferred customer for a long time. This is unlikely to change. I am also a customer of a few other banks because of my home loans with them. Somehow some of them offer me better rates than CIMB during the time of application. However, I do think that there may be many innovations from these new digital banks apart from the almost certain higher returns if I leave my money in these digital banks. (They are supposed to have lower operating costs).

Who knows, my future home loan could be from these digital banks too! All the best yeah. Be ready to offer the best services to all Malaysians and beyond.

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