KUALA LUMPUR (June 2): Axiata Group Bhd's subsidiary Boost Holdings Sdn Bhd and RHB Banking Group have signed a heads of agreement to form a consortium to apply for a digital banking licence from Bank Negara Malaysia (BNM).

In a filing with Bursa Malaysia, Axiata said Boost would own a majority stake of 60% in the digital bank joint venture (JV), while RHB would hold the remaining 40%, with a minimum issued share capital of RM100 million.

Both parties will seek to expand on Boost’s extensive fintech experience developed through Aspirasi, its digital micro-financing and micro-insurance provider, and the Boost e-wallet, aiming to increase financial inclusion and expedite the development of digital products and services to the underserved and unserved segment including micro entrepreneurs, small and medium enterprises (SMEs) and those in the gig economy.

During a virtual briefing with the media today, Axiata president and group chief executive officer (CEO) Datuk Izzaddin Idris said the group will be injecting the Aspirasi loan book into the venture, provided that the consortium secures the licence.

“We are going to inject the loan book of Aspirasi to kick-start the business of the digital bank. The deadline for submission is June 30, but it will take BNM about 18 months to decide on the award of the licences. We will only know towards the end of next year,” he said.

While the parties have yet to submit their joint application for the licence, Izzaddin said the digital bank will be ready to commence operations as soon as it secures the licence.

RHB group managing director and CEO Datuk Khairussaleh Ramli said the potential digital bank venture would serve as an extension of the bank’s Digital Transformation Programme, which is a core component of its FIT22 strategy.

He said that RHB could attempt to go into the segment alone, but that would require the bank to start looking at new technology stacks and try to understand how business is being done for these small-ticket items.

“That would take a long time. We believe the best way for us to approach this segment is to partner someone who has that experience and Boost has been involved in this segment — it is not something new for them.

“We would like to partner someone that already has experience and can bring in expertise in the form of AI (artificial intelligence) and the new technology stack, while RHB can bring in its experience and expertise in the running of a bank, such as in liquidity management, capital management, risk management and compliance,” he said.

Asked if the parties are exploring the possibility of roping in other partners for the venture, Izzaddin said the consortium is currently limited to the two current members in the interest of expediency.

However, he said whether or not there will be other partners joining the consortium would be mutually discussed and agreed upon by the current parties going forward.

“As far as we are concerned, the two partners currently are good to go for submission for the digital banking licence,” he added.

Commenting on the possible identity and brand of the potential digital banking venture, Boost CEO Sheyantha Abeykoon said this is currently in discussion.

“We will come up with a brand that is relevant to the target segments we want to cater to. This will be announced at the appropriate time,” he said.

Axiata rose nine sen or 2.4% to RM3.81 at the noon market break, giving a market capitalisation of RM34.95 billion.

RHB rose 14 sen or 2.6% to RM5.44, translating into a market capitalisation of RM21.8 billion.