This article first appeared in The Edge Financial Daily on January 23, 2020
KUALA LUMPUR: Ride-hailing firm Grab, gaming firm Razer, budget airline operator AirAsia Group Bhd, together with telecommunications player Axiata Group Bhd and Malaysia’s second biggest bank by market capitalisation CIMB Group Holdings Bhd, are looking to apply for digital banking licences in Malaysia.
According to Reuters, quoting sources familiar with the matter, some of these companies have begun talking to consultancies as they explore a possible foray into digital banking.
“Across Asia, regulators are opening up banking to new digital players, encouraged by a boom in mobile connectivity and the prospect of tech firms — not shackled to expensive physical branches — offering low-cost financial services. This month Singapore received 21 applications for five digital bank licences,” the news wire wrote yesterday.
Bank Negara Malaysia (BNM) had, on Dec 27 last year, announced it planned to issue up to five licences to new online banks offering either conventional or Islamic banking under a proposed licencing framework set to be finalised by the end of June this year.
‘Many banks interested’
“Many financial and non-financial institutions are sizing up market opportunities and working with external parties,” Reuters quoted one of the sources as saying, adding Malaysia has said it prefers bidders whose equity is controlled by local companies.
Local lenders Hong Leong Bank Bhd and Malayan Banking Bhd are also considering bidding for a licence, it added.
The Edge Malaysia also reported last July that Grab and at least four banks — CIMB, Affin Bank Bhd, Hong Leong and AMMB Holdings Bhd — have signalled their interest in pursuing a digital or virtual banking licence in Malaysia.
“As the leading mobile wallet [platform] in the region, we are fully supportive of Bank Negara Malaysia and the government’s [plan] to offer digital banking licences as part of an effort to grow the cashless economy. We are definitely keen to explore [this] and are currently in discussions with the regulators,” a Grab spokesperson told The Edge at the time.
Meanwhile, Reuters wrote that Razer, whose financial technology (fintech) unit led a consortium for a Singapore application, was in talks with a local conglomerate for a Malaysian licence. It quoted Razer Fintech’s chief executive officer Lee Li Meng as saying that the company had extensive operations in Malaysia in the digital payments space and would evaluate the digital banking opportunity.
For Axiata, the news agency said one option is to apply through Axiata Digital Services, which houses all of the group’s digital ventures and owns the e-wallet Boost. Axiata told the news wire it had signalled interest for digital banking.
As for AirAsia, its financial services venture BigPay operates an e-wallet that comes with a prepaid card, while Ant Financial and Touch ’n Go’s e-wallet is the largest e-wallet service in Malaysia with 6.9 million registered users. CIMB owns a majority stake in Touch ’n Go.
Grab, AirAsia and Maybank declined to comment, while CIMB did not respond to queries and Ant Financial said it was premature to comment, the news agency wrote.
According to BNM’s exposure draft revealed last December — which outlines the proposed framework for the licencing of digital banks to offer banking products and services to address market gaps in the underserved and unserved segments — digital banks have to maintain minimum capital funds unimpaired by losses of RM100 million during the foundational phase. Thereafter, the sum has to be increased to RM300 million.