Grab-Singtel and Sea Group consortia bag Malaysia digital bank licences
Tan Ai Leng
TWO Singapore-based consortia are among the 5 winners of Malaysia’s digital bank licences announced by Bank Negara Malaysia on Friday (Apr 29) – a consortium led by GXS Bank and Kuok Brothers, and another led by Sea Limited and YTL Digital Capital.
GXS Bank is a Grab-Singtel joint venture, and the New York Stock Exchange-listed Sea Limited is the parent company of e-commerce platform Shopee. Both companies secured Singapore digital bank licences in 2020.
Before Malaysia's central bank unveiled the winners, these two consortia were already regarded as frontrunners for the licences, given their strong background as digital financial service providers and their existing infrastructure that supports future banking services.
The other 3 groups which bagged licences were:
- E-wallet company Boost Holdings and RHB Bank consortium;
- A consortium of Aeon Financial Service, Aeon Credit Service and US-listed fintech firm MoneyLion; and
- A consortium led by KAF Investment Bank.
Boost is a unit of Malaysia’s telecommunications group Axiata, which has evolved from a cashless payment app into a provider of micro-financing and micro-insurance services to consumers. RHB is Malaysia's 4th-largest fully integrated financial services group.
Aeon Credit Service, a household name in Malaysia, has operated in Malaysia for 25 years and now has about 65 retail outlets with over 4 million customers. MoneyLion, co-founded by Malaysian Foong Chee Mun, is a leading digital bank in US offering lending, financial advisory and investment service to consumers.
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KAF Investment Bank, a unit of diversified financial-services provider KAF Group, partnered with fintech company MoneyMatch and South-east Asia's largest car e-commerce platform Carsome to secure the digital bank licence.
Twenty-nine consortia applied for the digital bank licences in June 2020. Malaysia is the third country in South-east Asia to issue digital bank licences, after Singapore and the Philippines.
In a statement, Bank Negara Malaysia said the assessment criteria covered the character and integrity of applicants, nature and sufficiency of financial resources, soundness and feasibility of business and technology plans, as well as the ability to address financial inclusion gaps.
The successful applicants will undergo a period of operational readiness, to be validated by Bank Negara Malaysia through an audit, before they can commence operations. This process may take between 12 and 24 months.
With the award of digital bank licences, the central bank’s governor Nor Shamsiah expects the soon-to-be operators to advance the country’s 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,” she said in a statement.
“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.
Sophia Lee, co-head of financial institution ratings of RAM Ratings, said the entry of digital banks to Malaysia will spur financial innovation and accelerate the digitalisation of financial services.
“By utilising technologies based on artificial intelligence or other forms of predictive algorithms along with big data analytics, digital banks may undertake alternative assessments of credit risks to enable greater financial inclusion,” she added.
With this, those who lack standard documentation or credit history, especially gig workers, could benefit from digital banking, she added.
Lee noted that the participation of digital banks will also fuel competition in the unsecured retail lending – that is, personal loans and credit cards – and micro enterprise segments of traditional banking. These represent about 7 per cent and 4 per cent of the banking system’s loans respectively.
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