BNM receives 29 applications for digital banking licences

• BNM will issue five digital banking licences by next year
• A wide range of companies and businesses have filed applications for a digital bank licence
• BNM pushes for digital banking to reduce the unbanked population

Bank Negara Malaysia (BNM) has received a total of 29 applications for digital banking licences. BNM made the announcement following the closing of a six-month application period that ended on 30 June 2021. According to BNM, a mix of banks, industry conglomerates, fintechs, e-commerce players, and technology leaders in the country have shown interest in operating a digital bank in the country.

Big name companies and businesses are interested in a digital bank licence

While BNM has declined to name the applicants, there were some institutions that disclosed they have submitted applications. Some of the big name companies that were attracted to the prospect of being one of the first digital bank operators in Malaysia include AEON Credit, Axiata–RHB, BigPay, Grab-Singtel, Green Packet, iFast, MPay, Pertama Digital, PUC, and Star Media Group. However, consumers will have to wait to actually obtain services through digital banks as successful applicants will only be revealed by BNM in the first quarter of 2022.

AEON Credit and its parent company AEON Financial Service created a joint venture that they hope will be a recipient of one of the five licences. AEON is known for offering credit cards, life insurance, and banking in Japan, Malaysia, and several other countries.

Bigpay, a part of Airasia Group, created a consortium with the Malaysian Industrial Development Finance, Ikhlas Capital and a foreign conglomerate with fintech expertise. Bigpay offers a mobile app connected to a credit card that allows users to track and plan their spending.

iFast is a wealth management fintech platform headquartered in Singapore. It has previously tried to apply for a banking licence in Singapore but failed to make the final cut. This time, the company has created a consortium with other Malaysian companies like THZ Alliance, and Koperasi Angkatan Tentera Malaysia. According to Lim Chung Chun, founder and CEO of iFast, their partners will allow them to target well the bottom 40% of Malaysia.

Similar to iFast, Grab-Singtel has previously applied for a digital banking licence in Singapore. The Monetary Authority of Singapore granted Grab-Singtel a licence in December 2020. As Grab-Singtel attempts to enter the Malaysian market, it is expected that the consortium will tailor its existing products to better meet local requirements.

Aside from iFast and Grab-Singtel, SEA Group and Razer Fintech have also made known their interest to tap the Malaysian market as a digital bank. However, no statements have been released so far on whether they have done so.

Focus is on unserved and underserved customers

On 31 December of 2020, BNM released a licensing framework for digital banks and announced that five applications would be approved and allowed to operate in the country. This is part of Malaysia’s plan to decrease its unbanked population from 8% to 5% through technology. Furthermore, the digital banking revolution in the country is expected to improve financial products, reduce costs, and strengthen the financial literacy of Malaysians in general.

A simplified regulatory framework during the initial stage of operations will guide digital lenders in the country. They will be required to comply with the Financial Services Act 2013 and the Islamic Financial Services Act 2013 and other regulations.

Several Asian countries are opening the banking sector for online-only entities amid a surge in digital banking. Last year, Singapore issued digital banking licences to four applicants, while Hong Kong issued 8 licences.