Malaysia central bank Bank Negara Malaysia announced on Friday that it has received 29 applications for a digital bank license under the Financial Services Act 2013 and the Islamic Financial Services Act 2013, following a 6-month application period, which ended on Wednesday (June 30).

A diverse range of parties have submitted applications for the digital bank license, ranging from banks, industry conglomerates, technology firms, e-commerce operators, FinTech players, cooperatives, and state governments, the regulator said in a statement.

The central bank did not list out the applicants.

Notable applicants that have officially announced their applications include Grab-Singtel venture, Axiata-RHB consortium, Paramount-Star Media Group, iFAST Corporation Ltd, AirAsia’s BigPay-MIDF-Ikhlas Capital consortium , AEON Credit Service (M) Bhd, among others.

Malaysia’s move comes at a time when regulators across Asia including Singapore, Hong Kong, and the Philippines are opening up the banking industry to digital players, encouraged by higher smartphone penetration and better internet connections.

Central Banks and consumers also hope that digital banks could bring financial inclusion to underserved segments, helped by advanced technology.

“Successful applicants that meet all prudential criteria will be expected to contribute towards greater financial inclusion by offering products and services to address market gaps in the underserved and unserved segments,” the central bank said.

“This includes promoting suitable and affordable financial solutions by leveraging on innovative application of technology,” it added.

Up to five licenses may be issued, and notification of successful applications will be made in the first quarter of 2022, Bank Negara said.

National cooperative teams up with strategic partners

Seperately, Angkatan Koperasi Kebangsaan Malaysia Bhd (ANGKASA), also known as National Co-operative Movement of Malaysia, Malaysia-listed company Boustead Holdings Bhd have teamed up with one of the world’s largest independent insurance brokerage companies to apply for the digital banking licenses.

These entities have collaborated under MyAngkasa Digital Services (MDS), a subsidiary of ANGKASA, to apply for an Islamic digital banking license from Bank Negara, according to a statement.

A host of strategic partners, including digital banking provider, MAMBU, cloud solution specialist Amazon’s AWS and licensed eMoney player, MRuncit Commerce (MCash eWallet), along with other ecosystem partners form part of the consortium that has also received full backing from the Ministry of Entrepreneur Development and Cooperatives (MEDAC) and the Cooperative Commission of Malaysia.

During the initial foundation period, MDS Consortium is expected to focus on its captive market of 7 million people, most of which are in the unserved and underserved segments.

The consortium aims to leverage on its combined brand loyalty, wide distribution channel footprints of cooperative networks, and its existing membership base to roll out its unique model of ‘sachet banking’ comprising innovative, simple daily banking products that suit its target segments such as dual savings, bite-size financing and a slew of digital financial management tools to support its customers in managing financial health and literacy awareness, MDS said.

Boustead, a public listed conglomerate majority-owned by military retirement fund Lembaga Tabung Amanah Tentera (LTAT), is involved in various businesses including plantation, heavy industries, property, and pharmaceuticals among others. The conglomerate, which serves as the investment arm of LTAT, directly holds 20.81 percent and indirectly holds 0.03 percent in Affin Bank Bhd, a listed banking group in Malaysia.

“The independent insurance broker” has also a solid footing in Malaysia as it has been providing comprehensive solutions since 1978 focusing on specialist insurance, reinsurance, takaful, and employee benefit solutions, MDS said.

Accelerated adoption of technology and e-commerce activity

“The pandemic has accelerated the adaptation of technology and eCommerce activity and we will deliver digital banking products that can be personalized to allow our customers to take control of their financial needs. We want to make banking simple by providing our customers full digital experience with innovative products and services that adapt to their lifestyles and requirements. We also want our digital bank to hold to the principles of Shariah-ethical banking without its traditional complexities,” said MDS chairman and ANGKASA president Abdul Fattah Abdullah, who said he is positive about the prospect of securing one of the five digital banking licenses to be awarded.

ANGKASA was officially registered as the national union of co-operative in 1971. Since its establishment, ANGKASA has played the role of the apex of cooperatives for the Malaysian cooperative movement. With the approval of the new Cooperative Act in 1993, ANGKASA was formally recognized by the government of Malaysia to represent the cooperative movement nationally and internationally.