Editor’s note: This interview is part of a Q&A series with some of the contenders vying for a digital banking license in Malaysia.
Malaysia’s central bank Bank Negara Malaysia announced last month it has received 29 applications for digital banking licenses.
A diverse range of parties has 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 plans to issue up to five licenses in the first quarter of 2022.
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. Demand for online banking services has also accelerated by the ongoing COVID-19 pandemic.
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.
TechNode Global has talked to several applicants which submitted their bids, to understand more about the opportunities they see in building a digital bank and their competitive edge against other contenders. One of those includes Malaysian budget airline AirAsia Group Bhd’s FinTech arm BigPay.
“BigPay was built like a digital bank from the start. We have never had a banking license, but the way we have built our technology stack and structured our operations has always been with the vision of offering a full suite of banking services,” BigPay Founder and Chief Executive Officer Salim Dhanani told TechNode Global in an email interview.
“We are not starting from scratch with no customers — especially not, given the access we have with the AirAsia ecosystem. We are developing on a pre-existing mission with a deeper set of products that cater to our customers,” he said.
“This is very unique in the market because we are one of the only companies following a ‘neobank’ model in the Malaysian market today. On top of that, every single member of the consortium brings deep-seated expertise in banking as well,” he added.
In the interview, Salim also shared BigPay’s plans and strategy on how to serve the “underserved and unserved” segment in Malaysia.
BigPay has put together a consortium of strategic partners to support its application: Malaysian Industrial Development Finance Bhd (MIDF), a unit of the country’s largest asset manager Permodalan Nasional Bhd, private equity firm Ikhlas Capital and a foreign conglomerate with FinTech expertise.
Singapore-headquartered Ikhlas Capital is a private equity firm founded by CIMB Group former chairman and CEO Nazir Razak. Nazir is the chairman of Bank Pembangunan Malaysia Bhd, a development financial institution wholly owned by the Malaysian Government through the Minister of Finance Inc.
MIDF Group is a financial services provider in three core business areas, investment banking, development finance, and asset management.
Each of the consortium partners is “contributing something unique for the success of BigPay Bank,” the company said in a statement when it announced its application.
In addition to the consortium partners, BigPay said it is part of the AirAsia Group and has access to a broad ecosystem that includes e-commerce merchants and consumers, insurance, and telecoms.
Launched in 2017, BigPay mobile money app provides several regulated financial products, from e-money and international remittance to micro-insurance and budgeting. Available in Malaysia and Singapore, BigPay is continuing its expansion throughout ASEAN.
Following AirAsia’s acquisition of Gojek’s Thai operations, BigPay said last month it intends to work with GoPay and the Bank of Thailand to get the required licenses to operate.
In November last year, BigPay also received conditional approval to provide online lending services in Malaysia, under a community credit license from Malaysia’s Ministry of Housing and Local Government.
AirAsia Group is in the midst of building its non-airline, digital businesses, and super app as most of its planes were grounded due to the ongoing COVID-19 pandemic.
The group has injected $53.27 million in its financial services unit Big Pay Pte Ltd through its wholly-owned subsidiary AsiaAsia Digital, DealStreetAsia reported in June, citing a regulatory filing with Singapore’s Acra. The investment, through the allotment of shares, was made on May 14.
What opportunities does BigPay see in digital banking in Malaysia?
BigPay has been built on a neobank model with the goal of democratizing financial services. We have launched multiple regulated products under multiple licenses – but a digital banking license would allow us to offer the full suite of products to the Malaysian public.
Over the last 10 years, the Malaysian economy has grown together with its middle class. But the reality is that one of the big drivers of sustainable economic growth for the lower and middle class is twofold: access to financial literacy and access to cost-effective financial products. That is what really allows for wealth creation, and this is the opportunity that BigPay sees.
What competitive advantage BigPay’s consortium has against other competitors? How does BigPay plan to position its digital bank or enhance its current products should it be granted a digital bank license?
BigPay was built like a digital bank from the start. We have never had a banking license, but the way we have built our technology stack and structured our operations has always been with the vision of offering a full suite of banking services.
Our customers and market positioning have always been such. We are not starting from scratch with no customers – especially not, given the access we have with the AirAsia ecosystem. We are developing on a pre-existing mission with a deeper set of products that cater to our customers.
This is very unique in the market because we are one of the only companies following a neobank model in the Malaysian market today. On top of that, every single member of the consortium brings deep-seated expertise in banking as well. We feel that together, we can bring to the market an incredible set of products and make it a Malaysian success story.
Bank Negara hopes to address market gaps in the “underserved and unserved segments.” How substantial are these segments? What is BigPay’s strategy or plan to serve these segments? What kind of technology/innovation does the consortium plan to introduce to serve these segments?
The segments are large, and unserved and underserved is an interesting dichotomy. Just because someone has a debit card does not mean that they are banked. It is really the financial products they have access to that allow consumers to grow and develop their financial health, to have a level of financial freedom, and to continue to create wealth not only for themselves and their families but for the Malaysian economy as well.
BigPay is helping with this on two fronts:
First, we understand that there are a lot of people across the country that do not have access to financial services which can improve their financial health. We want to be there to give them access to simple and intuitive debit accounts, affordable loans, and saving products – regardless of how much capital they have or whether they have an extensive credit history.
This is where BigPay does well and will continue to do well with a digital banking license. We believe this will really contribute to the Malaysian economy.
Secondly, we have built a best-in-class technology stack and we will continue to develop it. It helps us keep our costs low while making a viable business around supporting underserved and unserved consumers.
Given the wide range of parties applying for digital bank licenses, what criteria would Bank Negara emphasize or prioritize when granting a digital banking license?
This is a question for Bank Negara, although they have made it very clear through policies and interviews what their priorities are. We will see it play out over the next 12 months.
How will digital banks have an impact on the banking industry in the short term and long term?
In the short term, banks are not necessarily serving all these segments that digital banks are going after. But over time, banks will adapt. They are implementing new technologies and focusing on efficiency. As a result, we’ll see a more competitive market that will ultimately benefit Malaysian consumers and businesses — which is a great thing.
Based on your estimation, any timeline on how long the digital bank can break even or be profitable? What are the risks and challenges to run a digital bank? How will BigPay manage the risks and challenges?
We cannot reveal all our secrets yet, but there is a strong business plan. BigPay is not trying to build a business around short-term profit. We are in for the long term and looking at building a strong foundation — with a strong user base and with the right products.
We can keep these products affordable and accessible while being a sustainable business. There are inherent risks as there would be with any bank, but we have a strong consortium with a lot of experience in the banking sector. We believe we are geared to face any challenge.