Bank Negara Malaysia announced on Friday the five successful applicants for the digital bank licenses as approved by the Minister of Finance Malaysia. The country will have three digital banks licensed under the Financial Services Act 2013 (FSA) and two Islamic digital banks licensed under Islamic Financial Services Act 2014 (IFSA).

According to the cenral bank, the following applicants are to be licensed under the Financial Services Act 2013 (FSA):

• a consortium of Boost Holdings Sdn. Bhd (a unit under telco Axiata Group) and RHB Bank Bhd;
• a consortium led by GXS Bank Pte. Ltd (Grab-Singtel consortium) and Kuok Brothers Sdn. Bhd (linked to tycoon Robert Kuok); and
• a consortium led by Sea Ltd (Singapore-headquartered e-commerce firm) and YTL Digital Capital Sdn Bhd.

The following applicants are to be licensed under the Islamic Financial Services Act 2013 (IFSA):

• a consortium of AEON Financial Service Co., Ltd., AEON Credit Service (M) Bhd and MoneyLion Inc.; and
• a consortium led by KAF Investment Bank Sdn. Bhd.

Three out of the five consortiums are majority-owned by Malaysians namely Boost Holdings (a unit under telco Axiata Group) and RHB Bank Bhd, Sea Ltd (Singapore-headquartered e-commerce firm) and YTL Digital Capital Sdn. Bhd. and KAF Investment Bank Sdn. Bhd.

“Digital banks are expected to further advance 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,” Bank Negara Malaysia Governor Nor Shamsiah said in the statement.

“Digital banks can help individuals and businesses gain better access to more personalized solutions backed by data analytics. As businesses move online, digital banking also provides a safer and a more convenient way to transact,” she added.

According to Bank Negara, all 29 applications received were thoroughly assessed pursuant to section 10 (1) of FSA, and IFSA, which require Bank Negara to consider all the factors in Schedule 5 of the Acts and other relevant policy requirements.

The assessment criteria cover the character and integrity of applicants, nature, and sufficiency of financial resources, soundness and feasibility of business and technology plans as well as ability to meaningfully address financial inclusion gaps.

“Applications were assessed on their individual merits, as well as relative to other applications based on consistent evaluations of each assessment criteria. This horizontal review is based on the assessment criteria applied across all applicants to determine the relative strength of each application and identify successful applicants, the central bank said.

Throughout the assessment process, Bank Negara said it instituted strict governance and evaluation procedures to ensure robust, objective and consistent assessments across all 29 applications received. Four levels of assessment were carried out, supported by a cross-functional technical team, a review team and internal independent observers from Bank Negara’s risk and legal departments. The final recommendations to the Minister were deliberated and endorsed by the central bank’s Management Committee.

Following this announcement, the successful applicants will undergo a period of operational readiness that will be validated by Bank Negara through an audit before they can commence operations. This process may take between 12 to 24 months.

In line with the 5 strategic thrusts stated in the Financial Sector Blueprint 2022-2026, BNM will continue to work with the financial and fintech industries and relevant stakeholders to continuously enhance access to financial services throughout the country and across all segments of society.

Bank Negara announced in July 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.

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

Malaysia will be joining Hong Kong, Singapore, and the Philippines to issue digital banking licenses in recent years. Neighboring Thailand is also preparing rules of setting up virtual banks, Bloomberg reported in February.

Consortiums partnering banks, e-wallets have an upper hand to bag Malaysia digital bank licenses