Twenty-nine applicants. Up to five licenses. That is the arithmetic facing Bank Negara Malaysia as it prepares to name its first digital banks, with an announcement expected in March.
The result will make Malaysia the second country in ASEAN to issue such licenses. In December 2020, the Monetary Authority of Singapore picked four winners from 14 applicants. Two of them were full digital banking licenses: one to Sea, a home-grown tech start-up listed on the New York Stock Exchange, and one to a partnership of Grab and Singtel, according to a commentary in The Diplomat.
Why customer bases matter
The Diplomat’s analysis rests on one point. A digital bank competes with incumbents that already have large customer bases, so it needs a deep pool of users from day one. Grab and Singtel fit that rule in Singapore, where most people use Singtel as their mobile provider and almost everyone has Grab on their phone.
The pair are applying together again in Malaysia, but the commentary says a win is not guaranteed. Singtel lacks the dominant position it holds at home. Their rival, Axiata, is a major telecom holding company partnering with RBH, one of the country’s largest banks. Axiata’s e-wallet company Boost had 8.8 million users as of 2020, and the largest shareholder is the sovereign wealth fund Khazanah Nasional Berhad.
Others in the field have heavy backing too. Sunway, which controls Credit Bureau Malaysia, has teamed up with Bangkok Bank and a fintech linked to China’s Tencent. BigPay, a local start-up, is bidding with the support of AirAsia, which has been pushing into financial services. Sea Group has reportedly joined Malaysian conglomerate YTL Berhad.
The unbanked question
Malaysia has a problem Singapore largely does not. World Bank figures put the share of people over 15 with a bank account at 98 percent in Singapore in 2017 and 85 percent in Malaysia. That gap means the central bank may set aside a few licenses for applicants aimed at low-income or unbanked groups.
Some are already in the race. The governments of Sarawak and Sabah each formed a separate consortium to widen access to credit in rural areas. Boustead Holdings, majority owned by a pension fund for the armed forces and recently in some financial trouble, has paired with the national cooperative Angkatan Koperasi Kebangsaan Malaysia Berhad to serve cooperative members and others the banks overlook.
The Diplomat’s view is that the decision will show which tech companies and conglomerates have the inside track, and how the new digital ecosystem will shape who gets financial services and credit.
Sources
Sources
- All eyes on digital banking licenses this week in Malaysia
- Bank Negara Malaysia to Award Digital Banking Licenses
