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What’s next?

After waiting on this announcement for more than a year, we expect that this news will generate a significant level of excitement and activity within the sector, with the announcement bringing a new level of credibility to digital banking in general. BNM’s allocation of these new digital banking licences will also strengthen Malaysia’s banking sector, driving fintech innovation and financial inclusion, and ensuring Malaysia remains competitive with the rest of Southeast Asia, and indeed the world.

What we’ll see next is a period of intense activity within the Malaysian fintech and digital banking ecosystem to get up to speed, and a growing sense of urgency from traditional banks as they seek to accelerate their digital transformation efforts to ensure they’re not left behind.

Licenses were awarded to the following consortiums:

To be licensed under the Financial Services Act 2013 (FSA)

  • Boost Holdings Sdn. Bhd. and RHB Bank Berhad;
  • GXS Bank Pte. Ltd. and Kuok Brothers Sdn. Bhd; and
  • Sea Limited and YTL Digital Capital Sdn Bhd.

To be licensed under the Islamic Financial Services Act 2013 (IFSA):

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

According to BNM:

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.

Which banks are at risk?

Traditional banks that are already making good progress on their digital transformation strategies need to be cautious of these new digital banks, but if they’ve put in the work selecting the right technologies and understand what their customers really want and need, then in every likelihood they won’t suffer too much. However, traditional banks that are lagging on digital transformation must ensure they have a solid plan in place to transition to digital, or risk losing market share as the new generation of digital banks gain greater consumer confidence.

Consumers today expect to be able to manage all aspects of their life with a few clicks and swipes on their phones, so financial institutions need to ensure they’re really meeting their customers’ expectations if they don’t want to be left behind as this new breed of digital banks enters the market.

Malaysian consumers to benefit

Consumers will be the biggest winners from the newly regulated digital banking space in Malaysia. Digital banking can provide enormous advantages to consumers, particularly those who’ve been left unbanked or underserved by traditional financial institutions. While some of the products and services may be similar, digital banks have clear advantages over traditional banks, most notably in speed, convenience and cost. They can also offer their products and services to a much broader audience thanks to lower cost of customer acquisition and servicing. Digital banks operate in the cloud and use next-gen technologies like artificial intelligence, machine learning and data analytics to create hyper-personalised, customer-centric products and services that directly meet the needs of their customers. Ultimately, digital banks make banking faster, easier and more convenient.

On a macro level, digital banking will also help to improve financial inclusion in Malaysia, with unbanked and underserved consumers more likely to be able to access and afford financial products via digital banks. Digital banking can also make finance more accessible to small businesses that may otherwise struggle to access business funding.

Ultimately, we see the introduction of these new digital banking licences to the Malaysian banking sector as having a tremendously positive impact on the industry as a whole, and especially for consumers.

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William Dale
Will is responsible for driving growth of the business across the APAC region. During his career, Will managed large enterprise transformation projects and he now works on technology architecture, business models and consumer product strategy with neo-banks, tier one banks, fintechs and financial brands who rely on the Mambu platform to provide banking, lending and BPaaS services.
William Dale