As existing banking licence already enables incumbent lenders to provide their services on online platforms, they will not need a new licence for digital banking
by ASILA JALIL / pic by TMR FILE
BANK Negara Malaysia (BNM) has issued a policy document on licensing framework for digital banks last week, following a six-month public consultation, and set June 30, 2021, as the deadline for submission of applications for those wishing to conduct digital banking business.
MIDF Research head of research Imran Yassin Mohd Yusof told The Malaysian Reserve (TMR) that the application for the licence is likely to be dominated by non-bank entities.
He said this is because the existing banking licence already enables incumbent lenders to provide their services on online platforms.
“Hence, existing banks would not need a new licence to operate in the digital banking space.
“Having said that, we do not rule out the possibility of banks joining these consortiums,” he added.
Last Thursday, BNM said the licensing framework for digital banks enables the innovative app to uplift the financial wellbeing of individuals and businesses, and foster sustainable growth.
This includes expanding meaningful access to and promoting responsible use of suitable financial solutions to unserved and underserved segments, it said in a statement last week.
BNM added that a simplified regulatory framework, which will be applied to digital banks during the initial stage of operations, commensurates with an asset threshold of not more than RM3 billion for three to five years.
Imran Yassin said it is still uncertain whether non-banks will also lead the digital banking sphere as a whole as competition will be intensive.
The central bank had stated that it will issue up to five licences to qualified applicants to operate digital banking in the country, either for conventional or Islamic banking.
Digital banks in the country will focus on offering banking products and services to address market gaps in the underserved and unserved segments.
Imran Yassin added that operations of incumbent banks will be disrupted by non-banks as the latter can offer products and services that are not served by traditional financial institutions such as micro-lending.
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid also shared similar views as he opined digital banks will disrupt the operations of traditional banks, although not extensively.
Banks have been diligent in ensuring they are at the forefront in the digitalisation journey as it has been embedded in the business strategy for traditional banks.
“The banks will continue to allocate capital expenditure in this respect so that they are able to leverage the latest technology that will improve the customers experience and productivity, while lowering the cost of acquisition for each customer,” he told TMR.
Although incumbent banks face competitions from players in varying industries, Mohd Afzanizam said banks may still be one step ahead in areas relating to wholesale money markets.
“This ensures them to access funds as and when they need it. They also can always tap the capital markets to fund their financing assets,” he added.
In Malaysia, among the non-bank players that have shown interest to apply for the licence are Grab, Axiata Group Bhd, BigPay, Sunway Bhd, Razer Inc and GHL Systems Bhd.
The National Cooperative Movement of Malaysia is also vying for one of BNM’s banking licences.