Axiata partners RHB for digital banking licence

Both parties will form a consortium for the application to accelerate Malaysia’s digital transformation and financial inclusion ambition


AXIATA Group Bhd and RHB Banking Group Bhd had entered into a memorandum of understanding to apply for a digital banking licence under the framework issued by Bank Negara Malaysia (BNM).

Axiata, via its subsidiary Boost Holdings Sdn Bhd, and RHB signed a comprehensive heads of agreement yesterday to form a consortium for the application to increase competitiveness and accelerate the country’s digital transformation and financial inclusion ambition.

In a joint statement filed to Bursa Malaysia yesterday, the parties stated Boost Holdings will hold a majority stake of 60%, while RHB will hold the remaining 40% in the digital bank, subject to approval from the central bank.

Celcom Axiata Bhd has signed up as a major commercial partner on joint go-to-market activities with the digital bank on products and services which will benefit the customers of both parties.

The digital bank will focus on the underserved, unserved and unbanked market in the country.

Axiata president and group CEO Datuk Mohd Izzaddin Idris said the parties will submit the comprehensive application to the central bank by the end of June and it is expected to take about 18 months before BNM issues the five digital banking licences.

He also said the consortium has yet to decide on who will lead the digital bank.

“As part of the submission to the central bank, we will need to submit the organisation structure and individuals involved.

“We have not selected the CEO yet and we are evaluating the candidates,” he said during a virtual press conference yesterday. Mohd Izzaddin is not excluding the possibility of bringing in another partner should an opportunity arise.

“If that opportunity is presented, then perhaps we would consider it. It is a bit tricky because the different countries have different jurisdictions as to how digital banking will operate,” he said.

Under the agreement, the parties will seek to expand on Boost Holdings’ extensive fintech experience developed through Aspirasi, a digital micro-financing and micro-insurance provider, and the Boost e-wallet.

RHB Banking Group MD and CEO Datuk Khairussaleh Ramli said RHB views the digital bank platform as an extension of its digital transformation programme — a core component of its FIT22 strategy — which aims to increase financial inclusion and expedite the development of digital journeys and products to wider community segments.

Although RHB has the capability to venture into digital banking on its own, he said it would take a longer time for the group to understand the segment which requires new technology to efficiently serve the customers.

“The best way for us to approach this segment is to partner someone who has got the experience and brings in expertise in the form of artificial intelligence and other technology.

“We can bring our experience of running banks like liquidity management, capital management and risk management,” he said.

The parties will also leverage RHB’s [email protected] experience in building successful digital offerings, such as the RHB MyHome app, small and medium enterprise (SME)-integrated eSolutions, Digital SME Financing App and electronic Know-Your-Customer onboarding solution to spur similar innovation for digital bank customers.

Currently, Axiata serves more than 250,000 merchants and micro-businesses via Boost e-wallet and Aspirasi micro-financing businesses, whereas RHB offers more than 200,000 of its SMEs access to a connected ecosystem of SME banking and business solutions.

The parties have agreed that the minimum initial issued share capital of the digital bank as required by BNM will be RM100 million.