PETALING JAYA: The remaining two digital banks waiting for their launch have been running behind schedule due to technical issues.
A source told StarBiz that the “digital channels” of the two banks are not completed till now, causing Bank Negara to withhold its approval for the virtual services to go live.
One of the digital banks is being developed by a consortium of Sea Ltd and YTL Digital Capital Sdn Bhd, while the other is by a consortium led by KAF Investment Bank that includes Carsome, MoneyMatch and Jirnexu.
For context, Sea is the parent company of eCommerce platform Shopee and Jirnexu owns financial comparison website RinggitPlus.
It was reported earlier that the KAF-led consortium’s digital bank planned to go live by end-2023 or early this year.
The source further noted that both digital banks faced “more or less similar” issues as the earlier three digital banks that were already launched. “But the speed of rectification (of the issues) differs. Some banks were faster, some are slow,” the source said.
Despite the issues plaguing both digital banks, the source said Bank Negara’s “review team” expects both consortiums to receive the green light by year-end to go live.
The launch, however, may be delayed further if the two digital banks request for further time extension to prepare their systems.
Bank Negara’s review of both consortiums’ digital banks is ongoing.
On April 29, 2022, the central bank announced that five consortiums had been approved by the Finance Ministry for the digital banking licences.
Under the Financial Services Act 2013, three licences were given out to a consortium of Boost Holdings Sdn Bhd and RHB Bank Bhd; a consortium led by GXS Bank Pte Ltd and Kuok Brothers Sdn Bhd; and a consortium led by Sea-YTL Digital.
Meanwhile, under the Islamic Financial Services Act 2013, the two remaining licences were awarded to a consortium of AEON Financial Service Co Ltd, Aeon Credit Service (M) Bhd and MoneyLion Inc and a consortium led by KAF.
The five consortiums were handpicked from a total of 29 applications.
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.
At the time of announcing the licence winners, Bank Negara said the successful applicants will undergo a period of operational readiness that will be validated via an audit before they can commence operations.
This process may take between 12 and 24 months. The 24-month deadline ended in April this year.
The GXS Bank-Kuok Brothers consortium was the first to launch its services called GXBank on Nov 30, 2023. It is noteworthy that GXS Bank is a joint-venture (JV) between Grab Holdings Ltd and Singapore Telecommunications Ltd.
GXBank signed up over 100,000 customers in less than two weeks after launch.
Following this, the AEON-led consortium launched its AEON Bank on May 26, 2024, marking the first syariah-compliant digital bank in Malaysia.
On June 6, Boost Bank was launched. The digital bank is a 60:40 JV between Boost Holdings and RHB Bank.
Interestingly, of the country’s eight domestic banking groups, RHB Bank is the only one to have invested in a separate digital bank licence.
In an earlier note issued in April this year, UOB Kay Hian (UOBKH) Research said competition for deposits will increase and this could put further pressure on net interest margins (NIMs) of conventional banks.
According to the research firm, GXBank set the bar high for deposit rates with a daily interest rate of 5% per year and with non-campaign rates at 3% a year.
In comparison, conventional banks were offering lower fixed-deposit campaign rates of 3.60% to 4.10% for tenures of three to 12 months and non-campaign interest rates ranging from 2.65% to 2.70% for similar tenures.
This, it said, could keep overall deposit competition elevated but not irrational.
“As other digital banks commence full operations, we anticipate they will also offer competitive deposit interest rates calculated on a daily basis.
“This expectation is due to the importance of deposits in fuelling asset growth, particularly for new digital banks in their initial operational stages,” added UOBKH Research.
However, with digital banks required to maintain assets of less than RM3bil and a minimum capital fund of RM100mil, the total potential deposit pool amounts to only RM14.5bil, representing less than 1% of the total banking system’s deposit base.
The research firm said this limitation should help mitigate overly irrational competition for deposits among conventional banks.
As three out of five digital banks have rolled out their services, Bank Negara has turned its attention to the digitalisation of the insurance and takaful space.
Earlier this week on July 9, Bank Negara invited applications for digital insurer and takaful operator (Dito) licences to be submitted between Jan 2, 2025 and Dec 31, 2026.
On the same day, the central bank issued a policy document on licensing and regulatory framework for Ditos.
Unlike digital banks, Bank Negara has made it clear that it will issue licences to any digital insurer and takaful operator that meet its requirements and will not limit the number to only five.
