KUCHING: With many parties throwing their hat in the ring for a go at digital banking, the question now remains as to who will succeed – and what criteria it takes towards getting one of up to five licences that may be issued in the first quarter of 2022.

Earlier this month, Bank Negara Malaysia (BNM) has received 29 applications for a digital bank licence under the Financial Services Act 2013 and the Islamic Financial Services Act 2013, following a six-month application period, which ended on June 30, 2021.

A diverse range of parties have submitted applications for the digital bank licence, the central bank said, ranging from banks, industry conglomerates, technology firms, e-commerce operators, fintech players, cooperatives and state governments.

“Successful applicants that meet all prudential criteria will be expected to contribute towards greater financial inclusion by offering products and services to address market gaps in the underserved and unserved segments,” BNM said in a statement.

“This includes promoting suitable and affordable financial solutions by leveraging on innovative application of technology.”

“I think there are diverse reasons why would a party harbour interest in digital banking. Key reasons include providing a synergistic supplement to their existing business activities and venturing out into a new business with their core business as the support pillar,” Business enabler ecosystem firm Vision Group managing director Chua Zhu Lian told The Borneo Post.

“In my opinion, BNM has a reputation on having zero tolerance to bank’s failure as it would be detrimental to the financial system. Based on this guiding principle, the first filter would be on applicants who can demonstrate strong management record, reputation with good governance with strong financial resources.”

Vision Group deputy managing director of group digital technology Albert Chee added that applicants, be it bank-led or non-bank led who can meet these criteria will then be able to proceed to the next bucket.

“The next assessment would be on applicants who can deliver the key value proposition for greater financial inclusions on the unserved and underserved segments,” Chee said.

“Depending on where the applicants can fit in the value chain, such as specialists, ecosystem player or innovative basic banking providers, the applicants must demonstrate a strong value proposition with its transformative technology to serve these segments while ensuring that earnings are sustainable.

“Lastly, it will be the applicants risk management and compliance capabilities as banking is a highly regulated industry. It requires a robust risk and compliance framework to ensure that the applicants can adhere the various key regulatory aspects such as risk tolerance limits, liquidity ratios, capital adequacy, money laundering controls and many other requirements at all times.”

Key success criteria of a digital bank lie in key factors such as ecosystem integration with existing user base with strong user stickiness; differentiated tech capabilities, especially in emerging tech; balanced culture and operational mindset between conventional banking conservatism and new age tech agility.

Digital banks also need strong adaption to local culture and communal habits; a collaboration with other players within the ecosystem, especially conventional financial service providers as well as putting empowerment in the hands of the people.

“A bank must put people first and focus on empowering its’ users, instead of focusing on organisational dominance,” Chee added.

Successful applicants that meet all prudential criteria will be expected to contribute towards greater financial inclusion by offering products and services to address market gaps in the underserved and unserved segments. BNM