All eyes on e-money providers


  • Banking
  • Tuesday, 31 Dec 2019

“With five licences going to be issued, we believe the most likely candidate to apply for the licence will be the prominent ones such as Boost, Grab, Touch ‘N’ Go and BigPay, ” MIDF Research said.

PETALING JAYA: Electronic-money (e-money) providers are most likely to be the front runners to receive the digital banking licence from Bank Negara, said MIDF Research.

“We believe that it is only a natural progression for e-money providers to expand into the digital bank space, especially with the explosion of e-money users. After all, it means that these providers could better utilise their deposit liabilities, ” it said in a report.

“With five licences going to be issued, we believe the most likely candidate to apply for the licence will be the prominent ones such as Boost, Grab, Touch ‘N’ Go and BigPay, ” it added.

However, the research house noted that there are currently a lot of e-money service providers with 42 non-bank providers.

On the limitations of the licences that disallow any physical branch, it said this may disincentivise existing traditional banks to acquire the digital bank licence.

“It would mean that existing banks will have to create a digital bank subsidiary and with that, it could tie the banks with additional capital. Besides, existing banks’ licences already allowed them to offer their products digitally, ” MIDF Research said.

It, however, said that CIMB GROUP HOLDINGS BHD, Affin Bank Bhd, HONG LEONG BANK BHD, AMMB HOLDINGS BHD and Standard Chartered Bank have expressed interest in acquiring the licence. “Of these, CIMB is the only one with experience after it had set up a digital-only bank in the Philippines and Vietnam, ” it said.

Bank Negara had released the draft on the Licensing Framework for Digital Banks on Friday and it aims to finalise the policy document by the first half of next year.

There will be five licences that will be issued and the five licensees of either conventional or Islamic will be required to comply with the requirements of the Financial Services Act 2013 or Islamic Financial Services Act 2013. They would need to have a minimum capital of RM100mil during the foundational phase, and RM300mil thereafter.

MIDF Research said the high capital requirement would likely exclude either start up or smaller fintech companies and e-money providers.

“This mean companies with strong shareholders are the most likely to apply for the licence. The minimum capital of RM100mil during the foundational phase is lower than any current requirements but the RM300mil thereafter is similar to the requirement for a locally incorporated foreign bank, ” it said.

It also noted that the minimum total capital ratio requirement is the same as with the existing traditional banks.

The research house has maintained its positive call on the banking sector, noting that it is still in the early days for digital banks to actually be a threat to existing banks in the short to medium term.


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