Digital banking licence scene heating up


MoneyLion Foong Chee Mun

NEW names are emerging in the digital banking sphere even as Bank Negara this week released an updated exposure draft on the licensing framework for the setting up of such banks.

The central bank is expected to award up to five digital banking licences by the end of the year, behind Singapore’s Monetary Authority of Singapore which will announce its list of successful applications in June.

Among the names that are being bandied around as those interested in the licence apart from tech firms, Grab Holdings Inc, Razer Inc and telecommunications (telco) group Axiata Group Bhd which have each expressed their interest, are property firm Paramount Corp Bhd, US-founded financial start-up MoneyLion Inc and integrated tech firm Green Packet Bhd.

Teaming up

In the case of Paramount, sources say the property group is mulling the possibility of teaming up with a consortium of players which could include Chinese tech companies and FMCG players with strong retail networks.

If this materialises, it will fit into the goal of the company – which recently completed the sale of its controlling stake in its pre-tertiary education business – to become an integrated property player, a source says.

That said, Paramount group CEO Jeffrey Chew’s banking expertise as the ex-CEO of OCBC Bank (M) Bhd and the founder of Fundaztic.com, a peer2-peer financial platform will also come in handy.

Paramount group CEO Jeffrey Chew's banking expertise as the ex-CEO of OCBC Bank (M) Bhd and the founder of Fundaztic.com (Fundaztic), a peer2-peer (P2P) financial platform could come in handy.Paramount group CEO Jeffrey Chew's banking expertise as the ex-CEO of OCBC Bank (M) Bhd and the founder of Fundaztic.com (Fundaztic), a peer2-peer (P2P) financial platform could come in handy.

It is understood that Paramount has already had some form of engagement with the central bank on the matter.

New York-headquarted MoneyLion, a financial start-up which has offices in New York City, San Francisco, Salt Lake City, and Kuala Lumpur is also one of those which is studying the feasibility of obtaining such a licence.

Chief technology officer Foong Chee Mun, who co-founded the company and runs its KL office, says to this end, the company is “exploring the eco-system.”

“MoneyLion’s mandate with our investors is to play in the United States and that’s always our first priority.

“However, we are always open to interesting collaborations knowing that exploring foreign markets will require strong local partners, ” Foong tells StarBizWeek.

MoneyLion which allows consumers to borrow, save and manage their wealth and finances through an application is no new kid on the block.

Started in 2013, it has over six million customers across the United States.

“As one of very few people who is running a digital bank, I can tell you that in order to run a viable digital bank, you don’t just digitalise your current banking products.

“It is about being relentlessly customer-focused and to be able to create personalised consumer finance products that suit each of your customers, ” Foong adds.

MoneyLion, which makes money from member subscription, is at the Series C financing stage which is normally considered the last stage of the venture capital financing process for start-ups.

At this stage, most companies are not really start-ups anymore as they typically are fairly established and already profitable.

MoneyLion which counts among its investors Edison Partners and Greenspring Associates from the United States, however, is not yet profitable but expects to be in the black this year, according to Foong.

Green Packet Bhd meanwhile is also keen to obtain a digital banking licence.

Group MD and CEO C.C. Puan tells StarBizWeek: “Yes, we are interested.”

“We already have one foot in the door with our own brand of payment gateway and e-wallet and recently, we were awarded a white-label e-wallet licence to serve large communities.

“Getting the digital bank licence will enable us to unlock more financial services for our user base, ” Puan says, adding that the company is up for the challenge of addressing market gaps in a financial sector that is ripe for innovation.

“As a group, we have always been drawn to the unserved and underserved as demonstrated by our fintech proposition for the university and student segment.

“We are now in talks with potential partners for best strategies and business plans for our targeted under-served market.”

Puan also says he is grateful to the central bank for easing the regulatory burden during the foundational phase of digital banks.

“But we’ll see about our involvement, it’s too early to say.”

Under Bank Negara’s updated regulatory framework for digital banks which was released this week, the central bank said the risk categories to calculate the credit and market risk components for risk-weighted assets under Basel II capital framework has been rationalised into simpler categories.

It also stated that 25% of a digital bank’s on-balance sheet liabilities must be held in high quality liquid assets.

The central bank has extended the consultation period for the exposure draft until April 30 from Feb 28.

Digital banking is picking up in this region even as banks face slower growth in loan volumes and top-line revenues amid saturated markets.

India, China, South Korea and Japan have ventured into the digital banking model.

Japan, for instance, went for the zero branch strategy as far back as the 1990s with the setting up of Japan Net Bank.

There have been other Internet banks there since then such as Seven Bank which has been providing financial services via ATMs across 7-Eleven convenience shops in Japan since the early 2000s.

In South Korea, the then-chair of the Financial Services Commission Yim Jong-yong gave initial approval for the setting up of the country’s first two virtual banks back in 2015.

K Bank was its first, starting operations in April 2017 followed a few months later by kakaobank, which started with some 300 billion won (RM1.058bil) in start-up capital.

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