Large banks able to face competition from digital lenders

The six banking groups are Malayan Banking Bhd, CIMB Group Holdings Bhd, Public Bank Bhd, RHB Bank Bhd, Hong Leong Bank Bhd and AMMB Holdings Bhd, the holding company for AmBank (M) Bhd.

KUALA LUMPUR: Malaysia’s six largest banking groups by assets are well positioned to face competition from innovative digital banks following the announcement of five new digital entrants announced by Bank Negara.

The six banking groups are Malayan Banking Bhd, CIMB Group Holdings Bhd, Public Bank Bhd, RHB Bank Bhd, Hong Leong Bank Bhd and AMMB Holdings Bhd, the holding company for AmBank (M) Bhd.

According to Moody’s Investors Service, the new entrants would increase deposit competition in the consumer and small business segments, however the six largest banks will be able to fend off the competition due to their entrenched franchises and ongoing digital enhancements that will increase customer stickiness.

“They have been developing their own versions of ‘super apps’, which now allow customers to access the full suite of financial products and services, including digital payments for a wide variety of transactions using application programming interfaces,” it said in a statement.

It said they also benefit from the government efforts to promote payment efficiency and interoperability, which include the implementation of DuitNow and DuitNow Quick Response (QR) code, the country’s real-time retail payment system and standardised QR code respectively.

On April 29, Bank Negara announced that five consortia namely Boost Holdings Bhd-RHB Bank Bhd, GXS Bank Pte Ltd-Kuok Brothers Sdn Bhd, Sea Ltd-YTL Digital Capital Sdn Bhd, Aeon Financial Service Co Ltd-Aeon Credit Service (M) Bhd-MoneyLion Inc and KAF Investment Bank Sdn Bhd won Malaysia’s digital bank licences.

“In addition, the entry of digital banks will not materially affect the market shares of the largest incumbents over the next four to seven years because these digital banks will remain small,” Moody’s Investors Service opined.

It said new entrants may take between 12 and 24 months to set up and pass an audit conducted by the cental bank before starting operations. — Bernama