KUALA LUMPUR, April 10 — To win a digital banking license, applicants must convince Bank Negara Malaysia (BNM) that they have a winning strategy, including the right business model and technology, said Ernst & Young Advisory Services Sdn Bhd (EY).
Financial inclusion, innovative technology and capital strength of at least RM100 million will be the key factors for Malaysian applicants, the consulting firm said.
It said currently, BNM is proposing to issue up to five licenses to qualified applicants to set up digital banks that conduct either a conventional or Islamic banking business.
In the wake of the Covid-19 pandemic, the central bank had announced that the deadline to respond to consultation papers on the digital banking licensing framework has been extended to June 30, 2020, and possibly beyond.
To get through the first round of screening, EY said applicants must be able to demonstrate financial inclusion, including offering meaningful access and responsible, affordable financial solutions.
“BNM is looking for product strategies that meet the needs of the underserved and unserved banking segments, especially the poor.
“And the central bank is likely to be particularly interested in value propositions from non-bank applicants that address niche market needs,” it said in an article titled “EY Insights: How Covid-19 Will Affect Digital Banking in Malaysia” released today.
EY said applicants should also demonstrate capital strength to safeguard the integrity and stability of Malaysia’s financial system in a time of economic challenges amid Covid-19.
“They will need capital funds of minimum RM100 million in the foundation phase and RM300 million thereafter,” it said.
On business model, it said BNM expects digital banks to encourage take-up by offering world-class customer experiences, with critical elements including simple products, pricing and transparency, and a high degree of personalisation.
“On technology, the central bank is looking for technology strategies that should leverage cloud and Application Programming Interface (APIs), and have a high degree of automation, artificial intelligence (AI) and machine-learning.
“Technology should also support work from home,” it added. — Bernama
