By Dr Paul Anthony Mariadas, Dr Uma Murthy - May 19, 2022 @ 12:00am
Bank Negara Malaysia (BNM) has announced five successful applicants for digital bank licences.
The five comprise a consortium of Boost Holdings Sdn Bhd and RHB Bank Bhd; a consortium of GXS Bank Pte Ltd and Kuok Brothers Sdn Bhd; a consortium of Sea Limited and YTL Digital Capital Sdn Bhd; a consortium of AEON Financial Service Co Ltd, AEON Credit Service (M) Bhd and MoneyLion Inc; and a consortium led by KAF Investment Bank Sdn Bhd.
BNM stated that three out of the five consortiums are majority-owned by Malaysians, namely Boost Holdings and RHB Bank Bhd, Sea Limited and YTL Digital Capital Sdn Bhd and KAF Investment Bank Sdn Bhd.
BNM Governor Tan Sri Nor Shamsiah Mohd Yunus was quoted as saying: "Digital banks can help individuals and businesses gain better access to more personalised solutions backed by data analytics. As businesses move online, digital banking also provides a safer and a more convenient way to transact."
In short, all bank operations that were carried out physically will now operate with technologies such as artificial intelligence, blockchain and biometric security.
Digital banking focuses on matters that require official stamps, the signing of documents and everything that involves face-to-face dealings with bank officers.
But with today's smart technology, people can avoid queuing at a bank counter to manage their financial portfolio, check credit scores or get a loan.
Apart from that, the addition of digital banks is in line with the 12th Malaysia Plan's aim of restructuring the economy, strengthening security, wellbeing and inclusion, and advancing sustainability to facilitate access to financial services.
Digital banks will help groups that are often denied loans and small-scale businesses.
These efforts can indirectly boost economic growth and increase the confidence of industry players.
Certainly, it will be easier for digital banks to identify the traffic and financial interests of consumers.
In addition, the transition to all financial transactions will be smoother.
Moreover, digital banking can make life easier for people in rural areas.
However, problems arise when the building of the Internet infrastructure is not expedited by regulatory bodies and service providers. Hence the Malaysian Communications and Multimedia Commission must work closely with local authorities to provide the infrastructure.
Nevertheless, every new application or system will have its own risks.
The country's household debt ratio is expected to increase further. This is because the commitment burden will increase when loan demand continues to rise.
Previously, the highest household debt to gross domestic product ratio was 87.5 per cent.
That is a major factor in the bankruptcy rate in the country. In fact, this aspect of risk will also be impacted by the rising unemployment rate.
Thus, the five digital banking licences that have been granted must meet BNM's criterion
— the entity must not have assets exceeding RM3 billion in three to five years of operation.
In a nutshell, digital banking will continue to have a huge impact on consumers over time and has the potential to influence the banking industry if all of BNM's criteria are followed.
The writers are lecturers at the School of Accounting and Finance, Taylor's Business School, Faculty of Business and Law, Taylor's University
The views expressed in this article are the author's own and do not necessarily reflect those of the New Straits Times
Disclaimer: Perpustakaan Tun Abdul Razak,UiTM This material may be protected under Malaysia Copyright Act which governs the making of photocopies, reproductions or copyrighted materials. You may use the digitized materials for study or research
