Malaysia’s Central Bank May Give Out 5 Digital Licenses This Year

The Malaysian central bank, Bank Negara Malaysia, reportedly may issue up to five licenses for digital banks by the first quarter of 2022.

Successful applicants should cover the issues of serving “unserved and underserved” Malaysians while meeting “regulatory requirements to safeguard the stability of the financial system,” the central bank said. Deal Street Asia reported that the central bank will be accepting applications until June 30.

Malaysia’s central bank said it would ask digital banks to observe limits on aggregate asset exposures during the first years of their operations, the news outlet said. In its 2020 annual report, published Wednesday (March 31), the bank said that its framework was meant to cut barriers to entry while allowing the bank to pay attention to risks.

The central bank had gone through a process of drawing up a licensing framework for digital banks. In March 2020, the central bank said, “Digital banks will be required to comply with all equivalent regulatory requirements applicable to incumbent banks after the foundational phase.” In a press release, the central bank added that it was trying to “reduce regulatory burden for new entrants.”

Malaysia’s new program for digital banks comes as other Asian countries are looking into similar policies. The overall situation is that the number of consumers with smartphones and better internet connections has mushroomed.

Deal Street said that a number of Malaysian companies are said to be interested in applying. Others that are reportedly in the race for a digital license include ride-hailing and digital payments group Grab, budget airline AirAsia, gaming company Razer and a number of banks. These include Affin Bank, Hong Leong Bank and Standard Chartered Bank Malaysia.

The pandemic has shaken up the banking industry globally. In the U.S. it has meant that thousands of bank branches across the U.S. were closed temporarily or permanently — while others have limited their hours or switched to appointment-only models to reduce the risk of infection.

Along with that, half of all U.S. bank customers used mobile apps or websites in 2020 to interact with their financial institutions at least once a week, up from just 32 percent in 2018.