KUALA LUMPUR -- Telecommunications conglomerate Axiata Group and RHB Banking Group are jointly applying for one of the digital banking licenses Malaysia's central bank aims to start handing out next year.
A consortium of Axiata's e-wallet company Boost Holdings and RHB will be formalized with a 60:40 shareholding, respectively, the companies announced at a joint news conference on Wednesday.
The move by the Malaysian companies comes as Southeast Asia unicorns Sea, Grab and Gojek are taking advantage of a young and tech-savvy population to transform the regional economy in areas including e-commerce, ride-hailing, delivery and digital banking.
Last month, Axiata announced an investment of $60 million by Japan's SoftBank in ADA -- a digital analytics and marketing company in the Malaysian group. Axiata is also in the midst of merging its Malaysian telco operations under Celcom Axiata with Norway-based Telenor Group's Digi to create the country's largest mobile telecommunications company.
The Malaysian central bank released policy guidelines for digital bank licensing late last year, following the path of Hong Kong and Singapore -- which have already issued eight and four virtual banking permits, respectively.
Bank Negara Malaysia, the central bank, will close applications on June 30 and aims to hand out five licenses by mid-2022. Media reports suggest that more than 40 companies have expressed interest in applying.
"The guidelines issued by the central bank [are] somehow practical, understanding that digital banks need to be agile and swift in responding to customers," Axiata President and Group CEO Izzaddin Idris said at the news conference.
Malaysia's banking industry has between 4 trillion ringgit ($970 billion) and 5 trillion ringgit in terms of total assets.
According to Izzaddin, Boost and RHB will seek to expand on the former's extensive fintech experience developed through existing digital micro-financing and micro-insurance provider Aspirasi and e-wallet Boost.
"The digital bank will unlock synergistic opportunities to benefit underserved retail customers and micro-SMEs that fall outside the normal focus of traditional banks," he said.
Aspirasi has to date disbursed $100 million in microlending and micro-insurance. It has kept nonperforming loans below 3% because of an artificial intelligence-powered credit model, Izzaddin said.
Axiata serves more than 250,000 merchants and microbusinesses via Boost and Aspirasi, whereas RHB offers more than 200,000 of its small- and medium-sized enterprises access to a connected ecosystem of banking and business solutions.