Bank Negra Malaysia (the Central Bank of Malaysia) has earlier announced that it will be issuing up to five licenses for digital banks to qualified applicants by the first quarter of 2022.
A study by Bain & Company, Google, and Temasek (2020): The Future of Southeast Asia’s Digital Financial Services, revealed that over 70{aa282f308afcc222aaa21b0478c79e01a8fedd01972e2180867097bd93930f22} of consumers are either underbanked or unbanked and millions of small and medium-sized enterprises (SMEs) in the region face large funding gaps today. In Malaysia, around 55{aa282f308afcc222aaa21b0478c79e01a8fedd01972e2180867097bd93930f22} of the adult population is still underbanked and unbanked.
According to the report, through technology and data, these opportunities can help Southeast Asia’s digital financial services (DFS) industry reach its potential of generating up to US$60 billion by 2025.
Bank Negra Malaysia Driving Change
Bank Negra Malaysia (BNM) welcomed 2021 with the launch of the Licensing Framework for Digital Banks designed to ensure that new challengers with innovative business models that will operate for the best interest of Malaysia, which includes helping the unserved and underserved segments. Though existing bank licenses in Malaysia already allow incumbents to provide digital banking services, BNM’s latest initiative will be paving the way for smaller, more agile challengers to compete in the DFS sector.
“Through the use of agile technology platforms and data analytics, digital banks are expected to widen the offering of banking products and services that are more targeted towards solving Malaysian consumer pain points, particularly for the unserved and underserved consumer segments. The bank will adopt a proportionate regulatory framework as well as require digital banks to observe limits on aggregate asset exposures during the initial years of operations,” said BNM in its Annual Report.
Commenting about BNM’s impending issuance of digital banking licenses, SAP Malaysia Managing Director Hong Kok Cheong emphasized that now is an opportune time for banks, governments, and technology experts to collaborate to enhance financial inclusion and digitize the economies. He said:
“While the Covid-19 pandemic is accelerating the migration to digital, the regulation across the region is also becoming more open. The governments are more supportive and increasing the license allocations for digital bank operators.”
Hong highlighted that having the right business model to grow, scale, and turn profitable ensures the success of digital banking and that SAP can cater to both current and new players. He said that with Asia’s population size, scalability is significantly important. The SAP Malaysia MD also explained that successful digital banking players offer a superior or unique customer value proposition, stable revenue generation and profitability, high levels of efficiency from their technology stacks, and great platform scalability.
SAP and Digital Banking
SAP has been supporting the banking and finance industry with integrated applications, intelligent technologies, and a digital platform that enable banks to better serve current customers as well as reach the underbanked to support financial inclusion.
Specific to digital banking, SAP offers next-generation banking solutions such as SAP Cloud for Banking and Transactional Banking for SAP S/4HANA.
SAP Cloud for Banking is a package offering comprised of SAP S/4HANA Finance, SAP Banking (Loans and Deposits), and the SAP Payments Engine, running on SAP Cloud via SAP Cloud Application Services. An easy to configure, open platform, SAP Cloud for Banking allows for rapid innovation cycles and leverages the power of SAP HANA to deliver a data-driven customer experience.
Transactional Banking for SAP S/4HANA package provides financial institutions with an open-core banking platform that enables intelligent transactional banking. Aside from allowing banks to participate in ecosystems — supporting open banking and beyond– it also facilitates cost savings through intelligent technologies and processes.
“In today’s digital economy, Malaysian banks – including upcoming digital banks – have the potential to exceed customer expectations,” Hong said.
