PETALING JAYA: CIMB Group Holdings Bhd, the only bank in Malaysia that has digital banking experience overseas, will likely tie up with partners and form a consortium if it decides to apply for such a licence in Malaysia.
Its CEO of group ventures & partnerships Effendy Shahul Hamid said the bank is evaluating all options, feasibility and potential pathways, and “working towards forming a view to deliberate”.
“What is becoming clear is that if we do apply, we will almost definitely do it with other partners through a consortium of sorts,” he told SunBiz.
CIMB owns a 52.22% stake in Touch n’ Go Sdn Bhd (TNGSB), which offers the Touch ‘n Go eWallet via TNG Digital Sdn Bhd, a joint venture between TNGSB and Ant Financial. The Touch ‘n Go eWallet is one of the leading mobile payment service providers in Malaysia, enabling payment services for F&B, retail, shopping, entertainment, bills and toll payments. Touch ‘n Go eWallet has 8 million users and 125,000 merchant acceptance points as of Jan 21, 2020.
Malayan Banking Bhd (Maybank) has an indirect 30% stake in GPay Network (M) Sdn Bhd that operates e-wallet GrabPay via wholly-owned subsidiary Maybank Alliances Sdn Bhd.
Both Maybank and CIMB are understood to be the only two banks that have stakes in non-bank e-wallet companies and are to likely use those entities when applying for their digital bank licences.
Maybank did not reply to queries on its digital bank licence bid.
When asked on how will the digital bank be different from CIMB’s online banking, Effendy said online banking in the traditional sense involves availing banking services via the internet or mobile devices as an extension of regular banking services, which essentially makes it an alternate channel in addition to branches and other traditional banking avenues.
“A digital bank on the other hand represents an entire business, operating an independent revenue model with its own profit & loss and balance sheet, and is designed to proliferate a differentiated customer acquisition regime, and a specific segment focus. It also operates at very different cost and efficiency bases.”
Effendy opined that along with risks associated to entering new markets, the key challenges of running a digital business rest fundamentally on applying the right business model.
Being able to create and deliver propositions is one aspect, but the ability to acquire customers at scale is a core factor in driving success, he said.
“Segment strategy is crucial, as being relatively small setups mean that we cannot be everything to everyone in these instances. The ability for us to target correctly and iterate unconventional revenue models are key.”
He added that technology is a major challenge, requiring it to move away from traditional tech stacks and deploy capabilities that enable it to operate in an agile manner and evolve the business quickly.
“Elements of risk management are also inherently different for a digital business – the way we use alternative data and the robustness of the tools we employ, for example in credit scoring, are relatively new areas which we are starting to test.
“On the regulatory front, whilst we have observed the emergence of digital bank frameworks across Asia, the ability to balance innovation and sustainability is an ongoing and intense effort that requires shifts in how we think about banking, technology, and policy,” said Effendy.
