Top Fintech News in Malaysia 2022

2022 was set to be a transformative year for the fintech space in Malaysia. The long-awaited unveiling of the five awardees for the first digital banking licenses in the country finally took place to kick off the year and it was followed by other developments that saw a fresh regulatory landscape for several sectors related to fintech in the country.

Here’s a look at some of the top stories Fintech News Network covered around Malaysia in 2022.

Digital Banking License Winners Revealed

Over a year after the original digital banking framework was issued by Bank Negara Malaysia (BNM), the 29 license applicants that included fintech startups, traditional financial players and multinationals finally found out whether their bids had been successful.

Digital banking had provided opportunities to integrate underrepresented sections of Southeast Asian society into the digitized economy, with the central banks of various nations in the region devising their own digital banking frameworks and distributing licenses to pre-vetted and approved parties. Hong Kong in 2019 began issuing licenses to eight applicants followed by Singapore, and the likes of the Philippines and Indonesia introduced regulatory changes to pave the way for their own frameworks.

Bank Negara Malaysia (BNM) was originally scheduled to open to applicants in mid-2020, but the outbreak of the COVID-19 pandemic at the time set back the development of the framework, which was finally revealed in 2021 and the process was accelerated with interested consortia that support their applications by the end of 2021. After some minor delays, BNM officially announced the successful applicants in April 2022.

The selected entities consisted of recognized entities from local and international financiers, who worked in consortia with other established organizations to present winning applications. Applicants were also judged on their individual capabilities, such as the soundness of their financial resources, their business and innovation roadmaps, as well as their abilities to address financial inclusion gaps in the country.

Two types of digital banking licenses were eventually issued, the conventional variety along with Syariah-compliant Islamic banking licenses. For the conventional licence, selected bids came from front-runners Boost Holdings and RHB Bank Berhad; Kuok Brothers Sdn. Bhd in collaboration with GXS Bank Pte. Ltd., a partnership between Grab and Singtel; and to growing Southeast Asian technology player Sea Limited, which is partnering with YTL Berhad in Malaysia.

The Islamic licenses went to KAF Investment Bank, a consortium made up of recognizable Malaysian startups such as Carsome and MoneyMatch, and the financial services of AEON working with US neobank MoneyLion.

BNM’s blueprint for fintech in Malaysia

Malaysia’s central bank unveiled its plan for the country’s financial sector in January, centered around five strategic pillars to push economic development forward.

The plan touched on financing Malaysia’s economic transformation, raising the economic prosperity of households and businesses, promoting digitization of the financial sector, facilitating a green agenda for the economy and taking a leadership position in Islamic finance.

Of these, the third pillar stood out as digitization would be key to supporting the development of the other strategic measures. The plan highlighted key areas, including future-proof core digital infrastructures, so that they would be robust and up-to-date with the latest banking innovations. along with setting up the pathways to connect real-time payment ecosystems across ASEAN.

Multi-currency CBDCs will be a focus in this to enable faster and cheaper cross-border payments. Alongside that, BNM is also championing open data infrastructure and supporting a more active financial services landscape, with digital banking and digital insurance frameworks being established this year to further this push.

TNG Digital raises the largest funding round in Malaysia fintech history

The owner and operator of Touch ‘n Go eWallet in Malaysia, TNG Digital managed to raise RM750 million in its mid-2022 funding round – the largest equity funding round in the country’s history.

This funding round was led by TNG Digital’s owner Touch ‘n Go and leading e-tailer Lazada Group, and it continued the strong investment interest in the digital wallet, following an earlier investment round in which it raised $75 million from the insurer. AIA and New York-based investment firm Bow Wave Capital Management.

That meant the total amount TNG Digital raised in a year and a half was valued at over RM1 billion. “I am very happy to welcome Lazada to the Touch ‘n Go eWallet family. We feel this collaboration will bring next-level value propositions to users and merchant bases across the Lazada and Touch ‘n Go ecosystem,” Touch ‘n Go CEO Effendy Shahul Hamid said at the time.

Malaysia to regulate Buy Now Pay Later schemes

The Consumer Credit Oversight Board Task Force was formed to enable interagency efforts to strengthen regulatory enforcement for all consumer credit activities, including for providers of Buy Now Pay Later (BNPL) solutions.

The task force consists of the Ministry of Finance, Bank Negara Malaysia and the Securities Commission Malaysia which will work with various agencies to eventually consolidate regulatory oversight of all consumer credit activities under the Consumer Credit Act.

Part of the concerns surrounding BNPL, according to BNM governor Datuk Nor Shamsiah Mohd Yunus, was that users who pay later could be influenced to spend beyond their means and incur further debt.

The collaboration announcement was meant to remove regulatory uncertainty about the gray area in which the BNPL operators were operating at the time. This will make Malaysia one of the first countries to regulate BNPL, along with the UK and Australia.

Bank Negara Malaysia paves the way for digital insurance companies

The country’s central bank made a number of critical decisions affecting fintech startups in Malaysia in 2022, including the unveiling of another much-needed regulatory framework to license and govern new digital insurance companies and takaful operators (DITOs) across the country.

The main aim of the framework proposed in January was to ensure that digital innovation was a central tenet of these new DITOs, protect the interests of consumers and promote an environment of financial stability.

With a growing digital insurance and takaful sector in the country, BNM outlined clearer guidelines and requirements for DITOs, including highlighting a preference for new entrants not to compete directly with established insurers in clearly existing markets – instead, the central bank indicated a preference. for new DITOs to focus on the uninsured and underinsured, thus fulfilling a market need with their new digital status.

Some of the requirements included requirements for solid minimum and paid-in capital, to ensure solvency to cover all potential claims. DITOs will also need to provide assessments of shareholder suitability, as well as exit plans, should the DITO fail to upgrade from the foundation phase.

The framework and initiatives released in 2022 will have significant implications for many fintech quarters in Malaysia going forward, and it is clear that this year was a big one for the growing regulatory space in the country. It leaves an exciting basis for exploring what the next few years will bring for the industry as a whole, and for the country as well.