Digital banking – how simpler regulation is catalyzing growth

Digital banking is soaring in Asia. Amid the entry of disruptive fintech players, central banks and governing regulators are reacting to the trend by issuing digital banking licenses – or at least working towards it.

The aim is to provide opportunities for players like e-wallet and e-lender operators to be able to play an active role in financial markets, scaling up their accounts and users, despite not having any established record in banking.

Bank of Thailand’s Deputy Governor Ronadol Numnonda, for one, believes that digital banking will change the financial industry dynamics in the country, as new players enter. This type of innovation can stimulate the economic growth, enabling more flexible payment options and ramping up competition between existing players and new rivals.

Singapore, meanwhile, has issued five digital banking licenses, with 21 contenders already tendering their application – demonstrating just how much demand there is for a seat at the table. The Monetary Authority of Singapore (MAS) will be revealing successful applicants in the middle of the year.

Grab moves in?

In December, Malaysia released a digital banking licensing framework. The draft, proposed by Bank Negara Malaysia (BNM), has since been updated and simplified for digital banking companies starting up – an initiative to reduce the regulatory burden for promising new contenders.

It’s a tactical move that has attracted the Malaysian arm of Singapore ride-hailing giant Grab. The company is reviewing the feasibility of the initiative before finalizing its decision. Grab has been viewed as a prominent contender as it has already secured a large e-payments-reliant consumer base, as well as even launching its own e-wallet.

As well as providing a new source of income, entering into digital banking would help Grab’s objectives in supporting the gig economy workers it relies, whom it would be able to offer attractive services

Grab’s Country Head Sean Goh told The Malaysian Reserve, in the face of the rising cost of living, its workforce income has to be raised so that they can afford to keep up with increased financial demands.

All in all, simplifying regulations can catalyze digital banking market across Southeast Asia, helping enrich and drive the regions’ digital economy by attracting competitive new players.

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