Axiata, RHB formalise joint bid for a digital banking license

• Boost Holdings to own 60% majority stake, RHB to own 40% in the digital bank
• Both parties also exploring more opportunities to enhance joint customer ecosystems

AXIATA Group Bhd and RHB Banking Group (RHB) has formalised a joint bid for a digital banking license and have laid down their broad plans for a group-wide partnership.

Speaking at a virtual press briefing on June 2, company officials said it has signed an memorendum of understanding (MoU) that will see Axiata subsidiary Boost Holdings Sdn Bhd take a majority 60% stake while RHB will own the remaining 40% in the yet-to-be-named joint digital bank, subject to approval from BNM.

Meanwhile, Celcom Axiata Bhd will be the major commercial partner on develop joint go-to-market activities with the digital bank on products and services which will benefit the customers of both parties, company officials said.

Other commercial partners are being finalised and will be announced in due course, they added.

Axiata and RHB will also seek to expand on Boost Holdings’ extensive fintech experience developed through digital micro-financing and micro-insurance provider Aspirasi, and Boost e-Wallet.

Both companies believe Boost Holdings’ intimate knowledge of customers via analytics and artificial intelligence will provide better customer solutions, product personalisation and risk-based pricing.

“We are pleased to expand our partnership with RHB in cementing our mutual commitment to support the government’s ambition to narrow, if not close the national digital divide,” said Izzaddin Idris, Axiata’s president and group chief executive officer (pic) (CEO).

“Through innovative, efficient and secure banking services, we are confident our strategic collaboration will meet the fast-evolving demands of segments of retail customers and micro small and medium businesses (SMEs) overlooked by traditional institutions.”

Malaysia's central bank, Bank Negara Malaysia, first issued a policy on licensing framework for digital banks on Dec 31, 2020. The framework outlines licencing terms of new players with innovative business models that are expected to serve the economy and contribute to the well-being of Malaysians.

The central bank expects up to five licences for digital banks to be issued by the first quarter of 2022.

Combined strengths

RHB said it sees the digital bank as an extension of its digital transformation programme, which the it said is a core component of its FIT22 strategy,

RHB said its partnership with Axiata is a right digital model and partner in its quest to boost financial inclusion and expedite products to wider segments of the community, including SMEs and the gig economy industry.

The bank will bring to the consortium years of established trust with customers and regulators, as well as extensive experience in running a bank with proven expertise.

This includes core banking services, risk management and compliance, liquidity, capital, operational and credit management, product management, and responsible financing, RHB said.

Both parties will also leverage RHB’s Agile At Scale experience in building digital offerings such as the RHB MyHome app, SME integrated eSolutions, Digital SME Financing App and electronic know-your-customer (eKYC) on boarding solution to spur similar innovation for its potential digital bank customers.

RHB and Axiata believe that the digital bank will unlock synergistic opportunities to benefit underserved retail customers and micro SMEs that fall outside the normal focus of traditional banks.

Additionally, RHB and Axiata are also said they are exploring more opportunities to enhance their collective joint customer ecosystems.

One potential initiative involves providing combined solutions to SMEs.

Axiata claims to serve more than 250,000 merchants and micro businesses via their Boost e-Wallet and Aspirasi microfinancing businesses, whereas RHB claims to offer more than 200,000 of its SMEs access to a connected ecosystem of SME banking and business solutions. This includes an integrated suite for payments, human resource management, accounting, and financing.

“The joint bid for a digital banking license demonstrates our commitment to building the best solutions for our customers in every segment and partner with parties that can bring value to the overall proposition,” said Khairussaleh Ramli, group managing director and group CEO of RHB Banking Group.

“This includes the continued integration of the existing RHB and Axiata customer ecosystems to provide a better range of joint solutions, better connectivity, and even more convenience to all our customers.”

The road ahead

This joint bid is a culmination of Axiata’s and RHB’s continued relationship seeded since 2018. This has resulted in partnerships between RHB Islamic Bank and Boost, including donations being facilitated via the SyuQR digital platform, a cashless payment facility for government clinics, among many others.

Sheyantha Abeykoon, CEO of Boost Holdings Sdn Bhd (pic), said that Axiata and Boost are still discussing the identity and brand of the digital bank.

“We will come up with a brand that is relevant to the target segment that we want to cater to,” he said, adding that it will be announced at an appropriate time, noting that it's “probably quite shortly” from now.

However, he made no mention if existing digital business brands such as Boost and Aspirasi will continue as they are or if they will be folded into the digital bank.

While it is unable to share the staffing headcount for the digital bank just yet, Izzaddin said that they are “mindful of the composition,”  acknowledging that a host of different skillsets will be needed such as analytics and technology.

He pointed out that some of Axiata's in-house talents may be transferred across and likewise with RHB as per their agreement.

Izzaddin said the companies have not selected a chief executive officer for the new entitity as yet.

While the digital bank licencing submission deadline is at the end of June, Izzaddin said the approval process would take up to 18 months meaning that approval would likely only be given at the end of 2022.

“We are mindful of that timeline, but it doesn’t mean that we are not pushing ahead with the current offerings that we already engaging under Aspirasi and so on. More importantly, we will make the preparations necessary to go live the first day after the approval,” he said.