2022 was set to be a transformative year for the fintech space in Malaysia. The long-awaited reveal of the five awardees for the first digital banking licences in the country finally took place to kick the year off, and it was followed by other developments that saw a fresh regulatory landscape for several sectors associated with 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 which included fintech startups, traditional finance players and multinational corporations finally found out if their bids had been successful.

Digital banking had been presenting opportunities to onboard underrepresented segments of Southeast Asian society to the digitalised economy, with the central banks of various nations in the region preparing their own digital banking frameworks and distributing licences to prescreened and approved parties. Hong Kong started in 2019 to issue licences to eight applicants followed soon after by Singapore, and the likes of Philippines and Indonesia were introducing regulatory changes to pave the way for their own frameworks.

Bank Negara Malaysia (BNM) was originally scheduled to open for applicants by mid-2020, but the onset 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 sped up with interested consortiums shoring up their applications by end-2021. After some minor delays, BNM officially announced the successful applicants in April 2022.

The selected entities comprised recognised entities from local and international financiers, working in consortiums with other established organisations to present winning applications. The applicants were judged on their individual capabilities as well, such as the soundness of their financial resources, their business and innovation roadmaps, as well as their abilities to address financial inclusion shortcomings in the country.

Two types of digital banking licences were eventually issued, the conventional variety along with Syariah-compliant Islamic banking licences. For the conventional license, selected bids came from frontrunners Boost Holdings and RHB Bank Berhad; Kuok Brothers Sdn. Bhd in partnership with GXS Bank Pte. Ltd., a co-venture between Grab and Singtel; and to growing Southeast Asian tech player Sea Limited, working with YTL Berhad of Malaysia.

The Islamic licenses went to KAF Investment Bank, a consortium comprising recognisable Malaysian startups like Carsome and MoneyMatch, and the financial services arms of AEON working with US neobank MoneyLion.

BNM’s blueprint for fintech in Malaysia

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

The plan touched on funding Malaysia’s economic transformation, elevating the financial well-being of households and businesses, advancing digitalisation 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 digitalisation would be key to supporting the development of the other strategic thrusts. The blueprint highlighted key areas including future-proofing core digital infrastructures so that they would be resilient and up-to-date on the latest banking innovations. along with setting up the pathways to connect real-time payment ecosystems across ASEAN.

Multi-currency CBDCs would 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 the digital banking and digital insurance frameworks being established this year to advance this push.

TNG Digital raises largest funding round in Malaysia fintech history

The owner and operator of the 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 nation’s history.

This round of funding 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 on from a previous investment round that saw it raising US$75 million from insurer AIA and New York-based investment firm Bow Wave Capital Management.

That meant that in a year and a half, the total amount raised by TNG Digital was valued at over RM1 billion. “I’m extremely pleased 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 Group Chief Executive Officer, 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 shore up regulatory enforcement for all consumer credit activities, including for providers of Buy Now Pay Later (BNPL) solutions.

The task force comprises, the Ministry of Finance, Bank Negara Malaysia, and Securities Commission Malaysia which will be working 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 pay-later users might be influenced to spend beyond their means and incur additional debt.

The collaborative announcement was intended to dispel regulatory uncertainty about the grey area in which BNPL operators were functioning at the time. This would make Malaysia one of the first countries to regulate BNPL, alongside the UK and Australia.

Bank Negara Malaysia paves the way for Digital Insurers

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

The main aim of the framework proposed in January was to ensure digital innovation was a central tenet for these emerging DITOs, safeguarding consumer interests and promoting an environment of financial stability.

With a growing digital insurance and takaful sector in the country, BNM outlined more clear guidelines and requirements for DITOs, including notably highlighting a preference for new entrants to not directly compete with incumbent insurers in clearly existing markets — instead, the central bank indicated a preference for new DITOs to focus on the uninsured and underinsured, and thereby fulfil a market need with their new digital status.

Some of the requirements included a demand for solid minimum and paid-up capital, ensuring solvency to cover all potential claims. DITOs would also need to furnish assessments on their shareholders’ suitability as well as exit plans, should the DITO fail to graduate from the foundational phase.

The frameworks and initiatives released in 2022 would have sizable impacts on many fintech quarters in Malaysia going forward, and it is clear that this year was a big one for the burgeoning regulatory space in the country. It leaves an exciting foundation to explore what the next few years will bring for the industry as a whole, and for the country too.