This article first appeared in The Edge Malaysia Weekly on December 2, 2019 - December 8, 2019

THE Standard Chartered group has signalled interest in pursuing a virtual banking licence in Malaysia if the central bank issues such licences.

“If there’s a concept of a separate virtual licence that had some separate opportunities and obligations, absolutely, we will look at that,” chief executive Bill Winters tells The Edge in an interview.

A few months back, Bank Negara Malaysia said it expects its virtual banking framework to be ready for public consultation by the end of this year. It is anticipated that applications for licences will open by the first half of 2020.

A virtual or digital bank is one that does not have a physical presence but delivers products and services entirely online or through mobile platforms.

Increasingly, traditional banks that already offer digital banking services are moving to set up standalone digital banks with non-bank partners in a bid to attract younger customers. It also gives them a chance to compete with fintech companies that can provide cheaper and more easily accessible financial services.

StanChart, which considers itself to be at the forefront of digital banking, operates eight standalone digital banks in Africa. In Hong Kong, it plans to launch a virtual bank early next year with its non-bank partners after having clinched a licence in March.

It is also exploring its options in Singapore, which announced in June it would issue up to five digital bank licences. The Monetary Authority of Singapore is accepting applications until the end of the year.

“By December, the interested parties will have to put in their application, so we are exploring,” says Winters.

Meanwhile, the group’s Malaysian unit, Standard Chartered Bank Malaysia Bhd, is busy deepening its digital offerings.

“We have been pioneering in Malaysia [in terms of digital solutions]. We clearly have more work to do but we’ve introduced a set of products and services starting with payment cards, and are moving to current accounts and savings accounts by the end of the year that are 100% straight-through, with no human touch,” says Winters.

The bank’s current licence already allows it to deliver all its planned digital offerings, says StanChart Malaysia managing director and CEO Abrar A Anwar, who took the helm in November 2017.

“But [whether] we want to set up another bank … well, the central bank has not come up with the [virtual banking] guidelines as yet,” he remarks.

Over in Hong Kong, StanChart and Bank of China were among eight companies licensed to pioneer virtual banking there. Rivals HSBC and Citibank did not apply for the licences.

StanChart’s venture partners for the new bank are PCCW Ltd, HKT Trust and HKT Ltd and Ctrip Financial Management (Hong Kong) Co Ltd. It holds 65.1% of the joint venture.

Hong Kong is StanChart’s biggest single market and despite the unrest in the last six months due to political demonstrations, the group is pushing ahead with plans to launch the bank soon.

“We are [going] full speed in building [the virtual bank] right now, so I would expect in the early part of next year, we will be able to launch that,” Winters says.

StanChart also has a 5% stake in Line Bank, an upcoming digital bank linked to the Link messaging app, which was given a virtual banking licence in Taiwan in July.

In Africa, it launched its first digital bank in Cote d’Ivoire in 2018, followed by Uganda, Tanzania, Ghana and Kenya. This year, it extended the rollout to Botswana, Zambia and Zimbabwe.

“We started in Cote d’Ivoire, where we were somewhat of a disruptor as we didn’t have a historical presence there. We do have a branch, which is our headquarters, so if you really need to go to a branch, you can, but the intention is to do everything through your mobile phone, which is in fact what is happening. That has been a huge success,” Winters says.

The bank took that technology platform and modified it for the other seven African markets. “In those markets, this was just an incremental service [as] we have a retail presence there. But we found, in each of those markets, we’ve added more new accounts in the last six months than we did in the prior six years. So it’s been dramatic. Customers are accessing our services almost entirely through their mobile phones,” he says.

In Malaysia, based on Bank Negara data, the number of financial transactions conducted over the mobile banking channel last year more than doubled to 257.4 million, valued at RM100.1 billion. (2017: 107.7 million, RM50.7 billion).

In June, a Bank Negara official said 10 parties had expressed interest in setting up virtual banks in Malaysia. Technology firm Grab and several banks, including CIMB Group Holdings Bhd, Affin Bank Bhd, Hong Leong Bank Bhd and AMMB Holdings Bhd, were among those keen, The Edge reported that month.

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