COMING off a good – albeit challenging – year, fintech firm Boost has gotten yet another boost: it is among the successful applicants for the digital bank licences from Bank Negara.
Notably, it would take time for a full digital bank to get off the ground but Boost has a ready base of underserved customers to cater to and the firm is rearing to extend its financial services to the segment.
Group chief executive officer Sheyantha Abeykoon (pic) points out that Boost already has a strong digital lending business that is operating at scale, which would form the bedrock of its banking business.
Boost has disbursed close to RM750mil worth of loans to small businesses over the past three years with almost 42% of them having never received credit before.
“So we’ve extended new frontiers with this business. We’ve reached the underserved. And we’ve done that by using technology platforms,” he says.
On April 29, the central bank announced that the five successful applicants for the digital bank licences were the consortiums of Boost Holdings Sdn Bhd and RHB Bank Bhd; GXS Bank Pte Ltd and Kuok Brothers Sdn Bhd; and Sea Ltd and YTL Digital Capital Sdn Bhd; as well as under the Islamic Financial Services Act 2013, a consortium of Aeon Financial Service Co Ltd, AEON Credit Service (M) Bhd and MoneyLion Inc; and a consortium led by KAF Investment Bank Sdn Bhd.
The successful applicants will undergo a period of operational readiness that will be validated by Bank Negara through an audit before they can commence operations. This process may take between 12 and 24 months.
Digital banks are expected to further advance financial inclusion by significantly increasing opportunities for the underserved to participate in the economy through digital technology.
“Typically, a small business has little access to financing. So that’s the core of the business that we’ll expand into that’s working very well for us. It’s a proven model for us and we already have a head start. It is exactly in the zone of what Bank Negara is looking for – the underserved sector.
“The big thing that we can do in the bank environment that we can’t do today is we can have a deposit model as well. We have a lot of consumers who keep (money) on our Boost platform or Boost e-wallet. Today, we can’t use any of those deposits. So we will have a lot of avenues for deposit mobilisation once we get the bank licence.
“On the deposits side, I think we have the opportunity to come out with a lot more products, from savings to investment as well, on that whole spectrum,” adds Sheyantha.
The digital bank licence is not the only thing that will keep Boost busy in the coming year. Sheyantha is confident of the strong growth trajectory across all its businesses this year.In 2021, Boost consolidated its fintech businesses that were under Axiata or Axiata Digital under the Boost umbrella. This allowed Boost to operate the full spectrum of fintech services that cut across payments, digital lending, insurance and cross border payment in Malaysia and Indonesia.
“We are very excited about 2022. We’ve gotten over the hump last year and we see this year as a year where we can build along the foundation that we had built last year. This is the year we will double down on the good work we have done.”
Among its plans is to grow its merchant base by 30% from the current 500,000 and to continue efforts to digitise its merchant experience.
It is also looking to connect with other ecosystem players in Indonesia to expand its presence there.
Sheyantha also highlights that one of its more scalable businesses, which it intends to grow further, is its cross-border payment arm. Boost currently works with content providers to offer them access to its subscriber base through partnerships.
“There is a lot of friction (for a content provider) to enter a market and gain seamless access to a subscriber base. So when you can give that to them on a single platform, say through a billing relationship with over 20 million customers in this market, it becomes a very compelling value proposition.
“And there is a whole layer of value added services that we can put in on top of this, like bundling products from our content providers with (Axiata’s) data plan or our wallet incentives. So it has a very strong future,” he elaborates.
He hopes to add more partners to the value chain as it scales its cross border payment business to other markets. Boost is currently in talks with other new video content providers which would help it widen its offerings and market.
He adds that it is also operating in South Asia with networks in Sri Lanka, Bangladesh and India, which gives Boost an even stronger value proposition to partners.
Over the next three to four years, Sheyantha also expects to see better returns on its insurance business.
“The company is on a strong footing. And we are very proud of everything we’ve built over the last couple of years. If you look back five years ago, you wouldn’t have bet on a strong digital company being built out of a traditional company like Axiata.
“So it is also credit to the shareholder that enabled that. And it is also credited to the kind of vision that Axiata has in trying to build out digital champions.
“We come from a very good place, we paid tuition fees on the way. And there’s a lot of learning that we have had that will hold us in good stead for the future,” he says.
It has, notably, been a watershed year for fintech businesses worldwide, and in South-East Asia in particular. Investments have been pouring into the space even before the pandemic and the region has seen a good share of that money.
This has enabled Boost to ride on the trend and establish its foothold in its current markets.Sheyantha also notes that regulatory development within the region is increasingly enabling fintech players to operate in the mainstream space. The digital bank licence, for example, allows fintechs to play in the field of traditional financial institutions.
“It’s a very exciting space. I think it will continue to grow. Regulation is opening up. I think regulators in this part of the world are quite progressive and I think fintechs that embrace regulation and actively engage regulators are the ones that will prosper.”
This positive development also allows more fintech to expand their services and this, in turns, further benefits the underserved community.
“If you take our primary customers, which are underserved consumers and merchants, we are somebody that can meet all their immediate financing needs. So we basically become their financial services provider.
“The traditional sector has not catered to them for the longest time. If they want payment services, if they want to set up a business, get a loan, if they want to get insurance for their business, if they want payroll services, go online and so on, we would be the first port of call for this set of customers, bringing them into the banking or financial services world.
“And we realise we cannot serve these customers by just playing at one end of the spectrum. We cannot just be a payment service provider because there are so many other financial services where there is friction in providing for these customers.
“Hence, there is a need for us to provide the full spectrum of services because our primary focus is the underserved and they are not getting catered to by the larger guys,” he says.
Having got its playbook right in Malaysia and Indonesia, Sheyantha says Boost is looking to expand into another one or two more new markets within the region in the next 24 months.
Given that penetration for its services across all markets remains low, he believes there is room for the company to grow for many more years to come.