KUALA LUMPUR (April 29): Bank Negara Malaysia (BNM) has announced the five successful applicants for the digital bank licences as approved by the Minister of Finance, almost a month after the central banks original deadline.

The following applicants are to be licensed under the Financial Services Act 2013 (FSA):

a consortium of Boost Holdings Sdn Bhd and RHB Bank Bhd;

a consortium led by GXS Bank Pte Ltd and Kuok Brothers Sdn Bhd; and

a consortium led by Sea Ltd and YTL Digital Capital Sdn Bhd.

The following applicants are to be licensed under the Islamic Financial Services Act 2013 (IFSA):

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.

Three out of the five consortiums are majority-owned by Malaysians, namely Boost Holdings and RHB Bank, Sea and YTL Digital Capital and KAF Investment Bank, said BNM in a statement on Friday.

GSX Bank Pte Ltd is the digital banking group between Grab Holdings Inc and Singapore Telecommunications Ltd (Singtel), according to the formers filing with the US Securities and Exchange Commission (SEC) in October 2021.

BNM received a total of 29 applications from companies and partnerships across different industries, with a mix of foreign and domestic applicants.

The assessment criteria covered the character and integrity of applicants, nature and sufficiency of financial resources, soundness and feasibility of business and technology plans as well as ability to meaningfully address financial inclusion gaps.

"Applications were assessed on their individual merits, as well as relative to other applications based on consistent evaluations of each assessment criteria. This horizontal review is based on the assessment criteria applied across all applicants to determine the relative strength of each application and identify successful applicants," the central bank said.

BNM also said that throughout the assessment process, strict governance and evaluation procedures were instituted to ensure robust, objective and consistent assessments across all 29 applications received. Four levels of assessment were carried out, supported by a cross-functional technical team, a review team and internal independent observers from BNMs risk and legal departments. The final recommendations to the Minister were deliberated and endorsed by BNMs management committee."

Following the announcement, successful applicants will undergo a period of operational readiness that will be validated by BNM through an audit which may take between 12 to 24 months, before they can commence operations.

In the statement, BNM Governor Tan Sri Nor Shamsiah Mohd Yunus said, Digital banks are expected to further advance financial inclusion. By adopting digital technology more widely for everyday transactions, we can significantly increase opportunities for our society to participate in the economy by overcoming geographical barriers, reducing transaction costs and promoting better financial management."

Digital banks can help individuals and businesses gain better access to more personalised solutions backed by data analytics. As businesses move online, digital banking also provides a safer and a more convenient way to transact, she added.

Question 2 (30 marks) Describe SIX (6) drawbacks of implementing digital banks. Answers can be from the view points of the consumers and/or financial institutions.

please answer correctly with explanation, thanks