MyMy sets its sights on e-money following pivot from digital challenger bank.

Prospective Malaysian digital bank MyMy expects to begin offering Shariah services by Ramadan next year, as it completes a pivot to become an e-money provider.

Joe McGuire, co-founder of the fintech firm, which expects to launch conventional e-wallet services next year, said MyMy is still in discussions with Malaysia’s central bank about the Shariah products it intends to offer.

“What we are trying to put forward is unique and it will also require sign-off from our Shariah committee before we can progress it,” McGuire told Salaam Gateway.

“The date isn’t set in stone yet, because there’s Bank Negara (Malaysia’s central bank) and a bunch of other people who have to say yes first. But we have ambitions to do that.”

In 2019, MyMy set out to become the world’s first standalone central bank-licenced Islamic challenger bank, after Bank Negara announced it would provide five digital banking licences. It was one of a number of start-ups and consortiums to throw their hats in the ring. The winners of the licences are expected to be announced early next year.

By September that year, MyMy had received a 10 million ringgit ($2.4 million) seed injection from Koperasi Tentera, an association of Malaysia’s armed forces veterans and one of the country’s leading credit co-operatives. 

Now, two years later, it is reported that the start-up has received overall funding of 23 million ringgit ($5.5 million), most recently with a 4 million ringgit ($956 million) injection mostly from existing investors.

However, while its sights remain set on eventually becoming a challenger bank, MyMy’s focus is more immediately on being an e-wallet player, having been granted a conditional e-money licence from Bank Negara to do so earlier this year.

To bolster its ambitions in this regard, MyMy has just received approval for a principal membership from Mastercard to include prepaid physical and virtual cards in its offering. With this membership, MyMy will be allowed to issue its own credit cards.

“We’re the only genuine standalone start-up that has that,” said McGuire. He said other e-money services BigPay and Boost were only able to attain this membership through their respective ownership by AirAsia and Axiata, both major companies. 

“For a standalone startup to get that membership, that’s never happened in Malaysia; otherwise, we would have needed 10 million ringgit in paid-up capital. We are getting our own bank identification—six of the digits on the card—from them, and after we integrate that we will go into testing in November and start external beta testing with customers in January."

Notwithstanding MyMy’s charge into e-money, it still has plans to become a digital bank, in the mould of UK headquartered challenger Revolut. Although it had originally hoped to be awarded one of the five online banking licences on offer from Bank Negara, e-wallets are now the priority.

To illustrate this, McGuire outlined the path to becoming a digital bank in Malaysia: A candidate would first need to have 100 million ringgit ($23.9 million) in its account, even before being granted one of the licences. Only then could it move towards trying to launch any banking products.

“So all that these guys who take this route are doing is putting in a proposal. They won’t get to buy their technology or integrate it until they get the go-ahead for a licence in April or May next year,” said McGuire 

“And then they will have two years of work ahead of them before they can launch. By then, they will have laid out 100 million and probably put down another 200m [$47.8 million] to put a product to market.”

MyMy’s approach will be to use a corresponding amount to entice several million e-wallet customers over time, during which it will find out what they want while ensuring they are retained as its customers.

“Only then, in four or five years, when we have a really sound business, will we become a bank,” said McGuire. 

“If you look globally, we are yet to find a successful digital bank that has started out as a digital bank. They all started as e-wallet providers, like we will do, and then they graduated or evolved to finally become digital banks.”

This approach will mean that the route to making big banking money will take longer for MyMy, given that it will not be able to generate major income from cash management and net interest margin, which account for about 90 percent of consumer bank revenue. 

McGuire maintains that the start-up, backed by its growing cushion of investment money, is not looking to be highly profitable from day one; rather, MyMy is looking to build a product that generates trust about its brand. 

“From a profitability perspective, it will be much lower, but it also means that every dollar that we receive from funding we can use for the business and not for the regulator.

“None of the successful models of digital banking around the world started with a licence—even Revolut still doesn’t have a digital banking licence. What is important is to use the time well and build a solid customer base for our business,” said McGuire.

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