MyMy Holdings, a Malaysian fintech, has raised Rm10 million ($2.4 million) in a seed round to propel its ambitions to become a virtual bank with an Islamic identity.
Joe McGuire, co-founder and CEO, says the company is using the funding to secure an e-money license from Bank Negara Malaysia, the central bank. That will allow it to operate an e-wallet and negotiate a debit card from VISA or Mastercard. Assuming it gets the e-money license, MyMy will apply for a full virtual banking license in 2021.
The fintech’s partner is Koperasi Angkatan Tentera Malaysia (Koperasi Tentera), a co-op bank serving the military. According to its website, it serves over 156,000 members with Rm3.21 billion ($776 million) of assets.
KT’s CEO, Brigadier General Ahmad Zahudi, said in an announcement that the tie-up will help the co-op digitize dividend payouts, provide digital accounts and e-wallets, and later to offer multi-currency solutions for members travelling outside of Malaysia after COVID-19 restrictions are lifted.
It starts with a wallet
McGuire told DigFin that counting family members, this gives MyMy a base of about 400,000 users to get started, which means using their behavior data to build and improve financial services.
In the meantime, MyMy will hold customer money in trust at a banking partner, which McGuire declined to name. In countries such as the UK or Australia, regulators allow money operators to borrow a bank’s franchise as a card issuer to get a VISA or Mastercard product to its customers. No such law exists in Malaysia, so MyMy has to secure its own e-money license in order to strike a deal with a payments company.
He says the ambition is not just to offer yet another e-wallet, of which Malaysia has over 50. The objective is to become the first digital sharia-compliant bank, which could scale across the Islamic world, perhaps starting in neighboring Indonesia.
Malaysia offers the lowest barriers to changeJoe McGuire, MyMy
The other differentiator, McGuire says, is MyMy is building its own core banking stack itself, rather than rely on a vendor, be it a traditional provider to banks or from the crop of cloud-based, SaaS players.
“Technology is our competitive advantage,” McGuire said, paying tribute to the handful of neobanks such as Monzo and Revolut that have also relied on proprietary tech stacks. “We want to own the direction of our business,” meaning the bank can iterate without waiting for a vendor’s support or go-ahead.
McGuire dismissed the argument that a vendor is efficient because it keeps up with global regulatory and tech changes, and can invest in cyber security and other aspects of the stack at scale. “Actually it’s cheaper to do it ourselves,” he said, because of the speed to make adjustments by itself.
McGuire and his co-founder Kishore Samuel, MyMy’s COO, decided to launch a consumer bank because it can be very profitable, and Southeast Asia offers a compelling growth story of underbanked. But Malaysia is not awash with millions who’ve never had a bank account.
“Malaysia offers the lowest barriers to change from a customer’s point of view” in the region, McGuire said. Launching a bank, digital or otherwise, is hard when few have any experience with financial services. But 92% of Malaysians have a bank account and a debit card – but only 10% of transactions are digital.
“Banks here are really behind in technology,” McGuire said.
But they are profitable: he used to work at Commonwealth Bank in his native Australia, where the big-four retail names generate return on equity of 20% or more. His experience at Aussie-Hong Kong fintech AirWallex also showed him the potential of fintech, but McGuire wanted his own shot at founding a startup that could attain unicorn status (valued at over $1 billion).
Is MyMy likely to become one? McGuire reckons it will take five years, first winning a customer base through cards, payments, and digital services, before entering the lucrative (and licensed) businesses of cash management and loans, including mortgages.
The competition is fierce: 50 e-wallets, with the market dominated by the likes of Boost (from telco Axiata), Grab, and Touch’n’Go (CIMB, which operates an electronic highway toll franchise), not to mention AirAsia’s BigPay, gamer Razer, and “the Pays” such as Google, Apple, Alibaba and Samsung.
These players have distribution. McGuire says, however, that all are extensions of bigger corporations.
“All unicorns have begun as genuine startups, not corporate spinoffs,” McGuire said, citing the constant pressures of capital raising and customer satisfaction that startups have to obsess over.
Then MyMy will have to compete with all kinds of firms to win a virtual banking license. The central bank has kicked that process into next year, given the strains caused by COVID-19, and the details are not yet known. But according to DigFin’s own reporting, the big players do not appear to be looking at an Islamic license – a curious omission.
That’s a vacuum MyMy hopes to fill. It will also offer conventional products, but it has assembled a sharia council under the auspices of its chairman, Ahmad Burhanuddin bin Tunku Datuk Seri Adnan, a Malay royal and member of the board of Bank Rakiyat (which has a strong sharia business line).
This is where tech meets strategy: “We can’t convert traditional products into Islamic ones,” McGuire said, “so we’re building them from the ground up.”
But MyMy can’t win a coveted license on its own. Now that it has its capital backing – valuing the company at Rm50 billion ($12 billion), it says – the search is on for partners to create a compelling pitch.