More than 12 bidders, including ride hailing app Grab and low-cost carrier AirAsia, are reportedly seeking licences to set up digital banking operations in Malaysia.

These bidders include over 50 firms, including telecoms operator Axiata and a consortium backed by Tencent, reported Reuters citing people familiar with the issue.

Bank Negara Malaysia intends to offer up to five licences by early 2022.

Relatively low financial entry barriers as well as a growing young smartphone user base in the country are said to be the key factors driving the applicants.

Majority of the applicants are local businesses, noted the news agency.

Foreign players looking for digital banking licences in the country include Tencent-backed Linklogis, Grab, and internet platform Sea.

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Sea is collaborating with Malaysian conglomerate YTL Corp for the move while Grab-Singtel joint venture has applied with a consortium of other investors.

Both Sea along with a Grab-Singtel joint venture have earlier secured digital banking licences in Singapore.

For the digital banking application, AirAsia has partnered with a consortium through its fintech arm BigPay. Axiata has joined forces with RHB Bank for the application.

The capital requirements for launching digital banks in Malaysia is $72.1m (MYR300m).

EY financial services consulting partner Shankar Kanabiran was quoted as saying: “Malaysia has many of the characteristics digital banking players are looking for, with a sizeable population, large smartphone penetration and young population eager to try out new services.”

In Singapore, the paid-up capital requirements is S$1.5bn for fully functioning digital banks or S$100m for digital wholesale banks.