Aeon Credit, Aeon Financial Service and MoneyLion in favourable position to launch digital bank

KUCHING: The consortium of Aeon Credit Service (M) Bhd (Aeon Credit) with its parent Aeon Financial Service and MoneyLion Inc (MoneyLion) is in a favourable position to launch its digital bank well within the 24 months timeline set by Bank Negara Malaysia (BNM), analysts note.

The research arm of Kenanga Investment Bank Bhd (Kenanga Research) recalled that the collective Aeon Group (Aeon Co. (M) Bhd [Aeon] and Aeon Credit) has wide access to the local population through Aeon’s 202 retail outlets and Aeon Credit’s 1.1 million active loan customers with an existing e-wallet ecosystem.

“Additionally, the Aeon brand is highly familiar amongst the Bottom 40 per cent (B40) and underserved segments, with a sizeable portion (more than 50 per cent) of Aeon Credit’s belonging to this segment,” Kenanga Research said.

“It is the long-term ambition of parent, Aeon Financial Service (45 per cent digital bank stakeholder) to establish a digital banking presence in all 11 of its operating countries with Malaysia being the maiden ground.

“There appears to be no ownership transfer or dilution clauses to increase MoneyLion’s stake from its 10 per cent at present, ensuring Aeon’s interests remain intact.

“All in, we see this consortium to be in a favourable position to launch its digital bank well within the 24 months timeline set by BNM.

“With MoneyLion as the technology partner, its fintech knowhow and platform could be built and localised accordingly.”

The research arm highlighted that Aeon’s large data pool of consumer spending and repayment habits are also essential components to enable to digital bank to implement effective targeted marketing strategies.

“Meanwhile, the specific application and award for the Islamic license made sense as Aeon’s financing products are already shariah compliant and are well ready to cater to market needs.”

RHB Investment Bank Bhd (RHB Investment Bank) gathered that the digital bank will offer micro lending (small ticket sizes with high frequency) and wealth management products (data-driven hyper-personalised services) that reduces cannibalisation risk across Aeon Credit’s existing products, given the different target markets and product offerings.

“Conversely, deposits could be sourced from existing customers on loyalty programmes (mainly retail clients) and customers from Aeon’s other business lines, eg merchants,” RHB Investment

Bank said.

“With this, management expects acquisition costs for the digital bank to be lower vis-à-vis competitors without existing clientele.”

According to the research firm, Aeon Credit is likely to record near-mid-term losses from its joint venture (JV) stake in the consortium.

“Despite that, management targets to the digital bank to break even by Year 5 and turn around the accumulated losses by Year 8.

“Initial capital raised will be via internally generated funds.”