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Digital Banks In Malaysia

Updated: Jun 25


In April 2022, Bank Negara Malaysia (BNM) awarded 5 digital banking licenses out of 29 applicants. Being the first to launch, GX Bank has introduced saving pockets to encourage good financial habits towards achieving individual saving goals. Impian Gigih, an initiative under its Financial Inclusion Literacy programme, has begun with the aim to promote financial literacy and quality education among the underbanked segment. GX Bank has also integrated DuitNow QR payment feature into its app, and rolled out its physical debit card. As of now, AEON Bank and Boost Bank are in beta and alpha testing phase respectively.


With a relatively high banking population and a robust foundation of incumbent banks in place, Malaysia takes a prudent path in entering the digital banking landscape. Digital banks play a role to address the needs of the unserved and underserved segments, who may lack the credit history, collateral or documentation required for a conventional loan.


Digital banks benefit from lower operational cost as they need fewer resources and manpower, for instance by foregoing the need to set up physical branches and using cloud servers for data storage, which also allows for flexibility and scalability in the long-run. They are building from scratch, but they are not starting from zero. Without having to be confined to legacy operational model, the digital bank providers, many of whom are reputable commercial enterprises with large inherent customer network, can leverage on data-driven analytics to offer tailored services catering to the needs of different customers. It also serves as an opportunity for them to tap into unexplored market and come up with insightful solutions that can empower the underbanked community while strengthening their own ecosystem.


Not only will individuals benefit from the services they offer but also businesses, especially MSMEs (micro, small, and medium enterprises) to gain access to microfinancing options via alternative credit scoring. Customers will also enjoy better convenience and speed, more choices, and competitive interest rates.


Enhancing digital literacy across different generations and digital connectivity enabled by technology infrastructure ought to be pursued hand in hand with the development of digital banks to ensure they can fulfill the role in filling in the financial inclusion gap. Against digital risk that looms over the digital landscape, the implementation of countermeasures against fraud, along with insurance by PIDM up to RM250,000 per depositor per bank may instill public confidence to get on board.


The entry of new market players is unlikely to disrupt the traditional banking sector, especially with the regulatory limit of RM3 billion asset threshold in place during the foundational phase. Though we are still early in the digital banking space. Even with the upcoming roll-out of products and services in phases according to plan, much avenue for growth remains in the long run with the rapid evolution in the financial landscape and potential integration of emerging technology along the way. The increased competition shall serve to encourage incumbent banks to further innovate and level up to provide value-added services for customers.


Written by: Kaiqi Yong, on 5 April 2024


References:


  1. Bank Negara Malaysia. 29 April 2022. Five Successful Applicants for the Digital Bank Licences. https://www.bnm.gov.my/-/digital-bank-5-licences Bank Negara Malaysia.

  2. BNM Financial Sector Blueprint 2022 - 2026. https://www.bnm.gov.my/documents/20124/5915429/fsb3_en_book.pdf


 

About MYFinT Malaysian Youth FinTech Association (MYFinT) is a non-profit youth organisation dedicated to to empower, motivate and inspire the young generation in all industries to gain exposure to the latest trends and development in FinTech industry.





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