List of Digital Banks in Malaysia

Digital bank in Malaysia refers to banking services provided through digital platforms, eliminating the need for physical paperwork such as pay slips, cheques, or demand drafts. These services are accessible via online portals, mobile applications, and e-wallets. It makes digital banking more convenient for users.

In April 2022, Bank Negara Malaysia (BNM) announced the successful selection of five applicants for digital bank licences.

Which applicants were approved to become digital banks in Malaysia?

The approved applicants, licensed under the Financial Services Act 2013 (FSA), include a consortium of Boost Holdings Sdn. Bhd. and RHB Bank Berhad, a consortium led by GXS Bank Pte. Ltd. and Kuok Brothers Sdn. Bhd, and a consortium led by Sea Limited and YTL Digital Capital Sdn Bhd.

Another group of applicants to be licensed under the Islamic Financial Services Act 2013 (IFSA): a consortium of AEON Financial Service Co., Ltd., AEON Credit Service (M) Berhad and MoneyLion Inc., and a consortium led by KAF Investment Bank Sdn. Bhd.

Three successful consortia are majority-owned by Malaysians: Boost Holdings and RHB Bank Berhad, Sea Limited and YTL Digital Capital Sdn. Bhd., and KAF Investment Bank Sdn. Bhd.

What are the criteria for approval to become a digital bank?

BNM has thoroughly evaluated all 29 applications received by section 10 (1) of FSA and IFSA, stipulating that BNM should consider all factors in Schedule 5 of the Acts and other relevant policy requirements. The assessment criteria included the character and integrity of applicants, financial resources, the feasibility of business and technology plans, and the potential to address financial inclusion gaps.

BNM’s Governor, Tan Sri Nor Shamsiah, commented on the announcement, stating that digital banks are anticipated to further promote financial inclusion. She emphasized that by adopting digital technology for everyday transactions, opportunities for society to participate in the economy can be significantly increased.

The successful applicants will now embark on operational readiness, to be validated by an audit conducted by BNM before commencing operations. This process is expected to take between 12 to 24 months from the date of approval.

In alignment with the five strategic thrusts stated in the Financial Sector Blueprint 2022-2026, BNM will continue collaborating with the financial and fintech industries and relevant stakeholders to enhance access to financial services throughout Malaysia and across all societal segments.

What is digital banking in Malaysia?

Digital banking in Malaysia refers to the shift from traditional physical banking (like going to a bank branch) to managing all banking activities online. This includes activities such as checking balances, transferring funds, paying bills, applying for loans, and even depositing cheques using a mobile or desktop application.

In Malaysia, digital banks are either conventional banks that have added digital services or entirely new banks that operate solely online. The Central Bank of Malaysia, Bank Negara Malaysia (BNM), is the regulatory body that oversees digital banking in the country.

What are the differences between online bank and digital bank in Malaysia?

Online Banking and Digital Banking, although often used interchangeably, have subtle differences, particularly in Malaysia.

  1. Accessibility: Both Online Banks and Digital Banks are accessible via the internet. However, the term Online Banking is typically associated with traditional banks that offer internet-based services, while Digital Banks are entirely online with no physical branches.
  2. Services: Online banks, being part of traditional banks, offer a subset of services available in physical branches such as checking account balances, paying bills, and transferring funds. Digital Banks, on the other hand, strive to offer a full range of banking services online, including opening accounts, loans, investments, and more sophisticated financial products.
  3. Customer Interaction: Online Banks often have an option for face-to-face customer interactions in their physical branches. In contrast, Digital Banks interact with customers solely through digital channels like chatbots, email, and phone calls.
  4. Setup: Online banks are generally an additional service offered by traditional banks. In contrast, digital banks are typically start-ups or spin-offs designed from the ground up for digital operation.
  5. Regulations: In Malaysia, both types of banks are regulated by Bank Negara Malaysia. However, the regulations for digital banks are more specific to online operations, and the bank must comply with the guidelines outlined in the Licensing Framework for Digital Banks.
  6. Technology: While online banks use technology to facilitate traditional banking services, digital banks leverage advanced technologies like AI, big data, and blockchain to provide innovative and personalised banking solutions.
  7. User Experience: Digital banks often prioritise providing a seamless, user-friendly experience, with a focus on mobile banking. Online banking interfaces, on the other hand, can sometimes be clunky and less intuitive due to their legacy systems.
  8. Security: Both types of banks prioritise security, but digital banks often use more advanced security measures like biometric authentication, multi-factor authentication, and advanced encryption due to their entirely online nature.

Is digital banking same as mobile banking?

No, digital banking and mobile banking are not exactly the same. Digital banking is a broader term which includes all digital financial transactions done by the bank’s customers on different platforms like websites, mobile apps, ATMs, etc.

Mobile banking, on the other hand, is a subset of digital banking that refers specifically to app-based banking transactions made on smartphones or tablets. It is one aspect of digital banking where banking services are accessed via mobile devices.

Is digital banking safe or not?

Digital banking is generally safe if proper precautions are taken. Banks invest heavily in security technology to protect customer information. They use encryption and other security measures to ensure that data sent over the internet is safe from hackers.

However, no system is completely secure and there are risks involved. Cyber criminals are always looking for ways to bypass security measures and gain access to personal information.

Customers also need to take steps to protect themselves, such as keeping their devices updated, using strong and unique passwords, not sharing personal information and being cautious of phishing scams.

While digital banking has its risks, it can be considered safe provided that both the banks and customers take necessary security measures.

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