The Emergence of Digital Bank in Malaysia

Malaysia has seen a notable transformation in its banking sector in recent years, which has been marked by the rise of digital banks. These pioneering financial institutions are transforming the manner in which Malaysians handle their money, providing simplicity, accessibility, and a wide range of services that prioritise digital platforms. The shift towards digital banking is driven not just by technological progress but also by evolving customer tastes and the need for more streamlined financial products. 

Bank Negara Malaysia (BNM) has recently issued a significant number of digital bank licences, leading to a notable increase in the Malaysian banking industry. These licences enable organisations to function as virtual banks, providing a variety of financial services without the need for physical locations. Consequently, both domestic entrepreneurs and global competitors have penetrated the Malaysian market, bringing inventive digital banking options to customers.

(Source: fintechnews)

Digital Banking Transformation

Conventional banking arrangements have always depended on physical branches and in-person transactions. Nevertheless, due to the emergence of digital technology, the banking industry has seen a significant and fundamental change. Neobanks, or digital banks, function only on the internet, using technology to provide financial services without needing physical locations. This strategy enables them to provide reduced costs, elevated interest rates on savings, and a seamless customer experience via mobile and online applications.

Digital banks provide round-the-clock accessibility to financial services from any location with an Internet connection. Customers have the ability to effortlessly carry out transactions, verify their account balance, and make bill payments using their smartphones or PCs. Conventional financial institutions often impose exorbitant charges for a range of services, including ATM withdrawals, account upkeep, and cash transfers. On the other hand, digital banks often have reduced operational expenses, enabling them to provide competitive charges or even services without fees.

Digital banks use data analytics and artificial intelligence to better understand consumer behaviour and preferences. This allows them to provide customised financial guidance, focused product suggestions, and bespoke solutions to address specific requirements. Digital banks can cater to populations that have little or no access to traditional banking services, therefore offering them crucial financial services. Through the provision of streamlined account creation procedures and targeting a wide range of consumer demographics, they actively contribute to the advancement of financial inclusivity in Malaysia.

With the rise of digital transactions, there is a growing emphasis on cybersecurity and data protection. It is essential for digital banks to allocate resources towards implementing robust security protocols to safeguard consumer data and mitigate the risk of fraudulent activities. Both digital and conventional banks are obligated to comply with the same regulatory standards, including anti-money laundering (AML) and know-your-customer (KYC) rules. Balancing adherence to these standards with the goal of providing a smooth user experience is a considerable obstacle. Conventional banks are seeing growing competition from digital banks, which compels them to develop and improve their digital services to maintain market competitiveness.

Technological developments, shifting customer behaviours, and regulatory backing are projected to fuel the ongoing growth of digital banking in Malaysia. With the expansion of digital banks, there is a possibility of transforming the banking experience by providing Malaysians from all backgrounds with more convenience, accessibility, and financial inclusion. Nevertheless, achieving success in the realm of digital banking will need continuous innovation, strategic collaborations, and an unwavering dedication to fulfilling client requirements and expectations in an ever more digitalised society.

About the Author:


Senior Lecturer, Faculty of Business, Accountancy & Law, SEGi College Kota Damansara

Dr Tan was an industrial practitioner in a Japanese multinational manufacturing company, and he has been in the education industry for more than a decade. Prior to joining the SEGi family, he was leading faculties in various Malaysian colleges. Dr Tan introduces blended innovative and creative pedagogy in his lectures, which include Business Simulation Games to make teaching and learning sessions exciting and easy to instil within students’ mindsets. In addition, Dr Tan is also actively involved in entrepreneurship consulting programmes and digital entrepreneurship activities. He works closely with MNCs to cultivate and nurture young talent since he is passionate about young talent management. Dr Tan is a fellow member of the Institute of Marketing Malaysia, and his research interest spans a wide variety of digital entrepreneurship and customer relationships.





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