Opportunities for Digital Banks in Malaysia

 

The Monetary Authority of Singapore (MAS) has approved four digital bank licenses in 2020, and surprisingly three out of four (Grab, Sea, and Ant) are non-banking players. In Malaysia, the deadline for the submission of applications for digital banking licenses is set for June 30, 2021. Five digital banking licences will be granted by the first quarter of 2022. This will be one of the biggest disruptions to the financial services market in decades.

Unlike Singapore or Hong Kong, Malaysia has larger rural areas with unbanked population. Therefore, a digital bank will definitely help Malaysians, especially under the pandemic.

The increasing internet and mobile phone penetration rates as well as the rise in popularity of mobile and internet banking, even before the pandemic, offers a highly supportive environment for digital banks and fintech to flourish. The country is a market awash with mobile wallets. There are now 53 such wallets, but 85% of payments are still settled in cash, according to Mastercard (2020).

Given the lower capital threshold required in Malaysia of RM300 million versus Singapore’s S$1.5 billion, it added that smaller fintech companies with strong technology are also well-placed to succeed.

The diversity of population, high internet penetration rate and low capital threshold requirement create significant opportunities for digital-only banks to develop in Malaysia. The introduction of digital banks will expand market access and optimize SMEs’ business performance. And with more investment in technology, we could be ready for fintech!

 

Reference:

1.     Ahmad Naqib Idris, Significant opportunities for digital-only banks in Malaysia’s 'fertile ground for fintech', says S&P Global Ratings

2.     Dashveenjit Kaur, Digital banking gets real in Malaysia in 2021, 6 Jan 2021,  https://techwireasia.com/