Malaysia gears up for the future of finance as AirAsia, Sea Group, Grab face off in bid for digital banking licences

E-commerce giants, super apps and a budget airline are among the 29 applicants hoping to secure one of the five licences on offer from the central bank

Analysts see huge potential in the millions of Malaysians currently underserved by traditional banks – but warn that turning a profit may prove difficult

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Analysts see huge potential in the millions of Malaysians currently underserved by traditional banks. Photo: Shutterstock

Published: 9:15am, 31 Jul 2021Updated: 9:43am, 3 Aug 2021

When Pauline Wong misplaced her bank card in the process of moving to Malaysia earlier this year, she was shocked to discover the steps she had to go through to get a new one.

“Even after one and half years of Covid-19, they still haven’t made changes,” the 34-year-old media professional said, recounting how she had to visit a branch in person and spend 30 minutes waiting in line just to get a replacement debit card.

Unlike in Singapore, where Wong was previously based, many Malaysian banks still operate on a distinctly offline model – making the promised arrival of digital banks in the country “definitely exciting”, she said.

Malaysia’s central bank, Bank Negara Malaysia, is set to issue up to five digital banking licences by early 2022. Photo: Reuters

Malaysia’s central bank is set to issue up to five digital banking licences by early next year, paving the way for Southeast Asia’s fourth-largest economy to follow in the footsteps of Hong Kong – which began issuing licences from 2019 and now has eight virtual banks – and Singapore, which has issued four licences, with services expected to commence from early 2022.

On July 2, Bank Negara Malaysia announced that it had received 29 applications for digital banking licences from bidders including technology firms, e-commerce operators, state governments, and even budget airline AirAsia.

Digital banks promise greater convenience and speed over their bricks-and-mortar counterparts for Malaysia’s time-poor white collar workers such as Wong – but there is another segment of society who also stands to gain from the advent of digital banking: the millions of Malaysians currently underserved by traditional banks.