The Central Bank of Malaysia (Bank Negara Malaysia - BNM) has closed the digital bank application process in July 2021. 29 contenders (mostly in consortia) applied for up to 5 licences. The results will be announced in Q1 2022.

Banks, industry conglomerates, big tech players, ecommerce operator, fintech players, cooperatives and state governments are among the applicants. Few are named, and not all contenders like to make big announcements.

Malaysia has higher banked population (45.5%) than Southeast Asia average (26%). However, 40.9% Malaysians have limited use of banking services (i.e.: only for savings).

Malaysians are picking up on digital payment and mobile-as-a-payment-channel habit: E-money transaction value in 2020 grew 3.8x of 2016 to US$ 7.1B (though still dwarfed under credit card’s US$ 30.8B); Mobile banking transaction value overtook ATM1 for the first time in 2020, reaching US$ 110B, as Malaysians moved to contactless transactions during pandemic.

High internet penetration (84.2%) and population in digital economy (40.2% has used online commerce) serve as good foundation for digital bank growth and conversion.

On policy, we see clear focus of BNM in pushing for financial inclusion among underserved segments and micro, small and medium-sized enterprises (MSMEs).

On successful contenders, potentially we will see large ecosystem players, together with more specialised players focusing on specific segments (e.g.: SMEs, as well as Islamic banking).