The Rise of Digital Banks in Malaysia: Discussion on Industry Impact and Strategic Insights
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Abstract
The rise of digital banks in Malaysia marks a transformative shift in the nation’s financial services sector, catalysed by technological advancements, evolving customer expectations, and proactive regulatory intervention. Anchored by Bank Negara Malaysia’s digital banking framework, the licensing of new digital-only banks is driving financial innovation, enhancing service accessibility, and fostering competition across the industry. This paper presents a comprehensive examination of digital banking, beginning with global trends and conceptual foundations, and narrowing in on Malaysia’s regulatory and institutional context. It analyses the strategic positioning and operational models of licensed digital banks, particularly their efforts to serve financially underserved segments such as micro, small, and medium enterprises (MSMEs) and the unbanked. The study also assesses the strategic responses of incumbent banks and outlines the evolving cybersecurity and compliance landscape. Drawing on recent policy developments, market data, and case studies, the findings underscore the transformative potential of digital banks in promoting financial inclusion and catalysing a more resilient, technology-enabled banking ecosystem. The paper concludes with policy implications and avenues for future research.
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