S&P Global Ratings senior analyst, financial institution ratings, South and Southeast Asia, Sue Ong said the five digital banking licenses issued by Bank Negara Malaysia (BNM) in 2022 do not seem to be a game-changer for now.

“There are a couple of licensing requirements by BNM and the main one is that digital banking players need to serve the underbanked or unbanked population.

“But the thing is, Malaysia already has a very high banking penetration rate at more than 90% of the population and these are served by the traditional Malaysian banks,” she said during a webinar themed ‘Key Credit Risks for Malaysian Banks and Economic Outlook’.

Another requirement stipulated by BNM is for digital banks to cap their assets at RM3 billion within the first three to five years.

“This means that digital banks are unable to grow very quickly within the first few years.

“This will be a very small share of the total asset size of the Malaysian banking sector,” she said.

Meanwhile, Ong said potential competition may come from promotional campaigns during the launch of digital banks since they could attract customers with appealing deposit offers.

“But it is uncertain whether these deposits will remain steady once the promotions end, as it remains to be tested against the traditional banks’ deposit base,” she said.

She noted that the traditional banks have also stepped up their efforts and significantly enhanced their digital services offerings, focussing on improving user experience through mobile banking applications to compete with digital banks’ offerings.

“They have introduced numerous new digital products tailored for small and medium-sized enterprises (SMEs) and micro-SMEs, which are very similar to those by digital banks,” she added.