Digital Banking Will Increase Financial Inclusion in Malaysia
Bank Negara Malaysia (BNM) will issue 5 licenses for digital banks in the first quarter of 2022, and has received 29 bids by the end of the submission deadline.
Why did 29 applicants, including conglomerates and cooperatives, think it was worth putting together a bid when they know only 5 will succeed? That is because they know digital banking is the way forward, and it is high time Malaysia catches up.
To be frank, the pandemic actually accelerated our adoption of digital banking, because it highlighted the need for banking services to cut out unnecessary red tapes and in-person branch visits. Hygienic issues aside, physical banking can be time consuming, which is why most people prefer online banking, but still online banking is limited, but these limitations can be solved by digital banking.
Contrary to popular belief, using apps of physical banks like Maybank2U or CIMB Clicks is not digital banking. Digital banking is the complete elimination of any need for physical visits, paperwork, the sort of things you cannot perform through an app.
More impressively, convenience won’t even be the biggest benefit that will come with digital banking. That will be the massively improved financial inclusion.
While the Malaysian population is not massively underserved when it comes to financial inclusion, improvements are needed. Digital banking cuts around 90% from the operating and overhead costs of running a bank since there is no need for a brick and mortar premise, and fewer personnel are required. In turn, the costs saved will be reflected in more affordable financial services. As a domino effect, physical banks still in operation will also have to follow suit with
The biggest winners from this will be Small and Medium Enterprises (SMEs) that make up around 50% of Malaysia’s GDP. Loans will come with more reasonable interest rates, and be more accessible to the population previously left out. Lower-income groups will be able to enjoy better chances to build start-ups and SMEs, provisioning a base for financial mobility.
That is not to say there won’t be challenges ahead, for digital banking to be inclusive of all-Malaysians, we will also need to be vary of our digital inclusion. Internet usage will have to reach some of the more rural areas where a good number of Malaysians still live.
A survey conducted by VISA showed that the majority of our country is interested in digital banking, while this is a positive sign, we’ll still have to wait and see what happens. Who will win the 5 bids? How will they run their operations? It is not easy to implement something completely new onto a society that has been used to physical banking, but one thing is for sure, this is the way forward, for both consumers and the financial future of this country.
Digital banking is the key to financial inclusion in Malaysia – Nafis Alam, 2021
Majority of consumers are eager to use digital banking in Malaysia – Dashveenjit Kaur, 2021
Malaysian Digital Banks: 29 Applicants For A Maximum Of 5 Licenses – Zennon Kapron, 2021