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Malaysia’s prominent banks will be facing competition from the digital banking system following the announcement of five new digital entrants by Bank Negara Malaysia (BNM).

The country’s six largest banking groups by assets are Malayan Bank Bhd, CIMB Bank Bhd, Public Bank Bhd, RHB Bank Bhd, Hong Leong Bank Bhd, and AMMB Holdings Bhd, the holding company for AmBank (M) Bhd.

Moody’s Investors Service said the new entrants would increase deposit competition in the consumer and small business segments, however, the six largest banks will be able to fend off the competition due to their entrenched franchises and ongoing digital enhancements that will increase customer stickiness.

“They have been developing their versions of ‘super apps’, which now allow customers to access the full suite of financial products and services, including digital payments for a wide variety of transactions using application programming interfaces,” it said in a statement.

It said they also benefit from the government’s efforts to promote payment efficiency and interoperability, including the implementation of DuitNow and DuitNow Quick Response (QR) code, the country’s real-time retail payment system, and standardised QR code.

On 29 April, BNM announced five consortia, Boost Holdings Bhd-RHB Bank Bhd, GXS Bank Pte Ltd-Kuok Brothers Sdn Bhd, Sea Ltd-YTL Digital Capital Sdn Bhd, Aeon Financial Service Co Ltd-Aeon Credit Service (M) Bhd-MoneyLion Inc and KAF Investment Bank Sdn Bhd as the recipients of Malaysia’s digital bank licenses.

“In addition, the entry of digital banks will not materially affect the market shares of the largest incumbents over the next four to seven years because these digital banks will remain small,” Moody’s Investors Service noted.

It said new entrants may take between 12 and 24 months to set up and pass an audit conducted by BNM before starting operations.

However, it said small players will face greater competition from both the new entrants and the larger banks, and due to their limited resources, they will remain burdened by their legacy technology infrastructure.

Malaysia now joins other Southeast Asian countries, including Singapore, the Philippines, and Indonesia that have introduced digital banks into their banking systems.


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