Malaysia has no plans to issue more digital banking licenses, according to Bank Negara Malaysia Governor Nor Shamsiah Mohd Yunus.

“At this point, we have no plans to issue any more licenses than the five announced,” she told national news agency Bernama in an exclusive interview on Friday (May 6). “Our immediate focus is to ensure that digital banks can begin operations without delay so that they start delivering on their promised value propositions to serve the needs of the unserved and underserved segments.”

In deciding to award five licenses, Nor Shamsiah said the central bank considered many factors, such as the size of the country’s banking system relative to the economy. “This isn’t a case of ‘the more the merrier!’” she added.

The governor also said it is important to also recall back the situation in the 1990s, where the country had a large number of domestic banks, but many of which did not have the financial strength, size, and scale to operate viably or compete effectively.

“Clearly, Malaysians were not better served by the higher number of banks. We should also not forget about the Asian financial crisis where our economy suffered its deepest-ever recession because of some of these weak banks failing – with the cost borne by taxpayers,” she warned.

Nor Shamsiah was responding to a question on why is Bank Negara only offering five licenses and will more licenses be issued in the future.

Malaysia is joining Hong Kong, Singapore, and the Philippines to issue digital banking licenses, in a bid to embrace online-only banking services. Neighboring Thailand is also preparing rules for setting up of virtual banks, Bloomberg reported in February.

Singapore has issued four digital bank licenses in December 2020. Hong Kong has issued eight such licenses while the BANGKO SENTRAL ng Pilipinas (BSP) has capped the number of digital banking licenses to six in the Philippines.

Malaysia, a country of 32.4 million people, is a middle-income market with Gross Domestic Product (GDP) per capita of $27,913 according to the World Bank. It is a well-digitized society with about 105 percent smartphone penetration in 2020, according to GlobalData estimates, Maybank Investment Bank wrote in a note.

GRAB-Singtel, Axiata’s Boost-RHB, Sea Ltd-YTL, AEON Credit consortiums among winners of Malaysia digital banking licenses