The behavioural patterns of Malaysians towards the adoption and satisfaction with digital-only banks

Yew, Nigel Ee Hong (2025) The behavioural patterns of Malaysians towards the adoption and satisfaction with digital-only banks. Final Year Project, UTAR.

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Abstract

The rapid evolution of financial technology has brought about a profound transformation in the banking sector, with digital-only banks emerging as a key force reshaping the industry. Operating exclusively online without physical branches, these institutions are redefining how banking services are delivered and accessed. This transformation is not merely driven by technological advancements but also reflects a shift in consumer preferences toward more convenient and personalized financial solutions (WEI YET, 2024). In Malaysia, the rise of digital-only banks has gained significant momentum, supported by growing consumer demand and proactive regulatory efforts. Digital-only banks have existed for over two decades, with their establishment beginning in the late 1990s and early 2000s in countries like the United States, Europe, and Japan. In Asia, digital-only banks gained traction during the 2010s and 2020s, notably in China, South Korea, and Singapore (Yoon & Lim, 2020). Malaysia has also joined this trend due to advancements in its digital economy and financial technology, though the concept is still in its infancy within the country. As of April 2022, Bank Negara Malaysia (BNM) has issued licenses to five digital-only banks. However, before these banks can begin operations, they must undergo a readiness validation and audit by BNM within 12 to 24 months of the license announcement (Five Successful Applicants for the Digital Bank Licences, 2022). To promote financial inclusion, BNM envisions these digital-only banks offering affordable and accessible financial services to underserved segments, such as small businesses, low-income households, minorities, gig workers, and youth. Additionally, these banks are expected to reduce transaction costs, provide essential financial services, and enhance digital literacy among consumers. By doing so, they aim to make banking more inclusive, improve service quality, boost employment, and reduce poverty (Abdul-Rahim et al., 2022). The rise of digital-only banks in Malaysia represents a significant transformation in the banking sector, offering innovative, cost-effective, and convenient financial solutions. However, the adoption of digital-only banks remains inconsistent among Malaysians, influenced by various behavioural, cultural, and systemic challenges. While younger, tech-savvy generations readily embrace these platforms, older demographics and rural populations exhibit hesitance due to limited technological literacy, a preference for traditional face-to-face banking, and concerns about cybersecurity (Dharamshi, 2018). One notable behavioural trend among Malaysians is their high sensitivity to trust and security when adopting financial technologies (Dharamshi, 2018). Cybersecurity threats, including phishing, mobile malware, and password hacking, heighten scepticism toward digital-only banks. According to PWC’s Global Economic Crime and Fraud Survey 2018, 14% of respondents globally who identified cybercrime as the most disruptive fraud reported losses exceeding $1 million, with 1% experiencing losses above $100 million. In Malaysia, similar concerns persist, with users expressing anxiety about the safety of financial transactions on fully digital platforms (Price Waterhouse Coopers, 2018). These fears are compounded by incidents involving sophisticated malware that mimic legitimate apps to steal sensitive information, deterring widespread adoption.

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