The banking industry in Malaysia has a significant role in Malaysia’s economic growth.

Banks frequently attempt to maintain great customer experience through providing excellent services and reducing operating costs. 

The industry also constantly innovates concurrently with technological developments of telecommunications and information technology (IT).

Following the innovation and digitalisation, as reported by The Star (2018), more new jobs are opened in the Malaysian banking sector in the areas of automation and information technology (IT).

History – Banking Industry in Malaysia

The banking industry started off in the 19th century.

Penang’s strategic location and port facilities oiled the wheels for Penang’s identification as the catalyst for banks. 

A bank, back in the days, was an office with a big safe. It was called a “strongroom” in banking terms.

Time passes and customer’s trust towards banks was built up. This is upon seeing the inflow and outflow of banking transactions. 

Through revolution and modernisation, the design and landscapes of banking halls improved over the years. Look at our banks now. 

The banking halls are as good as hotel lobbies!

Now, banks emphasise one-to-one service and excellent customer service. 

The System and Components

Malaysian banking system comprises 3 major parts: The Central Bank, Banking Institutions and Others.

1. The Central Bank (Bank Negara Malaysia)

BNM is crucial in promoting economic growth. It maintains monetary, price and financial stability. 

This statutory body started its operation on 26 January 1959 with the name Bank Negara Tanah Melayu. 

The first office of the Bank Negara in 1959.

It was later changed to its name now.

2. Banking Institutions

Banking institutions comprise of Commercial Banks, Finance Companies, Merchant Banks, and Islamic Banks. 

All these institutions are registered with Bank Negara Malaysia (BNM) as licensed financial institutions. 

3. Others

Another minor yet important part of the banking system involves Discount Houses and Representative Offices of Foreign Bank.

“A discount house is a money lender that participates in the buying and discounting of bills of exchange and other financial products.”

However, Malaysia no longer has any Discount Houses as all previous ones had its operations ceased and was transformed into investment banks in 2006.

A Representative Office of a foreign institution in the banking sector is an office established in Malaysia to perform permissible activities for its head office/principal. 

The Representative Office should be totally funded from sources outside Malaysia.

Don’t get scammed! 

Check out the list of approved Representative Office of Foreign Banking Institution in Malaysia here.

The Challenges

Banks, like any other institution, deal with challenges in ensuring growth and maintaining stability. 

Among the intricate challenges that the Malaysian banking industry deals with are:

1. The competitive landscape against new entrances such as Fintech companies.

2. Having in-depth and specific understanding of customers’ perceived requirements.

3. Meeting customers demands and expectations.

4. Ensuring financial security of its own as well as the customers.

5. Securing customer’s personal privacy from being invaded and misused. 

IT in Malaysia Banking Industry

In the earlier years when the bank was established, tasks and transactions were manually carried out. 

The banking industry is impacted by the evolution of technology, so in the 1960s, it started adopting computerization banking services. 

The use of technology in retail banking was since then seen to escalate. 

How are IT integrated into Malaysian banking?

Automated Teller Machine (ATM)

Automated teller machines are computerized telecommunications devices that provide clients of a financial institution with access to financial transactions in a public place.

Malaysia’s first ATM appeared in 1981, which is Maybank’s Ampang Park branch ATM. 

With more technology advances, the branch’s electronic banking hall added more ATMs as well as other machines for better services. 

The machines added are cash deposit machines, cheque deposit machines, and bank statements printing machines.

This is now seen not only in Ampang but in every bank in Malaysia. 

Below is the number of ATMs in Malaysia per 100,000 population:

(Source: the Global Economy)

The number is gradually but very slowly decreasing due to the vision of going totally cashless. 

This is plus the fact that we also have Internet Banking, so fewer people are queuing in the hall.

Internet Banking

banking in malaysia

The first internet banking experience in Malaysia was in the year 2000, where Maybank became the first bank (again) to roll out an online service portal. 

With this system,  customers are able to carry out banking transactions online, not needing to visit the physical financial institution or bank.

Internet banking enables the checking of account inquiries, performing payments and loan repayments and placement of fixed deposit.

Other parts of online payment include e-payment, e-wallet, P2P Money Transfer and Cashback.

Telebanking Service

Telebanking, or in full term telephone banking, is a bank or financial institution’s service provided over the telephone. 

Through this service, cashless financial transactions and financial instruments (cheques, for example) could be done without the customers needing to visit the bank or ATM.

Most often, telebanking is used for inquiries and minors services such as reactivating internet banking account and procedure confirmation.

Banking Kiosk

With the help of technology, people living in remote areas or villages where bank branches are unavailable can also perform banking activities. 

This is made possible through banking kiosk, which provides customers accessibility to banking services without having to visit the bank. 

In layman language, the bank comes to you, in a machine form so transactions are made possible for you. 

Impressively, the first bank to launch a banking kiosk in Malaysia is also Maybank. 

The Importance of IT in the banking industry in Malaysia

Why is IT so important in this era, and how helpful it is for the banking industry?

1. Reduce Cost 

IT helps in reducing operating and processing costs that banks need to bear. 

Using the latest technology results in fewer costs with an additional market advantage. 

2. Improve Productivity

Banks have a lot of accounting, planning and control happening all at once. 

Computerisation helps ease management. 

It also makes reporting risks and performance accurately and on time. 

Combining all that, productivity is improved as progression is increased. 

From this:

To this: 

3. Competitive advantage through technology

Taking into consideration the two importance of IT in banking, adopting and updating technology in Malaysian banking creates a competitive advantage. 

As mentioned, it reduces transaction, operating and processing costs and increases overall productivity.

It will also ensure better product and services quality through greater product differentiation with competitors. 

Cross-border banking- Biometrics Identification

Any financing or banking arrangement and transactions made that crosses national borders is called cross-border banking. 

These arrangements or transactions include cross border loans, letters of credit or bankers acceptances. 

Cross-border banking is made possible with technology, precisely with biometrics identification and biometrics payment. 

Biometrics uses unique human physical characteristics (iris, fingerprints, etc)  as security for automated authentication. 

As Tricubes designs, develops and integrates biometrics verification hardware for various installation platforms and devices, we develop biometric payment hardware too. 

To date, Tricubes’ identity authentication solution is being used at national borders, access controls and facilities management in offices, MyKad programs and airports (such as Orly, Paris).

With an increasing need for more stringent security around the world, IAS is the answer to biometric-based solutions for organizations with security demands. 

Our IAS solutions sets include hardware, software applications for physical access, logical access and network security controls through biometrics and smart card technologies.

Contact us now for more information.