From Cash to Cloud – Inside Malaysia’s Digital Banking Race

From Cash to Cloud – Inside Malaysia’s Digital Banking Race

As Malaysia’s payments market surges past $90 billion, banks face a defining test – can they modernise fast enough to keep pace with digital challengers and rising consumer expectations? In this opinion piece for finews.asia, Mohd Khalil Alkhushairi, Country Director at BPC Malaysia, explores what it will take to stay ahead.

Malaysia’s consumers are racing ahead with digital payments, while many banks lag behind. Cards and wallets are part of everyday life, fintech challengers can issue a virtual card in minutes and national regulators have opened the door to new players. Banks still tied to legacy systems risk falling further behind in a market that’s moving on without them.

By 2025, card payments in Malaysia are projected to reach MYR422.4 billion ($92.6 billion), up from MYR387 billion in 2024 after consecutive double-digit growth. Credit and charge cards account for almost 60 percent of spend, with Malaysians using them more than twice as often as debit cards. Contactless is now common, with more than 63 percent of consumers holding and using a contactless card.

Regional Shift

Cash still accounts for close to half of daily purchases in Malaysia. Part of this comes down to habit, and part to the fact that not all merchants and customers are ready to abandon notes and coins. This uneven adoption means banks must serve very different expectations at once: digital-first services for younger users alongside more traditional preferences in other segments.

This picture reflects a wider regional shift. Visa’s recent Consumer Payment Attitudes study found that six in 10 Southeast Asian consumers now prefer to go cashless, and more than seven in 10 said they had gone without cash for over a week while trying new ways to pay. Cards still lead as the most used method, ahead of wallets and cash, both because of their merchant acceptance and because they often fund digital wallets themselves.

Fintechs Move Fast

Malaysia’s dual-speed market is most visible in consumer behaviour. Younger Malaysians are growing up mobile-first, often reaching for e-wallets and super-apps before ever applying for a bank card. For these consumers, topping up a GrabPay or Touch ’n Go wallet is second nature. They expect financial services to be instant, integrated and available through the apps they already use. Waiting several days for a physical card to arrive, or dealing with clunky card controls, feels outdated.

Fintechs have been quick to respond. BigPay, Wise, GoPayz and MAE offer instant virtual cards and embed payments in everyday apps. Their cloud-native systems let them roll out services such as multi-currency wallets and spending insights far faster than traditional banks, often at lower cost. Lower fees on overseas spending and transfers make them even more attractive. 

Banks on legacy platforms, by contrast, face long and costly development cycles whenever they try to launch something new.

Regulators Aren’t Waiting

National regulation is driving change. In 2022, Bank Negara Malaysia awarded five licences for digital banks under its new framework, updated in 2024 to strengthen capital requirements and consumer safeguards 

The central bank also established DuitNow QR as the national QR code standard, requiring banks and non-bank providers to use the same system. That has helped merchants adopt QR widely and lowered barriers for consumers to go cashless. 

Higher Standards For Banks

These reforms enable innovation and set a higher standard for banks. They sit within the  Financial Sector Blueprint 2022-2026, which sets out a vision of a system that is more digital, more inclusive and better protected against fraud.

Far from slowing change, national regulation is accelerating it, with goals that stretch beyond convenience to include financial inclusion, resilience, and cross-border connectivity.

Instant Issuance

For banks, the challenge is to turn scale and trust into digital competitiveness. That means addressing the legacy issue directly. Modern card management platforms enable issuing across credit, debit and digital credentials from a single system.

They support instant issuance, reduce the cost of running multiple outdated platforms and integrate directly with wallets and super-apps. They also enable richer services such as real-time fraud detection, flexible repayment options and personalised card controls.

Winning Loyalty

Beyond these features, modern platforms open the door to wider possibilities. They provide analytics that help banks detect fraud before it escalates, and they make it easier to design products such as buy now, pay later (BNPL) that are increasingly popular among younger consumers. 

They also enable banks to personalise offers and limits based on individual behaviour, turning transaction data into targeted services. In a competitive market, these capabilities are the tools needed to win loyalty and keep pace with fintech rivals.

From Plans to Action

Some banks have already started to move. Earlier this year, Co-opbank Pertama deployed a new fraud management system to meet tighter Bank Negara rules and strengthen customer protection online. The project showed how modern platforms can deliver regulatory compliance and a better customer experience at the same time. 

Elsewhere, banks that have replaced ageing systems have been able to introduce flexible credentials - letting a single card switch between debit, credit, instalment or rewards – while extending fraud protection across every channel. These examples show that the shift is not only possible but practical.

Meeting customer expectations

Across Southeast Asia, more than 80 percent of consumers now use a mobile banking app. That level of engagement sets a clear benchmark: people expect control, speed, and convenience. Freezing a card after it’s misplaced, setting limits before a trip, or unblocking it later should all be possible from a phone. When those options aren’t there, customers move to a provider that can deliver them.

Malaysia has the conditions for progress: consumers eager for convenience, national regulators pushing innovation, and technology ready to deploy. The banks that act now will protect their share, cut costs, and meet expectations that are already mainstream. Those who delay risk falling out of step with how customers now expect to pay.

Mohd Khalil Alkhushairi (pictured above) is the Country Director of BPC Banking Technologies in Malaysia. With over three decades of experience in corporate, retail, and digital banking, he has held senior leadership roles in Malaysia and abroad, including positions in bank transformation and market expansion. His expertise spans corporate banking, Islamic finance, and fintech innovation. At BPC, he leads efforts to advance digital banking solutions and payments infrastructure across the region.