Malaysia is stepping up efforts to modernise digital identity across financial services, as 18 banks take part in the second testing phase of the country’s MyDigital ID programme.
According to FinTech News Malaysia, the update was disclosed by the Ministry of Finance in a parliamentary response, highlighting how regulators are assessing whether the banking sector is ready for the nationwide adoption of the government-backed digital identity system.
The second phase of the sandbox is focused on testing MyDigital ID’s e-verification function. This capability allows customers to authenticate their identity digitally during key processes such as account onboarding and secure transactions, reducing the need for manual checks and physical documentation. The aim is to streamline customer journeys while maintaining strong levels of security and regulatory compliance.
According to the ministry, the integration is being overseen jointly by MyDigital ID Sdn Bhd and Bank Negara Malaysia. The programme is being built around security-by-design principles, with privacy-preserving safeguards and governance controls designed to support audit requirements. Authorities also confirmed that the framework aligns with international best practices, reflecting a growing emphasis on digital trust, data protection and cross-border interoperability.
Of the 18 banks involved in phase two, ten are currently in the process of integrating the system into their infrastructure, while two have already completed technical onboarding. This suggests that readiness levels vary significantly across institutions, underlining the complexity of deploying digital identity at scale in a highly regulated sector.
The current testing phase is expected to conclude in March 2026, after which regulators will decide whether the system is suitable for wider implementation. Importantly, nationwide deployment will only proceed if individual banks demonstrate sufficient operational readiness and meet regulatory security standards. This cautious approach reflects concerns around cyber risk, data misuse and the need for strong governance in digital identity systems.
The latest sandbox follows an earlier pilot involving 15 banks, which concluded in June 2025. During the first phase, six banks completed system integration, while eight carried out digital identity testing. The phased rollout indicates that Malaysian authorities are prioritising controlled experimentation before committing to full-scale deployment across the financial ecosystem.
If successfully implemented, MyDigital ID could become a core piece of infrastructure for Malaysia’s FinTech and RegTech landscape, enabling more efficient KYC processes, reducing fraud, and supporting digital-first financial services. For banks, the system could lower compliance costs and improve customer experience, while regulators gain better oversight and assurance around identity verification.
As countries across Asia-Pacific accelerate digital identity initiatives, Malaysia’s sandbox-driven approach positions it as a cautious but forward-looking player in building trusted digital public infrastructure.
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