18 banking institutions in Malaysia are now participating in Phase 2 of the MyDigital ID sandbox, which aims to integrate the national digital identity system into the financial sector for account opening and secure banking transactions.
The move to use MyDigital ID as a trusted verification platform is expected to unlock the full potential of digital banks to serve the underbanked community.
According to the Ministry of Finance (MOF), the Phase 2 sandbox focuses on testing MyDigital ID–based verification, which allows banks to verify a customer’s identity digitally when opening new accounts or performing secure, real-time banking activities.
The government said the integration is being implemented by MyDigital ID Sdn Bhd together with Bank Negara Malaysia, with an emphasis on security-by-design, privacy-preserving measures and auditable governance.
In a written parliamentary reply published on Thursday, the MOF said 10 out of 18 banks are currently undergoing the integration process and so far two have already completed the integration. It added that Phase 2 sandbox is expected to conclude in March 2026, after which wider implementation may begin, subject to the readiness of the respective banks.
MOF was responding to a question from Sri Gading MP Aminolhuda Hassan who asked whether banks and financial institutions are ready to adopt MyDigital ID in terms of security certification, personal data protection and audit standards.
MOF revealed that under the Phase 1 sandbox, a total of 15 banking institutions participated, which concluded in June 2025. Of these, six completed integration, while eight conducted electronic know-your-customer (e-KYC) testing.
The government, through BNM, must ensure that every financial institution achieves a high level of technical readiness and data protection before MyDigital ID can be deployed across the banking system.
While the MOF did not explicitly state that MyDigital ID will be used to onboard unbanked Malaysians, the ability to perform secure digital identity verification without physical branch visits could lower barriers for first-time account holders especially for digital banks.
There are currently five digital banks in Malaysia namely, GXBank, Aeon Bank, Boost Bank, KAF Digital Bank and Ryt Bank.
At present, new users signing up for a digital bank are typically required to make a small fund transfer from an existing, verified bank account under their name as part of the identity verification process.
This requirement is widely seen as a significant barrier for unbanked individuals, who may not have access to a traditional bank account in the first place. The ability to onboard customers using a trusted national digital identity system such as MyDigital ID is viewed as a potential game changer for financial inclusion, though its real-world impact will depend on the actual implementation.
At the moment, MyDigital ID is used as a single sign on for various government platforms. It is also implemented by telcos as a verification method for new prepaid SIM registrations.
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