Malaysia is stepping up preparations for a nationwide digital identity rollout across financial services, with regulators putting banks through a second phase of testing to assess their operational readiness.
According to FinTech News Malaysia, eighteen banks have now joined Phase 2 of the MyDigital ID sandbox programme, as the government works towards determining whether the sector can safely support large-scale adoption of the national digital identity system.
The update was disclosed by the Ministry of Finance in a written parliamentary response, with local news agency Bernama reporting on the progress of the initiative. The testing programme is a key milestone in Malaysia’s broader digital transformation agenda, particularly as digital onboarding and secure remote transactions become increasingly central to banking operations.
Phase 2 of the sandbox is focused on evaluating MyDigital ID’s e-verification capabilities. The functionality is designed to allow customers to authenticate their identity digitally during account opening and when carrying out sensitive transactions, reducing reliance on manual checks and physical documentation. According to the ministry, MyDigital ID Sdn Bhd and central bank Bank Negara Malaysia are jointly overseeing the integration process.
Authorities said the testing framework has been built around security-by-design principles, with privacy-preserving safeguards and governance controls embedded throughout. These measures are intended to support audit requirements and ensure alignment with international best practices, a critical consideration as financial institutions face increasing scrutiny around data protection, cyber resilience and identity fraud.
Progress among participating banks has varied. Of the 18 institutions involved in the current phase, ten are actively integrating the MyDigital ID system into their infrastructure, while two have already completed technical onboarding. The remaining banks are understood to be at earlier stages of preparation, reflecting differing levels of digital maturity across the sector.
The sandbox testing is expected to conclude in March 2026. Any move towards broader deployment will depend on the readiness of individual institutions, rather than a blanket rollout. Regulators have made clear that nationwide implementation will only proceed once banks can demonstrate robust operational capability and full compliance with regulatory security standards.
The second phase builds on earlier work completed in the first sandbox, which ran until June 2025 and included 15 banks. During that initial phase, six institutions completed system integration, while eight carried out digital identity testing. Lessons learned from that stage are now informing the more advanced e-verification trials underway.
Taken together, the phased approach reflects a cautious but deliberate strategy by Malaysian authorities, balancing innovation in digital identity with the need to maintain trust, security and regulatory oversight across the banking sector.
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