When Malaysia introduced digital banking licences in 2021, the reaction from the market was very immediate.

Bank Negara Malaysia received roughly 29 applications at the time, with companies forming consortiums, investors lining up to be a part of it, and the rumour mill worked overtime.

Even before any official announcements, you could sense where things were heading, and there were enough signals in the market for people to piece things together.

But somehow, the rollout of digital insurers and takaful operators has unfolded in a much quieter route.

Applications opened in January 2025, but more than a year in, there has been very little in the way of public movement. Not a single obvious frontrunner, and for sure, there was no visible clustering of partnerships.

That said, conversations are still happening behind closed doors in which industry sources point out that there are genuine interests, especially from technology firms and startups.

Still, the lack of visibility stands out, particularly when compared to what we saw during the digital banking cycle. Something that people in the industry have started to notice.

For one, the application window runs until December 2026 which gives potential entrants an abundance of time to think things through, line up capital, and firm up partnerships before committing.

Even so, the quiet is hard to ignore.

In most large licensing exercises, you tend to see signs early but so far, that kind of early noise has not really appeared in the digital insurance space, at least not publicly.

A Launch Without the Noise

Bank Negara Malaysia released the Digital Insurers and Takaful Operators (DITO) framework in July 2024 as part of its Financial Sector Blueprint 2022–2026.

At its core, the framework is meant to close protection gaps and expand access to insurance. The focus is on inclusion, competition, and better delivery through digital models.

DITOs are expected to operate “wholly or almost wholly” (almost entirely through digital channels), offering products that are more accessible and better suited to underserved segments.

Applicants will go through a foundational phase that can last between three to seven years. During this time, they are expected to demonstrate that their business models are sound and sustainable.

Capital requirements start lower and increase gradually as the business matures, striking a balance between encouraging entry and maintaining long-term resilience.

Initially, the framework was expected to issue up to five licences. However, that cap has since been removed, signalling that the regulator is open to more entrants, as long as they meet the necessary standards.

Those standards remain high. Applicants will still need to meet requirements across governance, risk management, consumer protection, technology, and, where relevant, Shariah compliance.

A Longer Timeline Changes Behaviour

One key difference from digital banking is the timeline. Digital bank applicants worked toward a single, fixed deadline. That created urgency, and with it, visibility.

The DITO window, by contrast, stretches across two years which changes the behaviour.

What I mean by this is that companies now have more room to refine their models, engage with potential partners, and have early conversations with regulators before formally applying.

Bank Negara Malaysia has also required prospective applicants to go through consultation sessions ahead of submission whereby those engagements began back in October 2024 and have continued since.

With more time and a more structured process, tit seems like there is simply less pressure to signal intentions early with much of the activity staying behind the scenes.

Capital Could Be the Real Constraint

If there is one area that stands out, it is the capital.

The ability to build and run digital infrastructure is not the main hurdle. Raising the right kind of capital is.

DITO applicants are required to start with a minimum paid-up capital of RM30 million during the early phase, scaling up to RM100 million over time.

On its own, that may not seem excessive. But it starts to look different when placed alongside digital banking.

Digital banks in Malaysia begin with RM100 million during their foundational phase and scale up to RM300 million, with asset caps in place to manage risk.

So while digital insurers start lower, they do not remain “lightweight” for long.

For startups and technology firms, this creates a familiar challenge. Many are exploring partnerships with established insurers or institutional investors to meet these thresholds.

But insurance is a different proposition for investors.

Compared to other areas of fintech, it is a harder sell. Returns take time, and businesses have to be patient.

Fintech News Malaysia also understands from conversations with potential applicants that investor appetite so far has been lukewarm at best.

At the moment, the two players to have publicly indicated its intention to pursue a DITO licence is Malaysian digital takaful operator Ouch! and Policystreet.

The former company recently raised RM5 million in funding, led by PPB Ventures, and plans to channel part of that into securing the licence and building out its technology stack.

Its CEO, Shazy Noorazman, has said that the licence would allow Ouch! to expand its range of Shariah-compliant products and improve access to protection.

The latter’s Co-Founder and Chief Operating Officer Yen Ming Lee, said in a recent panel discussion us,  shared that the company is currently waiting on further developments around the DITO framework before deciding on its next steps.

Watch the video here:

Insurance Often Moves on a Longer Timeline

Part of the slower pace also comes down to how the licensing is structured. Digital banking, for the most part, offers a more unified path.

A single licence allows a player to offer a full suite of banking services under one entity. They then can decide whether they want to pursue conventional or Islamic.

The DITO framework is more segmented. You cannot run life and general insurance under the same entity. The same applies to takaful.

In practical terms, a group that wants to build a full-spectrum digital insurer across both conventional and Islamic segments may need up to four separate licences.

Each licence sits under a different corporate structure. Each requires its own capital. That alone adds complexity.

Beyond licensing, insurance itself operates on a longer cycle.

Unlike banking, where changes in payments or lending can quickly show up in everyday behaviour, insurance takes time. It involves underwriting, claims management, and maintaining solvency over the long run.

Regulators are not looking for speed. They are looking for durability.

Even digital-first players take a measured approach to growth.

Innovation still plays a role. The framework encourages the use of technologies like AI and machine learning to improve pricing, streamline claims, and deliver more personalised products.

There is also room for embedded insurance, digital-first experiences, and new risk-sharing models.

But all of it sits within a tightly controlled environment designed to protect policyholders.

Incumbent insurers and takaful operators also have the advantage of existing distribution and customer relationships. For now, many appear content to observe how the framework evolves before making large commitments.

Some may eventually partner with technology firms rather than apply on their own.

In my opinion, it is still early days as licensing cycles often gather pace closer to the deadline.

What we do not see yet may already be in motion behind the scenes.

Momentum, after all, does not always build in public.

Fintech News Malaysia has reached out to Bank Negara Malaysia for comment and will provide updates should a response be made available.

Featured image: Edited by Fintech News Malaysia based on an image by user4894991 via Freepik.