Internet Banking: A Comparative Analysis of Legal and Regulatory Framework in Malaysia

Abstract

Information technology developments have revolutionised the banking sector. This revolution in turn has resulted in new delivery channels for banking products. With the introduction of Automated Teller Machines (ATMs) in 1981, both conventional and Islamic banks in Malaysia started a journey towards an ongoing technology revolution. The successful implementation of ATMs paved the way for the introduction of Tele-banking and PC-banking in the 1990s. Following this, Internet banking was launched in June 2000. It is anticipated that the introduction of Internet banking will provide a faster and cheaper delivery method. Nonetheless, it is feared that the customers' concerns concerning security and privacy may hinder the growth of Internet banking in Malaysia. This article will explore the development of Internet banking in Malaysia and its regulatory framework, together with the security and privacy issues of Internet banking in the light of the Banking and Financial Institutions Act 1989 (BAFIA), the Islamic Banking Act 1983 (IBA), the Central Bank's Minimum Guideline on the Provisions of Internet Banking Services by Licensed Institutions 2000 (Guideline), the Computer Crimes Act 1997 (implemented in 2000), and the Personal Data Protection Bill 1998 (which remains as a bill). The article will also show how Malaysia has enacted laws to meet the demands of various quarters, including Muslims, in this information era, and that they are compatible with (the objectives of Islam) maqasid al-Shariah.