Malaysia: A Flourishing Fintech Ecosystem
IMF News, February 28, 2020
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- Published: February 28, 2020
Overview
- Malaysia’s annual economic growth has averaged just under 5 percent over the past five years.
- Fintech is rapidly becoming a central part of the country’s financial sector, with considerable promise for expansion according to IMF analysis.
- Fintech can help ordinary people access financial products securely and efficiently, while boosting countries’ economic growth.
Adoption and infrastructure
- Internet banking in Malaysia has quadrupled in the last decade, topping a 90 percent usage rate in 2018.
- Mobile banking is booming, supported by near-universal 4G network coverage, affordable data, and 5G is in the works.
- The World Economic Forum’s 2019 Network Readiness Index ranked Malaysia high among the 139 countries surveyed—and first among countries in emerging and developing Asia.
- Commonly used fintech forms in Malaysia include:
- digital payments and mobile wallets
- “insurtech”
- lending
- digital remittances
- blockchain
- crowdfunding
- electronic Know-Your-Customer processes
- other forms of financial technology
Financial sector impacts and market structure
- While fintech products offered by traditional financial institutions expand, the number of physical commercial bank branches is declining, and the number of automated teller machines has fallen over the last two years.
- Traditional Malaysian banks continue to dominate in deposits, lending, and raising capital while adopting new technologies and either competing or collaborating with new tech startups.
- As of April 2019, there were close to 200 startups in Malaysia in a range of fintech areas, including payments, lending, and blockchain.
Challenges, risks, and regulatory responses
- Cybersecurity is listed among top concerns by Malaysian banks and regulators; Malaysia has been a leader on regulations to help ensure the financial system remains safe amid the possibility of cybersecurity incidents.
- Additional challenges to future fintech growth include:
- a shortage of talent in key tech areas like data analytics and machine learning
- regulatory burdens
- access to funding
Islamic fintech and sector-specific developments
- Malaysia is a leader in Islamic finance and has a unique position within Islamic fintech.
- Islamic bank loan growth in the country expanded by 8.9 percent in 2018, compared to 2.5 percent for conventional banks.
- Islamic fintech is still in its infancy in Malaysia; the central bank supports efforts to promote the sector.
- Fintech tools could be particularly useful in Islamic finance, with improved transparency—framed as a core principle of Islamic finance—potentially a result.
Source: Malaysia: A Flourishing Fintech Ecosystem — https://www.imf.org/en/news/articles/2020/02/27/na022820-malaysia-a-flourishing-fintech-ecosystem