Malaysia: Selected Issues

IMF Staff Country Reports, February 28, 2020

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Malaysia: Selected Issues

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Bibliographic details

• Published: February 28, 2020
• Series: IMF Staff Country Reports
• DOI: https://doi.org/10.5089/9781513531960.002

Executive summary

• Investigates impact of financial technology (FinTech) on Malaysia’s financial sector.
• Malaysia is digitally enabled to seize the opportunities brought by FinTech.
• Malaysian banks continue to dominate in deposits, lending and capital raising, but have been gradually reducing their emphasis on physical distribution networks.
• The top five Malaysian banks have increased their technology-related spending over the past three years.
• Regulators have been mindful of developments outside of the traditional regulatory perimeter that could pose financial stability risks.
• Rapidly evolving technology is likely to bring multiple challenges to the financial sector.

Key findings

• Digital readiness: Malaysia is positioned to take advantage of FinTech-driven opportunities.
• Banking sector structure:
  • Banks remain dominant in deposits, lending and capital raising.
  • There is a gradual shift away from physical distribution networks.
  • The top five Malaysian banks increased technology-related spending over the past three years.
• Regulatory landscape:
  • Developments outside the traditional regulatory perimeter may pose financial stability risks.
  • Regulatory requirements are an important component of operating in the FinTech space.
  • Regulators must balance financial stability and consumer protection with promoting innovation and competition.
• Capacity building:
  • Bank Negara Malaysia has spearheaded various initiatives to address the lack of regulatory acumen among FinTech industry players.
• Sectoral scope:
  • A key regulatory challenge is to balance benefits and downside risks in both conventional and Islamic finance.
• Supervision and regulation:
  • Frequent refinements to regulations and supervision are required to keep pace with the highly dynamic nature of FinTech.

Policy recommendations and implications

• Maintain balance between:
  • Ensuring financial stability and consumer protection.
  • Promoting innovation and competition in FinTech.
• Strengthen regulatory reach:
  • Monitor and address risks arising outside the traditional regulatory perimeter.
• Enhance regulatory capacity:
  • Continue initiatives to raise regulatory acumen among FinTech participants.
• Dynamic regulatory approach:
  • Implement frequent refinements to regulation and supervision to align with rapid technological change.
• Consider dual-framework risks:
  • Design regulatory responses that address both conventional and Islamic finance implications of FinTech developments.

Publication and metadata

• Pages: 21
• Volume: 2020
• Issue: 058
• Series: Country Report No. 2020/058
• DOI: https://doi.org/10.5089/9781513531960.002
• Stock No: 1MYSEA2020002
• ISBN: 9781513531960
• ISSN: 1934-7685
• Subjects: Banking, Digital currencies, Financial services, Fintech, Islamic finance, Mobile banking, Technology
• Keywords: Asia and Pacific, bank-Fintech partnership, Co-working space, CR, Digital currencies, Fintech, FinTech Association of Malaysia, Fintech firm, FinTech in Malaysia, firm, Global, ISCR, Islamic finance, Islamic FinTech, Malaysia, Mobile banking, Southeast Asia, start-up, tech company

Source: Malaysia: Selected Issues (IMF Staff Country Report No. 2020/058).

Content in this bundle

• Malaysia: Selected Issues; IMF Country Report No. 20/58; January 23, 2020
  • Malaysia: Selected Issues; IMF Country Report No. 20/58; January 23, 2020 (Markdown version)
  • Malaysia: Selected Issues; IMF Country Report No. 20/58; January 23, 2020 (PDF)