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Shaping the Future of Malaysia’s Financial Services Through Fintech

05 Oct 2022 | Malaysia

The fintech market in Malaysia has enjoyed a rapid growth in the last two years. In the second half of 2020, still at the height of the COVID-19 pandemic, increased business activities and a higher volume of digital payments helped the sector develop after sluggish activity in the earlier part of the year. According to fintech reports in Malaysia, online and mobile banking penetration rates enjoyed 112.5% 61.8% growth respectively, with RM 460 million worth of mobile banking transactions conducted.

As the government works to create a better market environment for key players in the fintech industry, more regulatory developments and initiatives are being introduced to ensure the competitiveness of the market. Why is fintech important in Malaysia, and what can industry players from the private and public sectors do to accelerate its inclusivity and development? We look at the ways that Malaysia’s fintech market can develop and become more progressive in the near future.

Support for Malaysia’s Fintech Market

Malaysia’s Fintech Market

The fintech market in Malaysia includes five segments: digital payments, digital investing, neobanking, alternative lending, and alternative financing. The number of fintech companies in Malaysia rose to 294 in 2021, with 60 companies operating in the digital payments segment.

The national government has several entities dedicated to financing innovators in Malaysia's fintech space. Through government support, Malaysia has advanced to become one of the most developed fintech markets in Southeast Asia.

As the government also earns revenue from digital payment through taxes, the plan is to nurture the fintech market to make these transactions more accessible, making more profit for both the sector and the government.

Venture capital firms incorporated under the Ministry of Finance include Malaysia Debt Ventures Berhad, Cradle Fund Sdn Bhd, and Malaysian Digital Economy Corporation Sdn Bhd provide innovative financing services for fintech startups in Malaysia.

Bank Negara Malaysia, the country’s central bank, has issued the Financial Sector Blueprint 2022-2026, which heavily leans into the development of Malaysia’s fintech market. Some of the plans for the sector include an open data scheme, real-time and cross-border payment linkages, and developing alternative finance channels.

Looking Ahead

Other industries that enable the fintech market in Malaysia will also benefit from strengthening their infrastructure to support the growth of the industry. Increased connectivity from telecommunications providers, especially through wider 5G coverage, will allow more consumers to transact through digital payment providers and neobanks more conveniently.

The digitalization of small and medium enterprises (SMEs) in Malaysia should also enable them to have access to digital financial services through fintech. Many SMEs remain reliant on traditional sources of borrowing such as loans, money lenders, and pawnbrokers. Through fintech, microentrepreneurs can access funds that can help them reduce costs and increase their savings.

As Malaysia’s fintech market continues to support the growth of other industries, further investments to this sector will help accelerate its roadmap to higher inclusion and better investment standards for consumers. The country's post-pandemic recovery will allow the fintech market to accelerate and improve access to both microentrepreneurs and the underbanked population.

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