The demand for FinTech (Financial Technology) has greatly grown in Malaysia, being fuelled by factors such as rapid adoption of technology, high internet penetration, and increased levels of mobile usage. The country’s conditions such as having a strong underlying market, a large population, and its B2C (Business to Consumer) business model has also offered great conditions for FinTech solution companies to grow even further. Positioned in the Southeast Asia region, Malaysia is considered a hotbed of FinTech start-ups due to its attractive entrepreneurial space. Interestingly, some of the largest names in the finance industry are funding FinTech providers and therefore facilitating its growth and expansion in Malaysia.

Currently, the transaction value of the FinTech market in Malaysia has totaled $6,411 million in this year alone. This value is expected to grow further which is expected to eventually translate to a total amount of $12,966 million by the year 2020. There are four divisions of FinTech in Malaysia. These four areas include digital payments, digital finance, digital insurance, and digital investments. Among these, the largest is digital payments which have a total value of $5,018 million. As impressive as the statistical figures provided above may be, China still leads the list of global FinTech providers with a total transaction value of $1,562,408 million.

The FinTech Landscape in Malaysia

It has been a mission of the Malaysian government to reinforce any and all tech innovations in the country and therefore, they have encouraged the development, growth, and use of FinTech for the companies that they regulate. For example, the Bank Negara Malaysia (BNM), has always had the goal of transforming Malaysia into a cashless society. This has seen the payment services sector go through a lot of changes especially with the entry of new non-bank foreign and locally owned businesses. The insurance sector is already seeing some developments taking place in the form of InsureTech and there are expectations that more new FinTech solutions are set to dominate the market.

Some of the latest developments in the FinTech sector include:

  • Some foreign FinTech players have created partnerships in Malaysia with the goal of facilitating payments onshore and cross-border as well. There is more potential for this to continue developing.
  • Local banks have begun to support or adopt FinTech in their businesses. For instance, MayBank, has partnered with Samsung and AliPay to launch MayBank Sandbox which offers developers from anywhere a banking API to make use of existing banking functions.
  • Malaysia launched its Digital Free Trade Zone (DFTZ) back in November 2017 to help SMEs (Small and Medium Enterprises) get into cross-border trading while leveraging technology.

Policy Regulations and Laws Governing FinTech in Malaysia

The BNM has established the Financial Technology Enabler Group (FTEG) which comprises a group of policy experts who work on policy formulation. Most experts have the notion that if the authorities do not create a conducive environment to nurture innovation, the quality, efficiency, and accessibility of financial services will remain compromised. The BNM also launched a FinTech Regulatory Sandbox paper that was aimed at promoting innovation and delivery of financial services by allowing some freedom for products to experiment whether they are viable or not in a live atmosphere.

The Securities Commission (SC) regulates activities such as financial planning, provision of investment advice, stockbroking, and advising on corporate finance under the CMSA (Capital Markets and Securities Act). In 2016, SC introduced a framework that regulated P2P lending which allowed SMEs to access the debt funding avenue. In May 2017, the SC also introduced the Digital Investment Management framework that sets out the licensing and operational requirements for the offering of portfolio services to investors.

Internet Penetration in Malaysia

Internet penetration in the country of Malaysia had last year (2017) increased to 87.1% from a mere 70% in 2015. Also, households that had access to a computer and a mobile phone had risen to 74.15% and 98.1% respectively compared to 67.6% and 97.9% respectively in 2015. The number of individuals above 15 years of age who were using the internet had risen to 80.1% from 71.1% in 2015. Smartphone usage had also increased to 97.7% from 97.5% in 2015. Such data differences show that IT and communications continue to experience rapid growth in Malaysia, thereby creating a foundation for FinTech companies to grow.

Conclusion

The future of FinTech in Malaysia will likely blossom even further. The fact that the Malaysian government supports all endeavors towards a FinTech future shows that Malaysia is headed in the right direction. We’re proud to mention that our founder, Arai Ezzra, is a Malaysian citizen, helping to participate in Malaysia’s fintech fame. Being a FinTech company as well, we encourage you to check out our official DinarCoin website for more information regarding our gold price-backed cryptocurrency, the DinarCoin.