M’sian fintech sector thriving but challenges need attention: Experts

PETALING JAYA: The financial technology (fintech) landscape in Malaysia is thriving, marked by strong government support and a solid financial infrastructure, say experts.

However, they said to sustain and enhance this success, there are specific challenges that require attention and resolution.

The Malaysia fintech market is poised for significant growth, according to Mordor Intelligence (market research and consulting firm), with an anticipated expansion in transaction value from RM187.51 billion in 2023 to RM386.4 billion by 2028.

This projected increase reflects a compound annual growth rate of 15.56% during the forecast period of 2023 to 2028.

Universiti Teknologi Mara senior economics lecturer Dr Mohamad Idham Md Razak said the government’s proactive initiatives, such as the National Fintech Hub and regulatory safe testing grounds, have fostered a favourable environment for innovation and attracted substantial investments, which reached RM6.04 billion in 2022.

“However, challenges like talent gap and competition from neighbouring fintech hubs, particularly in Singapore and Indonesia, require strategic attention.

“Streamlining regulations and focusing on key sectors like e-payments, crowdfunding, and wealth management will be pivotal for Malaysia to differentiate itself and sustain its growth trajectory in the dynamic Southeast Asian fintech landscape,” he remarked..

Malaysian consumers, Mohamad Idham said are swiftly integrating fintech solutions into their daily lives, with a notable surge in the adoption of mobile payments and digital banking.

“Government-driven initiatives such as the National Fintech Hub and e-commerce campaigns have played a pivotal role in encouraging this transition, fostering an environment of innovation and financial inclusion.

“The widespread availability of smartphones, coupled with improved internet infrastructure, has made mobile payments and digital banking easily accessible to over 90% of Malaysians.

“Features like contactless payments, 24/7 accessibility, and enticing rewards contribute to the appeal of these fintech solutions, providing users with cashless convenience and strong financial management tools,” he said.

The future of fintech in Malaysia, Mohamad Idham said is poised for dynamic growth, driven by a wave of innovations and strategic market expansion.

“Anticipate the integration of cutting-edge technologies like artificial intelligence (AI), blockchain, and big data (data with greater variety, arriving in increasing volumes, and at a faster pace), ushering in a new era of hyper-personalised financial solutions and open banking collaborations between fintech startups and traditional institutions.

“Market expansion will focus on bridging the digital divide in rural areas, extending microfinance services, empowering small and medium-sized enterprises (SME) with streamlined digital tools, and fostering cross-border partnerships for regional financial integration,” he added..

Universiti Malaysia Pahang senior mathematics and computer science lecturer Dr Ku Muhammad Naim Ku Khalif said despite his supportive stance on fintech, Malaysia grapples with regulatory challenges that can potentially impede the sector’s growth.

“A delicate balance is needed to keep pace with rapidly evolving innovations without compromising consumer protection and financial stability.

“Regulatory fragmentation, stemming from multiple entities and overlapping regulations, introduces complexities and uncertainties for fintech companies,” he added.

Furthermore, Muhammad Naim said addressing financial inclusion requires a meticulous approach to ensure fair access, especially in rural areas with connectivity challenges.

“While the government is taking positive steps to streamline regulations and enhance coordination, continuous efforts are crucial to refine the regulatory landscape, foster innovation, and fortify Malaysia’s position as a prominent fintech hub in Southeast Asia,” he added.

Even with the thriving fintech landscape in Malaysia, Muhammad Naim said not all segments of the population are benefiting equally from the innovations.

“Tech-savvy urban adults and young entrepreneurs readily embrace mobile payments and digital banking, while fintech solutions like crowdfunding cater to the financial needs of businesses.

“However, challenges persist for certain groups, such as the digitally unversed elderly, rural populations facing internet connectivity issues, and low-income individuals encountering barriers like high smartphone costs.

“Bridging this gap requires targeted financial inclusion initiatives, simplified interfaces, and collaborations with community organisations to ensure equitable access and empower all Malaysians,” said Muhammad Naim.