Sand­boxes em­pow­er­ing Fin­techs in Malaysia

The coun­try is lay­ing a strong foun­da­tion for the fin­techs to flour­ish

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The coun­try is lay­ing a strong foun­da­tion for the fin­techs to flour­ish

Fin­techs are much in de­mand in Malaysia as the coun­try has seen large scale adop­tion of tech­nol­ogy, there is a high level of in­ter­net pen­e­tra­tion, use of mo­biles has grown phe­nom­e­nally and the banking sys­tem has ma­tured. The coun­try is also seen as a fer­tile ground for the growth of fin­tech star­tups be­cause of the strong en­tre­pre­neur­ial ecosys­tem and it is no sur­prise that the fi­nan­cial ser­vices sec­tor is the largest fund­ing source for the fin­techs.

Stud­ies have in­di­cated that the trans­ac­tion value of the fin­tech mar­ket in Malaysia is ex­pected to touch $13 bil­lion mark by 2020. Fin­techs are in­flu­enc­ing prac­ti­cally ev­ery­thing that has trans­formed into dig­i­tal - pay­ments, in­vest­ments, fi­nance and in­sur­ance to be spe­cific.


Malaysia’s cen­tral bank, Bank Ne­gara Malaysia, has its vi­sion of a cash­less Malaysia. And it has been en­cour­ag­ing ef­forts in this di­rec­tion and nat­u­rally there is pro­mo­tion for fin­techs, who are work­ing in this area. The pay­ments ser­vices sec­tor has seen sig­nif­i­cant changes and there are sev­eral non-bank en­ti­ties with their state of the art tech­nol­ogy plat­forms op­er­at­ing in the coun­try. Even the in­sur­ance sec­tor is see­ing some de­vel­op­ments tak­ing place in the form of in­suretech. Sev­eral for­eign fin­techs are present in the coun­try through part­ner­ship with lo­cal firms and many of these firms are as­sist­ing the banks and other fi­nan­cial ser­vices in­sti­tu­tions to mod­ern­ize their tech­nol­ogy plat­forms. The coun­try’s top bank 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.

Bank Ne­gara Malaysia too has launched a fin­tech reg­u­la­tory sand­box aimed at pro­mot­ing in­no­va­tion and de­liv­ery of fi­nan­cial ser­vices. Sim­i­larly, the Se­cu­ri­ties Com­mis­sion, which reg­u­lates ac­tiv­i­ties such as fi­nan­cial plan­ning, pro­vi­sion of in­vest­ment ad­vice, stock­broking and ad­vis­ing on cor­po­rate fi­nance, has in­tro­duced the Dig­i­tal In­vest­ment Man­age­ment frame­work that sets out the li­cens­ing and op­er­a­tional re­quire­ments for the of­fer­ing of port­fo­lio ser­vices to in­vestors.


The Malaysian govern­ment on its part sup­ports all ef­forts to cre­ate a con­ducive en­vi­ron­ment for fin­techs to op­er­ate in the coun­try. Also large cor­po­ra­tions and fi­nan­cial in­sti­tu­tions seem ready to em­brace the dis­rup­tion caused by fin­techs, as seen with the var­i­ous pro­grams launched by these en­ter­prises to help fin­tech star­tups de­velop. As men­tioned ear­lier, Maybank has launched the Maybank Sand­box and pro­vides en­trepreneurs and star­tups with the fa­cil­ity to get their fin­tech ideas out to be de­vel­oped. And be­yond the sand­box is the Maybank Fin­tech Pro­gram, an ini­tia­tive launched 3 years ago that in­volves reach­ing out to star­tups and help­ing them in­cor­po­rate fin­tech into their prod­ucts and pro­cesses.

Maybank also as­sists star­tups in mat­ters of reg­u­la­tion and com­pli­ance, as well as se­cu­rity, tech­nol­ogy, fi­nance, and banking mat­ters. It also works with the Malaysia Dig­i­tal Econ­omy Cor­po­ra­tion (MDEC), through the Malaysia Dig­i­tal Hub, which pro­vides Maybank with the plat­form to reach these star­tups for tech adop­tion, de­vel­op­ment op­por­tu­ni­ties, and men­tor­ship.


An­other ef­fort is the Fi­nan­cial Tech­nol­ogy En­abler Group (FTEG) set up by Bank Ne­gara Malaysia with the aim of sup­port­ing in­no­va­tions that will im­prove the quality, ef­fi­ciency and ac­ces­si­bil­ity of fi­nan­cial ser­vice in Malaysia, by for­mu­lat­ing and en­hanc­ing reg­u­la­tory poli­cies to fa­cil­i­tate adop­tion of tech in­no­va­tion in the fi­nan­cial ser­vice sec­tor.

The FTEG too has launched a fin­tech reg­u­la­tory sand­box. The idea is to en­sure that FTEG can catch reg­u­la­tory and com­pli­ance poli­cies that may in­hibit in­no­va­tion in the fi­nan­cial ser­vice sec­tor, by look­ing at how fin­tech star­tups op­er­ate and what us­ing their prod­ucts en­tail.

Par­al­lelly, MDEC’s Fin­tech Hub en­sures pub­lic-pri­vate part­ner­ship that not only pro­vides a co-work­ing space, but also of­fers an

ac­cel­er­a­tor pro­gram and a startup academy for fin­tech star­tups. The plat­form in­tends to bring to­gether all the rel­e­vant play­ers to help de­velop the fin­tech ecosys­tem.

Malaysia also has the Fin­Tech As­so­ci­a­tion of Malaysia, which func­tions as the key en­abler and a na­tional plat­form to sup­port the coun­try to be the lead­ing hub for fin­tech in­no­va­tion and in­vest­ment in the re­gion.


Re­search firm BMI says Malaysia has the po­ten­tial to be a world leader in Is­lamic fin­tech. It cites sup­port from the govern­ment, the cen­tral bank and the tele­com firms can in­deed pro­vide the boost needed to grow Is­lamic fin­tech. The coun­try al­ready has a strong Is­lamic banking sec­tor frame­work and ex­per­tise, says the firm point­ing out that the Is­lamic banking sec­tor was worth $202 bil­lion in 2017, while its Is­lamic loans also more than dou­bled to 30.2% the same year, com­pared to just 7.8% a decade ago. It says the growth will be spurred by the al­ready de­vel­oped in­fras­truc­ture, an in­creas­ingly af­flu­ent and tech-savvy pop­u­la­tion, and high mo­bile and broad­band pen­e­tra­tion rates and fast in­ter­net speeds. The Malaysian govern­ment’s on­go­ing push to de­velop the dig­i­tal econ­omy will pro­vide tail­winds to the fin­tech sphere, with the govern­ment view­ing fin­tech as a cru­cial part of the broader push, said BMI.


One of the no­table ad­vance­ments in the fin­tech sce­nario is the use of ar­ti­fi­cial in­tel­li­gence. Researchers forecast ‘robo ad­vi­sors’ and AI would dis­place tra­di­tional la­bor-in­ten­sive work­ing mod­els in the im­me­di­ate fu­ture.

Ac­cord­ing to Alvin Gan, ex­ec­u­tive di­rec­tor of KPMG Man­age­ment Con­sult­ing in Malaysia, emerg­ing tech­nolo­gies like big data, AI, ro­bot­ics and blockchain are re­shap­ing how the Malaysian fi­nan­cial in­sti­tu­tions de­liver ser­vices. He says the in­tro­duc­tion of ro­botic process au­toma­tion and chat­bots, for ex­am­ple, had en­abled greater pro­duc­tiv­ity hence al­low­ing FIs to ad­dress more com­plex cus­tomer needs.

As the con­ser­va­tive fi­nan­cial ser­vices sec­tor in Malaysia gets more and more

ex­posed to the de­vel­op­ments of fin­techs, in­sti­tu­tions would start us­ing tech­nol­ogy to shift from con­ven­tional busi­ness prac­tices to the on­line plat­forms. There will be in­creas­ing use of AI de­velop new forms of

cus­tomer-cen­tric fa­cil­i­ties. And Malaysia’s econ­omy will con­tinue with its dy­namism. And the ones to profit most would prob­a­bly be the con­sumers.

Bank Ne­gara Malysia is a ma­jor fa­cil­i­ta­tor for fin­techs in the coun­try

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