By Dr Kelvin Lee Yong Ming
Based on the World Bank’s Malaysia Economic Monitor Report: Raising the Tide, Lifting All Boats launched in October 2023, Malaysia’s economy is expected to expand by 4.3% in 2024. The digital economy could be also a significant contributor to the Malaysia’s gross domestic product (GDP), as it has currently contributed up to 22.6%, and expected to increase to 25.5% in 2025. Notably, fintech is closely related to the digital economy in Malaysia, playing a significant role in shaping and advancing the digital landscape. Additionally, financial technology (Fintech) plays a crucial role in facilitating financial inclusion and contributes to a more inclusive economic recovery.
According to the Fintech Malaysia Report 2023, the total number of fintech companies operating in Malaysia increased from 291 to 313 in the year 2023. This growth underscores Malaysia’s significant progress in the fintech sector compared to other countries. The widespread adoption of fintech solutions, such as e-wallets, is particularly striking, extending even to a small town like Engkilili in Sarawak. For instance, local businesses like grocery stores, pharmacies, and eateries in Engkilili are jumping on board with digital payment methods, including e-wallets, alongside traditional cash transactions. This exemplifies the accessibility and adaptability of fintech services across diverse regions of the country.
Internet connectivity remains a key driver of fintech adoption in Malaysia. Notably, Malaysia boasts the second-highest internet penetration rate in Southeast Asia, with approximately 94 percent of the population connected to the internet in 2022, as reported by Statista. Additionally, around 89 percent of Malaysians had access to mobile internet through their smartphones during the same period. By embracing digital payment methods, businesses can streamline transactions, reduce operational costs, and reach a wider customer base, thereby stimulating economic activity. As a result, the expansion of fintech services and digital payments contribute to a more efficient and dynamic economy, positioning Malaysia as a competitive player in the global marketplace.
Moreover, merchants in Malaysia are capitalising on this momentum by leveraging innovative solutions to cater to incoming travelers from China, as Malaysia is the fifth most popular destination globally for Chinese tourist, with an estimated 100,000 tourists spending RM1.5 billion in Malaysia during this year’s Chinese New Year. By accepting QR payments via the DuitNow QR feature through Alipay, one of China’s preferred payment platforms, merchants are offering travelers a fast, convenient, and secure payment experience. This initiative not only enhances the overall travel experience for visitors but also contributes to Malaysia’s economy and reputation as a tech-savvy destination.
In April 2022, Bank Negara Malaysia (BNM) also announced the list of five successful bank applicants for the digital banking license. Thus, digital banks, as one of the fintech solutions, are being leveraged to streamline and modernise traditional financial processes. The digital banks also help in serving the unbanked and underserved communities, allowing them to access a wider range of financial resources. This financial access not only empowers individuals but also contributes to a more inclusive economic recovery. Despite the recent launch of the digital banks in Malaysia, users need to leverage digital banks wisely, especially once lending capabilities are offered. It’s crucial for government agencies to organise activities or campaigns to promote digital financial literacy among existing and potential users to avoid issues like debt traps.
As Malaysia spearheads its economic recovery through fintech, it is poised to emerge as a dynamic and resilient player in the global economic arena. By embracing innovation, promoting collaboration, and prioritising financial inclusion, the nation is paving the way for a more robust and technologically advanced future. As the fintech revolution gains momentum, Malaysia stands at the forefront, ready to harness the transformative power of technology for sustained economic growth.
The government’s commitment to fostering a fintech-friendly ecosystem is evident in recent policy initiatives and regulatory frameworks. By creating an environment that encourages innovation and entrepreneurship, Malaysia aims to attract both local and international fintech players. This approach not only stimulates job creation but also positions the country as a regional fintech hub. In conclusion, Malaysia’s economic outlook is optimistic, with fintech plays a significant role in driving innovation, competitiveness, and economic growth.
Dr Kelvin Lee Yong Ming is a senior lecturer and programme director (Banking & Finance programme and Finance & Economics programme) at the School of Accounting and Finance at Taylor’s Business School, Faculty of Business and Law, Taylor’s University. Taylor’s Business School is the leading private business school in Southeast Asia for Business and Management Studies based on the 2023 QS World University Rankings by Subject and has received the Association to Advance Collegiate Schools of Business (AACSB) accreditation
