What’s in this article
The pandemic has accelerated digitalisation globally, including in Malaysia. With more companies looking to adopt new technologies to support and automate their business, the FinTech industry is certainly growing. Malaysia has seen many companies, local and foreign, setting up a company in this arena.
What are the Advantages of the Fintech Industry in Malaysia?
Anyone interested in making a FinTech investment in Malaysia will soon discover the many advantages possessed by the country’s burgeoning fintech industry. These include:
- Malaysia’s time zone is similar to that of many Asian countries
- The country is easily accessible, attracting important FinTech professionals and leaders from all over the region
- Malaysia also possesses a suitable regulatory environment as well as tax policies which are beneficial to businesses
- Relatively low operation costs with improved investment standards
Fintech in Malaysia and Islamic Finance
A stunning 60.3% of the people living in Malaysia are Muslim. Therefore, they require a form of fintech that is compatible with their religious beliefs. The large population of Muslims in Malaysia as well as other Southeast Asian nations has brought about the need for the expansion and growth of fintech companies that are involved in Islamic finance.
Malaysia has taken advantage of this fact; today, many of Malaysia’s fintech companies have involved themselves in Islamic finances. The country has also hosted several Islamic start-ups from abroad as well as their initiatives.
Growth of Malaysia’s FinTech Industry
Malaysia’s FinTech industry is one of the most developed in Southeast Asia.
The government has also offered funding to upcoming innovators in the country’s fintech industry. There are a few entities that specifically finance the FinTech industry:
- Malaysia Debt Ventures Berhad
- Cradle Fund Sdn Bhd
- Malaysian Digital Economy Corporation Sdn Bhd
This encourages potential innovators by setting aside necessary funds and creating a favourable business environment. These initiatives are some of the ways through which the government has powered the industry to proliferate within a short period.
The Fintech industry of Malaysia has also grown because of the demand for Fintech companies in the country. A 125% increase in mobile banking transactions was reported in 2020, with an over 100% increase in E-remittance in 2020. This growth has allowed the fintech market of Malaysia to be able to challenge the markets of other countries and present itself as a major player in the regional fintech scene.
Developments and changes to the Digital Laws of Malaysia also serve as proof of the growth of fintech in Malaysia. In December 2020, the central bank released a licensing framework for digital banks.
The increasing prominence of fintech in the country has led to increased regulatory amendments in Malaysia to ensure that the government can monitor fintech companies all over the country.
FinTech companies in Malaysia can also apply for the Malaysia Digital (MD) status. With the MD status, they are granted tax incentives and other benefits such as a pre-approved headcount for foreign talents registered under the Malaysian entity.
How exactly did Fintech contribute to Malaysia’s Company?
FinTech developments have made online payments and transactions easier. The FinTech industry in Malaysia has also done much to contribute to the economic growth of Malaysia. One way in which it has done so is by increasing its total GDP.
The business operations of the various FinTech companies have allowed the industry to contribute significantly to the Malaysian government’s revenue through taxes. The taxes paid in turn have helped improve the delivery of the services offered by the country’s fintech companies. and the country’s budgeting.
The industry has also helped to create employment opportunities within the country. These opportunities created relieve much pressure on the economy, without the government’s intervention to create additional jobs to reduce unemployment rates.
What is the International Reputation of Malaysia’s Fintech Industry like?
The Malaysian Digital Economy Corporation Sdn Bhd (MDEC) has in the past mentioned the potential of Malaysia to become a digital hub for ASEAN because it is well-placed to increase its rate of digital growth relative to other Asian countries.
Ernst & Young’s ASEAN FinTech Census which was conducted in 2018 referred to Malaysia as an “emerging FinTech hub in Asia”. The increasing digitalisation of the economy of the country has made Malaysia’s FinTech industry prosper while also attracting investors who have been taking the country’s FinTech industry to new heights since 2016.
Therefore, Malaysia is a FinTech hub within the Southeast Asian region, ranking it ahead of every other Southeast Asian nation except for Singapore. Therefore, Malaysia is doing well as far as network readiness is concerned.
These facts coupled with support from the government, regulators, and industry players provide Malaysia with the opportunities and potential as an emerging fintech market that is rapidly becoming one of the most vibrant and robust in Southeast Asia.
Conclusion
The FinTech industry in Malaysia has been growing at an impressive rate. Many FinTech companies in Malaysia even offer services to customers in other countries. Most importantly, the sector contributed positively towards the growth of the country’s economy while also creating numerous employment opportunities.
FAQs
The International Monetary Fund (IMF) has stated that as of April 2019, there were around 200 FinTech startups in Malaysia in the areas of payments, blockchain, and lending.
Many fintech companies in Malaysia have grown to a point at which they are able to expand their business operations to other countries. Most of this business expansion has been to other countries in the Asia-Pacific region.
The Network Readiness Index (NRI) is a set of rankings formulated by the World Economic Forum. It ranks how able a country is to take advantage of technological developments which have occurred around the world. It also shows how information and communications technology (ICT) impacts countries’ economic condition.
According to the latest statistics, there are 329 start-up fintech companies in Malaysia. Nearly all of these companies have an average of 100 employees. Therefore, over 30,000 people in Malaysia work in a fintech company – a statistic which provides evidence of the employment opportunities created by the industry.
