July 11, 2025
AI-Driven Fintech
The Next Phase of Digital Finance in Malaysia
Fintech, the revolutionary catalyst that marries futuristic innovation to the mundane financial function, is now catapulted into a transformative wave through Artificial Intelligence (AI). The recent fintech ecosystem in Malaysia has seen rapid progression through transformative regulation, strong mobile penetration, and growing investor interest. With AI at the forefront as a strategic differentiator in the global financial services, Malaysia stands at the precipice of a new frontier: AI-Driven Fintech.
The Malaysian Fintech Market: The Facts and Figures
The Market
The valuation of the fintech market in Malaysia was USD 46.86 billion in 2024, and it is projected to reach USD 143.35 billion by 2032, with a CAGR of 15% from 2026 to 2032.
The AI
Within this booming fintech market, the AI sector alone was valued at USD 1.9 billion in 2023 and is expected to rise at a CAGR of 7.3% and USD 3.11 billion in 2030.
The Government
Progressive regulations, digital economic policies, and funding programmes through the 2025 budget set out by the Malaysian government have been set out to foster the growth of fintech. Several initiatives, such as BNM’s Fintech regulatory Sandbox, MyDIGITAL, and the digital banking licenses, garner a supportive ecosystem for AI innovation in finance.
Why AI, Why Now?
From intelligent credit scoring and fraud detection to hyper-personalised banking, AI enables faster, smarter, and more inclusive financial solutions. The question is therefore not “Why AI?” but “Why Now?”
The Malaysian fintech landscape is on the cusp of a major evolution, moving beyond basic digital payments and wallets into more sophisticated realms such as embedded finance, RegTech, InsurTech, and WealthTech. As the nation positions itself as a leading force in digital transformation and a regional fintech hub, AI is no longer a future consideration; it has become the driving force behind innovation, operational efficiency, and sustained competitive advantage.
Several trends are converging in Malaysia to accelerate this shift:
- Financial Inclusion of B40 and SME
AI-powered credit scoring has enabled B40 households and underserved SMEs that lack traditional credit histories to expand access to financing through the use of alternate data.
- e-KYC and Fraud Detection
AI-enhanced identity verification and anomaly detection systems are becoming essential in combating financial fraud at scale. These AI-powered systems deliver rapid, scalable solutions that streamline compliance, enhance the user experience, and safeguard Malaysia’s financial ecosystem.
- Bank Negara’s Digital Bank Framework
The newly licensed digital banks will leverage AI on a foundational level, which are designed to deliver low-cost, scalable, and hyper-personalised services. AI will also be crucial in meeting the regulatory demands imposed.
- e-Invoicing and Tax Tech
With Malaysia’s mandatory e-Invoicing rollout continuing, AI plays a major role in the auto-categorising of transactions and data, anomaly detection, and even improving compliance accuracy.
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Practical AI Applications and Key Innovations
- AI in Credit Innovation
AI is transforming how Credit is assessed, where startups, fintechs, and digital banking services use AI-driven credit scoring models that take into account alternative and behavioural data such as utility bills, mobile usage, and even social media to ascertain creditworthiness. This particularly encourages SMEs and individuals with no credit history. Hong Leong Bank, in partnership with DCAP Digital, leveraging AI to enhance SME lending accuracy and accessibility, is an example of its practical usage in the new regime.
- AI in Customer Service
Chatbots and virtual assistants are now able to handle routine inquiries and transactions, are available 24/7, and are capable of understanding multiple languages, improving accessibility, enhancing customer satisfaction, and operational efficiency.
- AI in Robo-Advisory
Robo-advisory platforms in Malaysia are leveraging AI to deliver automated, personalised wealth management solutions that align with local risk appetites and Shariah-compliance standards.
- AI in RegTech and AML Compliance
Machine learning is playing a crucial role in Anti-Money Laundering (AML) efforts, where AI-driven RegTech solutions are capable of monitoring suspicious transactions and detecting fraud with greater accuracy than traditional rule-based systems.
National Support and Ecosystem Growth
Government Initiatives
The Malaysian government has indicated a strong commitment to accelerating digitalisation and AI adoption. The introduction of the National AI Roadmap (AI-RAMP) and National AI Office (NAIO) showcases its continued efforts in AI-driven innovation in finance. The 2025 budget of the government has allocated significant resources towards this goal through allocations such as RM1 billion for the National Fund-of-Funds and RM1 billion for the Pioneer Fund to support startups. These initiatives aim to establish Malaysia as a leading digital hub in ASEAN, supporting SMEs and startups with incentives to adopt advanced digital technologies and tools that enhance productivity and strengthen competitiveness.
Fintech Hubs and Partnerships
The announcement of the partnership between Alibaba Cloud and Payments Network Malaysia Sdn Bhd (PayNet) in support of Malaysia’s first fintech-focused accelerator hub is set to be a catalyst in providing startups with access to cloud infrastructure, AI tools, and global expertise, and empowering them to scale their solutions.
Gaps in the Market
- Talent Shortage: Although there is high recognition of the value of AI in businesses, 81% of Malaysian companies find it difficult to employ adequately skilled professionals to develop and manage AI-driven financial systems.
- Regulatory and Ethical Concerns: despite the advancement in technology, there still remain hurdles in regulatory uncertainty, data privacy, and ethical risks (such as algorithm bias) that need to be addressed through adaptive frameworks and clear guidelines.
- Fragmented Data Systems: where there is fragmented data integration and silos, it can result in ineffective AI adoption and limit the potential for automation and predictive analytics.
- Institutional Resistance: Traditional financial institutions may be reluctant to change due to a lack of AI literacy and concerns of job displacement.
The Road Ahead
Bank Negara Malaysia and the Malaysia Digital Economy Corporation (MDEC) have repeatedly highlighted AI as a key pillar in digital finance. Initiatives like the National AI Roadmap, MyDIGITAL, and Fintech Booster are signalling a concerted push toward an AI-powered financial future.
To overcome some of the roadblocks in AI adoption, the government can look into developing regulatory sandboxes to test AI applications before full-scale deployment and upscale the workforce strength through partnerships between industry, government, and academia. To facilitate a nationwide transformation towards innovation in AI-driven fintech, the government could extend services to rural and underserved communities, thereby promoting national financial inclusion.
In the coming years, AI-driven fintech is expected to become a defining force in Malaysia's aspiration to become a regional fintech hub.
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