Malaysia is considered the Fintech paradise due to the proliferation and development of mobile wallets, electronic payments, crowdfunding, and insurtech (combination of insurance with technology). In Malaysia, the average annual economic growth has been 5% in the last five years. Fintech companies are part of day-to-day life and are part of the country’s financial system, with many possibilities to continue expanding.
A constantly growing middle class, a strong influence of mobile telephony, and strong government support for the digital economy place Malaysia in a good place for Fintech innovation. The Internet banking sector has been one of the fastest-growing, reporting 90% in 2020, well above what was obtained in previous years.
Fintech Report 2021
Undoubtedly, the year 2020 was a rather atypical year due to the presence of the pandemic, which unfortunately affected the work of millions of people in the world, and at the same time, served as fuel for the rapid growth of the Fintech industry in Malaysia. In the recent Fintech report for 2021, some key movements are analyzed, and regulations are updated in the local Fintech space.
Covid-19 accelerated changes to digital transactions
Even though these changes have been taking place for approximately a decade, the presence of Covid-19 gave a boost to the adoption of digital banking; with the arrival in 2020 of mobile banking and online banking, transactions were carried out for a value of 460 million ringgit (Malaysian dollar), which represents an increase of 125% over the previous year. Through the Movement Control Order (MCO), the government acted as a catalyst, adding 3 million new users of banking services and promoting the use and adoption of the electronic wallet.
At the same time, the business rushed into acceptance, with around 400 thousand merchants signing up to accept the QR code. The fast-growing e-wallet industry has more than 40 non-bank providers; the largest wallet in the country already has more than 5 million customers and 300 thousand merchants who use it.
Digital finance is also on the rise
The aforementioned report also shows an increase in the adoption of digital finance in segments such as wealth technology, alternative financing, cryptocurrency trading, and financial technology, including remittances worth 26.5 billion euros. Ringgit demonstrating that Malaysians are abandoning their traditional providers for electronic remittance providers and lower costs. Concerning alternative financing, the capital raised through crowdfunding platforms was increased.
Regulatory changes drive Fintech companies
Regulatory changes were made in 2020 that greatly helped digital Fintech progress. The government has been working since 2019 on the development of a national digital identity framework (as Estonia already has). The Central Bank launched a licensing framework for digital banks in December 2020, up to five licenses in total. At the same time, more than 40 companies have formally taken an interest and submitted their applications online.
What do you think about this topic? Do you think that the pandemic has been an engine that has driven the growth of Fintech companies?
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