PETALING JAYA: The Fintech Association of Malaysia (FAOM) is positioning to put the financial technology (fintech) industry on a higher pedestal as it seeks to propel the industry forward at a time when the global economy is showing signs of slowing down.
Towards this end, its president Wilson Beh said the association is actively planning and executing strategic plans for 2023 and 2024 to strengthen Malaysia’s fintech industry, as part of a two-years mandate (2023-2025) obtained at its AGM in April.
These plans include closer collaboration with financial regulators, like Bank Negara and the Securities Commission, to support the industry’s growth, he told StarBiz.
In response to the talent shortage, he said FAOM has introduced the My Fintech Youth initiative to cultivate future leaders, ensuring a steady pipeline of talent ready to take on leadership roles in fintech.
“As the country’s fintech sector matures and enters the next stage of development, we firmly believe that collaboration among all stakeholders is the key to nurturing its growth.
“Facilitating cross-pollination of ideas and businesses among fintech players is a top priority for FAOM, significantly contributing to the development of a robust domestic fintech industry.
“We are also sharpening our narrative to market Malaysia as a leading regional fintech investment and startup hub.
“The country has every ingredient to be a robust and vibrant fintech destination, supportive and progressive regulation, world-class infrastructure, competitive cost of doing business with quality talents, and a good domestic captive size of market opportunities serving as a launchpad to the greater South-East Asian region,” Beh noted.
All these competitive advantages have to be narrated and marketed to global investors and fintech operators, he added.
The digital economy is one of Malaysia’s key economic pillars, currently contributing 22.6% to the country’s gross domestic product (GDP), and is set to rise to 25.5% by 2025, according to Malaysia Digital Economy Corp.
Beh said the local fintech industry has grown to be more than 300 companies in just a span of a few years, creating tens of thousands of jobs among Malaysians.
He said expanding the association’s membership base is another significant focus, and encourages corporates and agencies, such as lawyers, accountants, and business advisors, to join FAOM in supporting fintech companies at all stages of development.
The association to date has more than 100 members composed mainly of fintech companies.
“By becoming part of the association, they can play a pivotal role in helping fintech firms advance to the next stage of corporate development.
“Ultimately, our mission is to create a thriving fintech ecosystem in Malaysia by fostering collaboration, nurturing talent, stronger narrative and expanding opportunities for all stakeholders,” he said.
On another note, he said the growth of the fintech industry this year and in 2024 depends on striking a delicate balance between dealing with short-term economic issues and nurturing long-term growth.
He said this balance is crucial for ensuring that the fintech ecosystem continues to thrive.
Additionally, Beh said the government’s dedication to fiscal responsibility unveiled in Budget 2024 in its efforts to reduce the fiscal deficit next year from 5% to 4.3% of the GDP, is of utmost importance for maintaining the industry’s stability and progress.
“Moreover, substantial government support, with RM1.5bil allocated for startups and digital ventures, aligns perfectly with fintech’s objectives and Malaysia’s aspirations to lead the South-East Asian economy.
“Additionally, centralising resources for venture capital investments offers a competitive edge to fintech and local startups at a regional level, presenting a strategic advantage for the industry. In summary, the government and private sector alike have set the stage for the next phase of growth and maturity in the fintech sector,” Beh said.
In terms of the hurdles facing the industry, he said the fintech industry is encountering three significant challenges this year and in the upcoming year.
Firstly, he said fintech companies must navigate shifting regulations while promoting innovation and fostering strong partnerships with regulators to ensure financial technology becomes an integral part of the nation’s financial services industry, not merely an alternative.
The industry aims to be recognised as a vital pillar in the financial sector, he noted.
Secondly, Beh said safeguarding cybersecurity and data protection is paramount, given the sensitive nature of data in fintech operations.
Lastly, he said there is an ongoing mission to extend financial services to underserved communities, particularly in rural areas, by tailoring solutions to their needs.
“To overcome these challenges, proactive strategies, regulatory collaboration, and a focus on innovation are crucial.
“Furthermore, the fintech sector faces the challenge of building and retaining a talent pool, as it competes not only with legacy financial institutions but also with foreign jurisdictions to retain its talent.
“The industry must also address the adoption of artificial intelligence (AI) in finance, including fintech, in a regulated and secure manner.
“AI is rapidly becoming a significant aspect of financial services, and its integration must be carefully managed,” he said.
To propel the industry to a higher level, he said a comprehensive three-pronged approach is recommended.
Firstly, Beh said investing in education and skill development is of utmost importance to cultivate a skilled workforce, especially in areas like data analytics, cybersecurity, and financial technology.
Secondly, he said the establishment of an open banking framework plays a pivotal role in boosting competition, enhancing consumer choices and fostering innovation within the sector.
He said that lastly, integrating sustainability principles, such as environmental, social and governance (ESG) considerations into fintech operations can align with global standards and attract socially responsible investors, ultimately driving industry growth.
As for the trends in the fintech space over the next few years, Beh said that over the next three to five years, several key trends are expected to shape the fintech industry.
First and foremost, he anticipates a growing emphasis on sustainable finance, with fintech platforms providing tools and services to support sustainable and socially responsible investments.
This aligns with global ESG trends, reflecting the industry’s commitment to responsible and ethical financial practices, he said.
He said another significant trend is the rise of insurtech (insurance technology), where this sector is poised for substantial growth.
“Consumers are increasingly seeking more convenient and personalised insurance solutions. Insurtech startups are expected to offer innovative policies and streamline claims processing, transforming the insurance landscape.”Moreover, he said financial inclusion is set to be a pivotal theme.
Beh said fintech is likely to play a crucial role in enhancing financial inclusion in the country by providing affordable and accessible financial services to underserved populations, particularly in rural areas.
This aligns with the broader efforts to expand coverage across the country, as outlined in initiatives like the National Digital Network Plan (Jendela), he noted.
The Jendela plan aims to build a complete map of the country’s communications infrastructure and improve broadband coverage, among others.