How to set up a Fintech in Malaysia

Michael Correa sheds light on the key opportunities in the Malaysia market for aspiring fintechs, according to the findings of the 2018 Westpac EIU Fintechs in ASEAN Report.

1. What are the key factors driving Fintechs to set up operations in Malaysia?

Fintechs typically choose Malaysia to expand their current product range in a new market and create a base to service the region.

Malaysia's vibrant fintech ecosystem currently houses 15 per cent of fintechs among the seven ASEAN markets, and holds attractive prospects for future customer growth with smartphone penetration rates slightly below (35 per cent) the average ASEAN smartphone penetration rate of 39 per cent, and an above average level of financial inclusion, as the vast majority (85 per cent) of the population aged 15 and above holds a bank account. These factors present a large potential customer base for fintechs.

The country is also well prepared to support technological change, ranking 27th out of 82 economies in The Economist Intelligence Unit's Technological Readiness Ranking, which bodes well for the growth of fintechs.

2. What is the market outlook/opportunity for Fintechs in Malaysia?

An expanding economy, rising disposable incomes and greater consumer spending power will boost the appeal of the Malaysian market for fintech businesses - GDP per head is expected to increase by 38 per cent in the next five years.

From 2018 to 2022 spending on communications is expected to account for a growing proportion of total government expenditure, potentially leading to improved communications and connectivity - which will benefit fintech businesses looking to set up operations in the country.

Malaysia's overall business environment ranking of 15th out of 82 is expected to support fintech growth in the country. Additionally, the new government elected in 2018 has already implemented measures to improve living standards, which should help increase private consumption and create new market opportunities for the fintech ecosystem.

In Case You Missed It: If you are interested in finding more about how to set up a fintech in other countries in the region, try Setting up a Fintech in Singapore or How to Set up a Fintech in Indonesia.

3. What are the key challenges Fintechs in Malaysia face, and how can these be overcome?

Some of the major challenges in Malaysia include a lack of interaction between government agencies and businesses as well as a lack of openness among local businesses to collaborate. For example, in the Malaysia market, more could be done to strengthen cyber-security regulations and enhance dialogue between government agencies and local and foreign businesses.

To overcome this, the fintech businesses we surveyed all echoed the importance of leveraging partnerships with commercial and non-commercial organisations, and even competitor organisations to gain new ideas and advice on market and regulatory knowledge.

In fact, forming a distribution or other strategic partnership was the most common measure taken among companies surveyed (cited by 44 per cent of survey takers) to successfully crack the ASEAN markets, including Malaysia.

Benefits of such partnerships may include market intelligence, technology exchanges, referrals to potential customers, talent and funding for projects. When businesses with the right values enter partnerships, everyone benefits.

For more insights on Fintech opportunities in ASEAN, please view the full report, Fintech in ASEAN: Unlock the Opportunity Fintech in ASEAN: Unlock the Opportunity. The writer is general manager, Asia Pacific, for Westpac.