In our increasingly cashless world of neo banks and e-wallets, Malaysia has become a hotspot for both regional and global fintechs. Fintech companies are setting up bases in Malaysia not just to access the substantial domestic market, which boasts a population of more than 32 million, but also to establish their presence in Southeast Asia. This year, the capital of Kuala Lumpur shot up by 11 places in the Global Fintech Rankings, which is a testament to the country’s conducive environment for fintechs looking for a gateway to the region.
Leading platforms like GrabPay and Touch ‘n Go have a cumulative active user base of 21 million. Part of why fintechs have been so successful in the country is because they have managed to capture the e-commerce market, with many users choosing digital alternatives over cash for convenience, safety, and ease of use. Malaysia’s digital wallet usage rate of 40% sits at the top of ASEAN, above neighbours like the Philippines (36%), Thailand (27%), and Singapore (26%).
Malaysia is also well-known for being a multicultural and multilingual country. The country is home to speakers of 137 languages, including major lingua francas like English, Mandarin, Malay, and Tamil. This diversity lends itself to a wide pool of talent with different backgrounds and experiences, making Malaysia a microcosm of the larger Southeast Asian market.
Over the past years, the country’s digital adoption rate has been growing steadily, in part thanks to the support from government institutions like the Malaysia Digital Economy Corporation (MDEC). Regional tech giant Grab, for example, got its headstart in Malaysia as a ride-hailing platform known as ‘MyTeksi’. Since then, the super app has grown exponentially and recently announced plans to go public, with an expected valuation of US$39.6 billion.
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Unsurprisingly, the recent pandemic has only accelerated this growth. Mobile banking transactions, for instance, hit a record high of US$109.7 million last year, up by 125% from the year before, according to the Fintech Malaysia 2021 report. With people working from home and more concerned about safety and hygiene, the Malaysian market is adopting digital solutions at a faster rate than ever before.
The growth of Malaysia’s fintech ecosystem is also partly thanks to regulatory support from Bank Negara Malaysia (Central Bank of Malaysia) & Securities Commission.
To support regulator’s efforts, the Malaysia Digital Economy Corporation (MDEC) has launched the Fintech Booster, a capacity building program by MDEC, in collaboration with Bank Negara Malaysia (BNM) to assist fintech companies, both local and foreign in developing their products and services via three strategically crafted modules: Legal and Compliance, Business Model, and Technology.
Among the initiatives spearheaded by the government is the Malaysia Tech Month Fintech Showcase, led by MDEC. Malaysia Tech Month 2021 (MTM 2021) is a virtual, month-long curation of electrifying digital and technology keynotes, workshops, discussion panels and business-matching sessions. It will feature a distinguished group of local and international industry speakers and investors to share their expert thoughts and experiences in 4IR-driven digital economy. This showcase provides both domestic and global fintechs with a platform to network, demonstrate, and learn about best practices, which will ultimately fuel the country’s thriving tech ecosystem.
Wahed, a game-changer for Islamic Finance
New York-based fintech Wahed is one of the startups that will be featured at this upcoming showcase.
Established in 2015, Wahed is an Islamic digital investment manager that allows users to build ethical, shariah-compliant investment portfolios. The company does the legwork for users by screening investments for issues like excess debt, tobacco, alcohol, firearms, and gambling, among other things that might violate Islamic principles. Users’ investments are then diversified into different asset classes, such as US Equities, Malaysian Equities, Gold, and Islamic Bonds, also known as Sukuk.
Wahed entered the Malaysian market in 2019 as the first company to receive an Islamic Digital Investment Management License from Malaysia’s Securities Commission. To date, the company has more than 200,000 clients across the world.
Part of the reason Wahed has managed to achieve these milestones is because of Malaysia’s rich tech ecosystem.
“Malaysia is definitely home to one of the leading Islamic Finance ecosystems in the world,” said Syakir Hashim, senior vice president of business operations at Wahed.
Furthermore, the conducive regulatory environment also helped them expand in Malaysia. By consulting with MDEC, Wahed was able to understand the local ecosystem, stakeholders, and other government agencies. This support allowed them to tailor their offerings to Malaysian users.
“By truly delving into the market to understand the lifestyle, language, culture, and pain points of the local market, we were able to grow Wahed Malaysia to what it is today,” added Hashim. “We are en route to being the household name for Islamic Investing in Malaysia.”
Malaysia ranks 1st in the Global Islamic Fintech (GIFT) Index and had an estimated Islamic Fintech Market Size in 2020 of $3.0 billion expected to grow by 23% annually to reach 8.5 billion by 2025.
Harnessing Malaysia’s tech talent pool with MoneyLion
Another global fintech company that proves the preparedness of the Malaysian market is MoneyLion. The company develops financial products with low barriers to entry, providing a digital all-in-one finance platform for the everyday user. Some services MoneyLion provides include mobile banking, lending, automated investing, Buy Now Pay Later solutions, crypto, and more.
Co-founded by a Malaysian but based in New York, MoneyLion has raised US$227.5 million to date and is dubbed an emerging unicorn. In fact, it is in the final stages of its NYSE IPO, with an estimated US$2.9 billion in equity value.
Although MoneyLion does not yet have a local presence for Malaysian consumers, most of their technology and AI teams are based in the Malaysian capital of Kuala Lumpur.
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“One of the proudest achievements I have is that, out of a handful of successful neo banks in the world, we built MoneyLion’s technology entirely in Malaysia,” said co-founder and chief technology officer Foong Chee Mun.
Foong had been living in the United States during the founding of MoneyLion, but returned home to Malaysia for some time as his wife became pregnant. At the time, he hired three engineers to work with. Now, the Kuala Lumpur team has grown to 180 people and continues to attract tech talent from both local and international universities.
“The MoneyLion KL office is not just a backend office, we are responsible from end to end, from product ideation to management to engineering to optimization and growth,” added Foong. “I strongly believe that we have the right talent and environment to build a regional fintech hub right here in our very own backyard.”
How Ablr leverages Malaysia’s market-readiness and digital infrastructure
Another fintech that has successfully expanded in the Malaysian market is Ablr.
In line with its mission of humanizing financial services that improve people’s lives, Ablr leverages data to provide a better credit system for consumers.
Their first product, for example, enables businesses to allow customers to pay for goods and services over time via a series of flexible monthly instalments with no hidden or late fees. This means that businesses have a solution for accelerating revenue, while consumers can pay in a fair, convenient, and transparent way.
Founded in 2017, the startup now has offices in both Singapore and Malaysia.
There were multiple reasons for entering the Malaysian market. Ablr found that there was a real need within the Malaysian market for consumers to get access to fairer and more transparent financial solutions. Malaysia’s infrastructure, mobile phone penetration rate, and rapidly growing middle class were also factors that pushed for Ablr’s expansion into the country.
Market readiness was another key reason, said founder and chief executive officer Ian Ow.
“We believe Malaysia is about to experience a revolution through fintech innovation and digital enablement that would create many possibilities and opportunities for social and economic advancement,” he added. “The government has heavily supported the adoption of new ways to pay and access financial services, while Malaysians have displayed an open-mindedness in embracing new technologies.
Ablr was able to ride this wave of growth because of the fintech-friendly environment which promotes innovation and financial inclusion. For example, the Financial Technology Enabler Group (FTEG) set up by Bank Negara Malaysia pushes policies that increase the adoption of technological innovations in the financial services industry.
“Our initial rollout with businesses and consumers in Malaysia has been encouraging so far,” said Ow. “We are currently preparing for a soft launch with our key partners and are in the process of developing a focal vertical on Islamic Finance with that work anchored in Malaysia.”
Backing Malaysia’s fintech founders with 1982 Ventures
For Singapore-based venture capital firm 1982 Ventures, the decision to set up operations in Malaysia was an easy one.
The fund focuses on investing in early-stage fintech startups across Southeast Asia and found that Malaysia has a supportive ecosystem, despite being often overlooked by regional and global venture capital firms. When the Malaysian government put out an open call for overseas venture capital firms to work with the government, 1982 Ventures took the chance.
Since then, 1982 Ventures has found plenty of opportunities to work with different stakeholders in the local market.
“We have been engaged by Malaysian family offices, corporates, and investors that are looking for a fintech VC partner with a proven track record,” said co-founder and managing partner Herston Powers.
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1982 Ventures’ Southeast Asia portfolio includes fintech leaders such as Brick, Fundiin, Homebase, Infina and Wagely. 1982 Ventures will be announcing more investments and strategic LPs as they approach the first close of their fund.
While venture capital investment into fintech startups has been growing more than 50% annually for the past five years, the share of investment into fintech in Southeast Asia is much lower than the global rate. 1982 Ventures thus aims to fill this gap in the region, including in Malaysia.
“Fintech in Southeast Asia is a once-in-a-generation opportunity,” said Powers. “In nearly all major markets, the most valuable venture capital-backed companies are from the fintech sector and this will be the case in Southeast Asia and Malaysia.”
Wahed, MoneyLion, Ablr and 1982 Ventures will all feature at the upcoming Malaysia Tech Month Fintech Showcase. To learn more about the programme and the fintech showcase, please head to their official page.
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This article is produced by the e27 team, sponsored by MDEC
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