The ASEAN+3 Macroeconomic Research Office (AMRO) said Malaysia’s digital finance ecosystem is entering a more mature phase but faces key structural challenges, including fintech profitability pressures, rising cyber risks and regulatory gaps in fast-growing credit segments such as buy-now-pay-later (BNPL).

The research house said in a note on Tuesday that profitability pressures remain a concern for fintech firms serving low-income segments.

“These business models often generate relatively low revenue per customer despite significant upfront investment costs, making targeted public support important during the early stages of development,” it noted.

It also said cybersecurity threats and financial fraud have intensified, particularly among rural and elderly populations.

Addressing these risks will require continued investment in cybersecurity, broader digital financial literacy efforts, and stronger consumer protection frameworks to prevent vulnerable groups from being effectively excluded from digital financial services.

It also noted that closing regulatory gaps in rapidly expanding areas such as BNPL remains vital. While the Consumer Credit Act (CCA) brings non-bank credit providers under a formal supervisory framework, regulators will need to ensure robust ongoing oversight, while preserving space for innovation.

According to the research house, Malaysia has positioned the digital economy as a central pillar of its national growth strategy.

This rapid digital transformation is the result of deliberate policy efforts.

Through initiatives such as the Malaysia Digital Economy Blueprint (MyDIGITAL), complemented by Bank Negara Malaysia’s (BNM) Financial Sector Blueprint and the Securities Commission’s (SC) Capital Market Masterplans, the country has fostered a vibrant fintech ecosystem while advancing financial inclusion.

“By aligning national policies with infrastructure development, Malaysia has climbed global rankings and emerged as one of ASEAN’s leading digital economies,” it highlighted.

For AMRO， a key feature of Malaysia’s digital transformation has been focused on financial inclusion through innovative service delivery.

It is noted that under BNM’s licensing framework, digital banks are required to focus on underserved and unserved customers, including low-income households, micro-businesses, and gig workers.

Following this policy direction, a generation of digital banks has begun operations, offering fully digital account opening and simplified credit products.

“These services have gained strong traction among younger customers and underserved communities,

“Many of their customers previously had limited access to traditional banking services, underscoring the role of digital banks in expanding financial inclusion,” AMRO said.

Beyond consumer banking, AMRO noted alternative capital markets promoted by the SC have played an important role in addressing financing constraints faced by smaller enterprises.

Equity crowdfunding (ECF) and peer-to-peer (P2P) financing have also emerged as valuable funding channels for startups and micro, small, and medium enterprises (MSMEs) that may struggle to access traditional bank financing.

AMRO opined that these platforms have evolved toward more sophisticated investment structures and now support tens of thousands of businesses.

Secondary ECF trading platforms have improved liquidity, while the participation of institutional investors and government matching funds has helped deepen and professionalize the market, it added.

As a global leader in Islamic finance, AMRO also said Malaysia has successfully integrated fintech into Shariah-compliant financial services, creating new avenues for financial inclusion.

This strength is particularly evident in alternative capital markets, where Shariah-compliant funding now accounts for about 30 percent of total ECF and P2P financing.

According to the research house, this provides startups and faith-conscious MSMEs with an important additional source of growth capital.

Regulatory support is also reflected in the licensing of dedicated Islamic digital banks.

Meanwhile, Initial Exchange Offering (IEO) platforms, which are regulated by SC and facilitate the issuance of digital tokens, have enabled asset tokenization, allowing smaller investors to participate more easily in investment opportunities, said AMRO.

It noted digital finance has also transformed the way Malaysians make and receive payments. Government incentives helped accelerate early adoption, while the introduction of interoperable QR payment systems encouraged digital payment acceptance among micro and small merchants.

Initiatives such as the Retail Digitalization Initiative (ReDI) have supported digital onboarding among rural micro-merchants, helping narrow geographical gaps in access to digital financial services.

Concurrently, BNPL services such as Atome, Grab PayLater, and Shopee PayLater have expanded rapidly, particularly among adults, offering an increasingly popular alternative source of consumer credit, it added

“As Malaysia’s digital finance ecosystem continues to mature, sustaining momentum will require balancing innovation with prudent regulation, strengthening consumer trust, and ensuring that the benefits of digitalization are broadly shared,

“Malaysia’s experience offers valuable insights for other economies seeking to harness digital finance as a driver of inclusive growth,” it concluded.

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