44 percent of Malaysian banks and development financial institutions (DFIs) are in the developing stage of artificial intelligence (AI) readiness, having moved beyond experimentation but still facing fragmented capabilities across data, skills and operating models, a survey by Asian Institute of Chartered Bankers (AICB) showed last Thursday.

AICB said in a its recent report that while AI adoption is gaining momentum in Malaysia, many institutions remain cautious about using AI-generated outputs for key business decisions.

According to the report, only 17 percent have reached Established or Advanced maturity.

Investments in governance, data, and talent are taking shape, and repeatable use cases are emerging, but uneven execution, fragmented data, and capability gaps continue to limit broader adoption, said the report.

Meanwhile, only 25 percent of respondents trust AI-generated outputs enough to act on them in key business decisions.

It is noted that AI activity is largely confined to pilots and early use cases.

Efforts are often team-led rather than organization-wide, with skills, data, and governance capabilities still maturing.

As a result, successful experiments can be difficult to scale
beyond their initial scope.

The report also showed only 26 percent of institutions have a defined strategy linking AI to business goals.

79 percent report shortages in specialized AI technical skills.

Only 33 percent have established structured AI governance and model risk management.

27 percent apply formal AI risk tiering to tailor oversight according to the level of risk.

Overall, the findings show that AI is increasingly being deployed in areas such as Know Your Customer onboarding, fraud detection, Anti-Money Laundering and Counter Financing of Terrorism, and employee productivity.

However, the report also highlights important capability and governance gaps that need to be addressed as institutions move from AI pilots to responsible, scalable implementation.

These include the need for stronger AI strategies, clearer governance frameworks, improved model risk management, greater explainability, stronger data governance and wider workforce capability.

“Malaysia’s banks and DFIs [Development Financial Institutions] are no longer asking whether AI has a role in financial services.

“The question now is whether institutions have the judgement, ethics, governance and professional capability to use AI responsibly in decisions that affect customers, risk and institutional performance,” AICB Chief Executive Edward Ling said.

Jointly undertaken by the AICB, AICB’s Chief Risk Officers’ Forum and Ecosystm, the study draws on responses from 87 senior leaders across the banking and development finance sector, supported by executive roundtables and interviews.

AI demand powers Malaysia tech outlook despite risks – analysts