AI adoption is growing globally across sectors such as finance, healthcare, and sustainability. The financial sector has been one of the earliest adopters, using AI for: 

• Fraud detection and risk assessment – AI algorithms can detect suspicious transactions in real time. 

• Personalised financial services – AI-driven banking apps provide tailored investment advice. 

• Robo-advisory – Automated investment platforms use AI to optimise portfolios. 

Beyond finance, AI is also expanding accessibility for people with disabilities, offering tools like AI-powered speech-to-text solutions and smart prosthetics. However, Malaysia still lags behind AI-driven economies such as Singapore and China. According to Cisco’s AI Readiness Index (2024), only 14% of Malaysian companies are fully prepared for AI integration due to gaps in computational infrastructure and AI talent availability​. 

Malaysia’s financial sector is undergoing a digital transformation, and AI presents an opportunity to enhance accessibility and financial inclusion, especially in Islamic finance and underserved communities. 

• AI for Inclusive Banking and Credit Access 

One of the challenges in Malaysia’s financial sector is limited access to banking services for low-income and rural population, especially on their reliance on cash and traditional banking. Modern solutions like AI-driven alternative credit scoring models could help evaluate borrowers without traditional credit histories, allowing financial institutions to offer loans based on AI-analysed behavioural data. 

• AI in Islamic Finance 

As a global leader in Islamic finance, Malaysia can integrate AI to improve Shariah-compliant investment screenings and risk assessment s. AI-driven screening tools can automate halal investment filtering and ensure real-time Shariah compliance, streamlining fund management​. Some of the examples include Maybank Asset Management’s AI-driven platform (in partnership with Arabesque AI) as well as Wahed Invest (a fintech company specialising in Shariah-compliant investment solutions) 

• AI-Powered Customer Support 

AI chatbots and virtual assistants are enhancing customer service efficiency in Malaysia’s banks. These tools can provide multilingual financial assistance, helping Malay, Tamil, and Mandarin-speaking populations access banking services more effectively. 

Despite its potential, AI adoption in Malaysia’s financial sector faces several roadblocks. One major challenge is the shortage of AI talent. Malaysia lacks skilled professionals to develop and manage AI-driven financial systems, with 81% of Malaysian companies struggling to hire AI talent despite 90% recognising AI as a business priority. Upskilling financial professionals in AI technologies is critical to overcoming this barrier. 

Another significant hurdle is data integration. Financial institutions struggle with fragmented data systems, which prevent effective AI adoption. Data silos limit AI-driven automation and predictive analytics, with 81% of Malaysian companies citing this as a major obstacle. Without seamless data integration, AI solutions cannot fully optimise financial operations. 

Regulatory uncertainty and compliance risks also slow AI adoption in banking and investment. Strict regulations concerning data privacy and ethical AI use make regulators cautious about AI’s potential risks, including cybersecurity threats, algorithmic biases, and fraud. There is concern that fully automated AI-driven banking systems could weaken security barriers if regulations are not carefully designed. Malaysia needs an adaptive regulatory framework to balance innovation with financial security. 

Resistance to AI adoption within traditional financial institutions presents another challenge. Many banks and investment firms still prefer conventional decision-making over AI-driven automation due to a lack of AI literacy among financial professionals and concerns about AI replacing human jobs. Overcoming this reluctance requires targeted education programs and demonstrating AI’s role as an enabler rather than a disruptor. 

To fully capitalise on AI’s potential, Malaysia’s financial regulators and industry leaders should focus on three key strategies. First, developing a regulatory sandbox for AI in finance would allow financial firms to test AI applications in a controlled environment before full deployment. Countries like Singapore and the US have already adopted AI regulatory sandboxes, enabling innovation while ensuring compliance. 

Second, strengthening AI talent development is crucial. Financial institutions and government agencies should partner with universities and AI research centers to train more professionals in AI-driven finance. Investment in AI certification programs and specialised courses will help bridge the talent gap. 

Lastly, Malaysia’s central bank and financial regulators should encourage AI adoption in microfinance and digital banking to provide financial access to rural and underserved communities. AI can help fintech startups expand financial services beyond urban centers, promoting nationwide financial inclusivity. 

Malaysia is at a critical crossroads in AI adoption for financial services. While AI has the potential to enhance financial inclusion, streamline Islamic finance, and optimise banking operations, regulatory challenges, workforce shortages, and data integration issues must be addressed. 

To remain competitive, Malaysia must:  

✔ Develop a balanced AI regulatory framework to ensure security while enabling innovation.  

✔ Expand AI education and workforce training to build a strong talent pipeline.  

✔ Leverage AI to provide banking and investment access to underserved communities. 

By investing in AI-driven financial solutions and addressing adoption barriers, Malaysia can position itself as a leader in AI-powered finance, ensuring a more inclusive and efficient financial ecosystem. 

While AI presents immense potential to enhance financial inclusion and innovation, it also raises concerns about workforce displacement, regulatory challenges, and ethical risks. As we continue navigating this evolving landscape, it’s essential to weigh both the benefits and the tradeoffs.  

For a deeper dive into the consequences of AI adoption, my colleague, Julianna, shares her perspective in ‘Are We Funding AI—or Our Own Obsolescence?‘. 

References 

1.  Artificial Intelligence Market in Malaysia, Statista.
2. Malaysia launches National AI Office for policy regulation, Reuters.
3. Malaysia faces AI readiness gap despite increased investments, says Cisco, Business Today. 
4. Malaysia’s year in AI: Key advancements and future prospects, Tatler Asia.
5. Malaysia AI Roadmap underpins digital transformation, OpenGov Asia.
6. Growing Malaysia’s AI talent pool, The Star.