Malaysia’s financial sector is at a pivotal inflection point. With digital adoption at record highs—97% internet penetration, 75% of transactions via internet and mobile banking, and 70% of Malaysians using fintech or e-wallet services—embedded finance is no longer a future aspiration but a present-day imperative. Nearly 40% of Malaysian banks already embed financial services in third-party marketplaces, and those that do are seeing up to 30% growth in new customer acquisitions. Yet, for most, the journey has only just begun. The challenge now is not about proving the potential of embedded finance, but about scaling it—efficiently, securely, and profitably—across a diverse ecosystem of partners and channels.
Embedded finance enables banks to meet customers where they are—integrating payments, lending, insurance, and more directly into e-commerce, ERP, and lifestyle platforms. This seamless integration not only enhances user experience but also unlocks new revenue streams and customer segments, particularly among SMEs and the underbanked. Fee-based income, a key growth lever, already averages 11% of total bank revenue in Malaysia, with embedded finance poised to accelerate this further.
However, the true value of embedded finance is realized only when banks can serve multiple partners at scale, each with unique needs, technology stacks, and customer bases. Without the ability to scale, embedded finance remains a collection of isolated pilots—never achieving the network effects or operational efficiencies that drive sustainable growth.
Scaling embedded finance requires a fundamental shift from legacy, monolithic systems to modular, API-first architectures. The essential building blocks include:
A standout regional example is the rapid launch of an SME-focused digital bank in Southeast Asia, built and launched in just nine months. By orchestrating 22 fintech partners and delivering fully automated, API-driven services to 350,000 SMEs, this initiative demonstrates what’s possible when banks invest in modern, composable technology and agile delivery models.
To scale embedded finance, banks must move beyond traditional product-centric models and embrace new forms of partnership:
Success hinges on understanding each partner’s priorities—whether it’s driving sales, improving retention, or accessing new revenue streams—and designing propositions that align with those goals. Banks with experience in partner finance and third-party distribution have a head start, but all must adapt to a faster cadence of product development and iteration.
Banks must invest in developer-friendly, secure APIs that support multi-tenancy and efficient partner onboarding. This reduces the need for bespoke integrations and enables rapid scaling across diverse platforms.
Efficient onboarding, servicing, and support for a growing ecosystem of partners is essential. Banks should build cross-functional teams that can co-create, launch, and support embedded propositions at pace, breaking down traditional product silos.
Malaysia’s regulatory environment is evolving to support open banking and embedded finance, with frameworks emphasizing API standards, data security, and governance. Banks must:
Regulatory sandboxes and continuous feedback mechanisms can help test and refine new propositions in a controlled environment.
A lack of operational agility is a top barrier to digital transformation. Banks must adopt agile operating models, invest in cloud infrastructure, and foster a culture of experimentation and adaptability. Only 20% of banks report having a fully agile operating model, highlighting the need for organizational change.
Publicis Sapient’s experience in Malaysia and across Southeast Asia demonstrates that embedded finance is not just a technology play—it’s a business model transformation. By combining strategy, modern engineering, and deep industry knowledge, we help banks and fintechs:
Embedded finance represents a generational opportunity for Malaysia’s banks, fintechs, and ecosystem partners. By embracing modular technology, forging strategic partnerships, and navigating regulatory and operational challenges, the industry can move beyond pilot projects to create scalable, revenue-generating embedded finance businesses. The winners will be those who act boldly, innovate rapidly, and put the customer at the heart of every journey.
Ready to explore how embedded finance can transform your business? Connect with Publicis Sapient’s experts to start your journey.