Malaysia’s financial sector is at a pivotal moment. As digital adoption accelerates and customer expectations evolve, embedded finance—where financial services are seamlessly integrated into non-financial digital platforms—has emerged as a powerful growth driver. For Malaysian banks, fintechs, and ecosystem partners, embedded finance offers the potential to unlock new revenue streams, reach untapped customer segments, and deliver frictionless experiences across e-commerce, ERP, and lifestyle platforms. Yet, realizing this potential requires navigating a complex landscape of technology, partnerships, and regulation.
Malaysia’s digital economy is thriving, with 97% internet penetration and over 75% of transactions now conducted through internet and mobile banking. E-commerce, digital payments, and fintech adoption are surging—70% of Malaysians used fintech or e-wallet services in 2022, and over 400,000 new firms registered for QR code payment processing, a 164% increase from the previous year. Against this backdrop, embedded finance is rapidly gaining traction:
The appeal is clear: by integrating banking, payments, lending, and insurance directly into digital journeys—whether in e-commerce checkouts, ERP workflows, or lifestyle super-apps—banks and fintechs can meet customers where they are, reduce friction, and create new value propositions.
To deliver embedded finance at scale, banks must move beyond legacy systems and embrace a modular, API-driven technology stack. This approach enables rapid integration with multiple partners, supports real-time data flows, and allows for efficient customization to meet diverse partner needs. Key components include:
A recent case study in Southeast Asia saw a new SME-focused digital bank built and launched in just nine months, orchestrating 22 fintech partners and delivering fully automated, API-driven services to 350,000 SMEs. This demonstrates the art of the possible for Malaysian banks willing to invest in modern, composable technology.
Embedded finance requires banks to rethink traditional product-centric models and embrace new forms of partnership:
Success depends on understanding the priorities of each partner—whether it’s driving sales, improving customer 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.
Malaysia’s regulatory environment is evolving to support open banking and embedded finance. Key milestones include the establishment of the Fintech Regulatory Sandbox, the Open API Implementation Group, and the digital bank licensing framework, all of which emphasize API standards, data security, and governance. For banks and fintechs, this means:
Cybersecurity remains a top concern, and banks must invest in infrastructure that automates security controls and supports real-time fraud detection. Regulatory sandboxes and continuous feedback mechanisms can help test and refine new embedded finance propositions in a controlled environment.
While the opportunity is significant, scaling embedded finance across multiple partners presents unique challenges:
Banks that fail to build a digital-first, partner-centric organization risk being left behind by more agile fintechs and non-bank players.
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:
Our work with leading banks and fintechs in the region shows that with the right approach, Malaysian financial institutions can unlock new growth, drive financial inclusion, and deliver the seamless, customer-centric experiences that define the future of banking.
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 traditional boundaries and create new value for customers and businesses alike. 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.