Financial Sector Assessment Program: Malaysia – Sustainable Adoption of Innovative Channels for Financial Inclusion

This note focuses on the regulatory and market environment relevant to the emergence and adoption of innovative delivery channels to promote greater financial inclusion in Malaysia. It considers the implications for financial inclusion of the country’s evolving retail payments landscape and its potential to go beyond providing physical access to services. The analysis provided in the paper is based on wide range discussions with financial institutions, payment service providers, government authorities, and microfinance entities, which were conducted in April 2012. It covers the following sections in detail:

• Definition of financial inclusion with an overview of access to financial services and the institutional potential for expansion in Malaysia;
• Need for technology-enabled innovative channels to further financial inclusion;
• Telecommunications and payments system infrastructure for the rapid and safe adoption of innovative channels;
• Payment products with a focus on the adoption of electronic payments for the viability of innovative delivery modes and for increased usage of a range of financial services;
• ATMs, POS networks, internet, mobile banking, branches and the use of agents as possible distribution channels;
• Regulatory frameworks as established by the Bank Negara Malaysia (BNM);
• Recommendations to the BNM suggesting methods to address various challenges and to promote financial inclusion through innovative delivery channels.