Malaysian banks face SME loss as open finance fuels fintech competition

At a recent open-finance networking session in Kuala Lumpur, Professor Dr Colyn Gardner, co-founder and chief executive of Manaf Gardner Associates Sdn Bhd, warned that Malaysian banks could lose a sizable share of their small-and-medium-enterprise (SME) portfolio to fintech companies and challenger banks. He pointed to the United Kingdom, where legacy banks such as Barclays, NatWest and Lloyds have seen roughly 60% of SME lending shift to fintech and challenger institutions in less than ten years.

With SMEs accounting for more than 95% of businesses in Malaysia, the potential revenue loss is substantial. Gardner emphasized that open finance will give consumers greater control over data, enabling fintechs to compete directly with banks. He called for banks to upgrade their digital capabilities, attract the right talent, and address legacy IT challenges, while noting that some Malaysian payment processes already resemble open-banking models. The event featured UK experts who shared practical lessons on developing open-finance frameworks.