[KUALA LUMPUR] Malaysia missed important opportunities during the Covid-19 pandemic since 2018, modernising its banking sector and becoming a digital leader in the region. Veteran banker Andrew Shen said that once the windows close, industry players face greater challenges to achieve growth.
“During the pandemic since 2018, it was a time of massive change online, especially during the pandemic, where everyone moves online – work, shopping, finance. Business time.
He pointed out that while other markets embraced rapid technological upgrades due to competition, user expectations and changes in regulations, many Malaysian banks were conservative, slow and reluctant to innovate.
“It was a time of major online transformation. But in my view, the digital products of Malaysian banks are slightly outdated,” said the 79-year-old former central banker and now an auxiliary professor at the University of Malaya and Tinua.
He previously served as chairman of Hong Kong's Securities and Futures Commission from 1998 to 2005, serving as a central banker in both the Hong Kong monetary authority and Bank Negara Malaysia.
Shen also served as Chief Advisor to the Bank of China Regulation Authority. Recognizing the impact he had had, time The magazine included him in 2013 among the 100 most influential people in the world.
Shen noted that some of the country's biggest banks had previously shown cross-border ambitions, particularly the CIMB and Maybank had shown regional expansion strategies. But even these future-looking moves have lost momentum in recent years.
“Since 2018, they've become more cautious… and it's become a pandemic when digital transformation was supposed to accelerate. But I don't see the agent offering. My bank knows my spending patterns, but it doesn't give me tailored investment advice or aggressive digital tools,” he added.
The drawbacks go beyond the lack of sophisticated digital products. Sheng points to fundamental customer service obstacles, that is, obstacles that reveal resistance to sector modernization.
“Some banks are still in this old-fashioned call centre model,” he said. “If you call in the middle of the night, you'll either take someone in Bangladesh or the service is unavailable.”
Even basic digital tools such as chatbots, which are widely deployed in Southeast Asia, are underused or inadequately implemented in Malaysia. He described this as a systematic issue. It is rooted in culture and governance, not technology.
“If most staff are digitally oriented, moving banks digital is a major administrative challenge. The board and CEOs need to focus entirely on digital. But most are made up of former bankers and businessmen.
“Techfin” eats a banker's lunch
Although banks in Malaysia were stagnant, they not only support finance, but also redefine it, they believe that technology platforms are not just traditional fintechs where banks employ technology tools, but rather traditional fintechs that tech companies call “TechFin” where finance is suspended from the outside.
“The dominant issue since Covid has not been FinTech. It is the financialization of technology. It is Techfin, not FinTech. Technology platforms overwhelm the financial industry,” he explained.
The competitive imbalance is tough, with tech companies having better software, more data, less regulations and much more agile than traditional banks. Plus, they don't have much debt.
Meanwhile, banks are highly utilized, highly regulated and seemingly unable to compete, he said. He said such a scenario is not theoretical.
All across Asia, consumers are currently trading in real time using mobile-based QR code systems run by high-tech companies rather than banks, while beneficiaries use e-wallet providers such as Alipay, Wechat Pay, or small fintech startups.
This confusion is far beyond payments. Sheng warns that core financial activities, lending, wealth management and even insurance are being bound and digitalized by faster, more lean players.
“Platforms using crypto, blockchain and decentralized finance are eating bank lunches, and that trend is only accelerating,” said Shen, who will give a keynote speech at Malaysia's flagship fintech event.
Tokenization is the next frontier
What exacerbates the threat is the rapid evolution of tokenized digital assets, and Sheng believes that it is the development that fundamentally transforms capital markets and trade. Again, Malaysia is catching up.
“Perfectly anything can be tokenized… liabilities, assets, and even the next graffiti by Picasso can be converted into digital assets and sold,” he said.
Tokenization enabled by blockchain and decentralized infrastructure allows assets to be divided, digitized and traded globally in real time. Even commodities such as gold, carbon credits, and even palm oil are now being investigated as tokenized products.
“If we could tokenize palm oil and make it available to people like me to buy tons because they like the weather,” Shen said. “But the reality is that in Malaysia we can't do it now. Someone else will.”
And that's the real danger. He noted that if Malaysia doesn't act, others will control the digital asset space, resulting in Malaysian capital, investors and talent going elsewhere.
“If you're going to do that, someone else would… money and flow would go elsewhere.” He added.
With its population of just 33 million, Malaysia lacks a market size that slowly builds its scale. Countries such as Vietnam and the Philippines are better positioned to have over 100 million people each able to quickly develop digital ecosystems and attract local mobility.
Power shift to asset managers
Beyond Malaysia and Southeast Asia, Shen observed that the global financial system has undergone a quiet, deep power shift from traditional banks and towards dominant asset managers and trading platforms.
“Technology tends to be concentrated. The top five banks in any country dominate most of the banking business. But the top five asset managers, not necessarily banks, are still strong, if not more so,” he said.
He said that large banking institutions such as JPMorgan and UBS have an impact, but their growth lies less than traditional lending, and is in their role as a global asset manager and market trader.
He cited the increased weight in UBS's asset management and the control of JPMorgan in the dollar market, investment banking and trading.
Sheng also highlighted the rise of non-bank players such as Citadel and Jane Street. This has grown into a giant that trades giants that rival traditional banks with volume and influence.
He noted that such trends are being accelerated by digitalization and scale. Technology amplifies the benefits of incumbents with deep data, large capital bases and global reach, further pushing small or slow institutions into margins.
At the same time, he warned that banks in emerging markets such as Malaysia are lagging behind digital transformation and making them vulnerable.
“All banks need to ask: Do they need to ask how to reduce costs, improve productivity, manage risk and create new value?” Shen said. “People who don't ask that question now may not be there to answer it later.”
