KUALA LUMPUR: Financial service providers in Malaysia are increasingly adopting artificial intelligence (AI), according to the central bank’s AI Survey 2024.
The survey found that in 2024, 71% of banking institutions and development financial institutions, and 77% of insurance and takaful operators had implemented at least one AI application.
“Notably, in 2024, 71% of banking institutions and DFIs had implemented at least one AI application, an increase from 56% in the previous year. Similarly, 77% of ITOs had adopted at least one AI application, compared to 58% in the previous year,” according to Bank Negara Malaysia’s (BNM) discussion paper on “Artificial Intelligence in the Malaysian Financial Sector” today.
BNM said over 60% of banking institutions and insurers view AI as a strategic priority over the next one to three years. “This trend looks set to continue in the coming years, as over half of the respondens agreed that AI has the potential to generate significant new value for both their organisations and consumers.”
The central bank stressed it remains vigilant to developments in AI and closely monitors its usage across financial service providers. “As AI technologies and the state of adoption in financial service providers continue to grow and evolve, we recognise that AI use may introduce new risks that are not adequately addressed by the existing regulatory framework.”
BNM said an escalation in supervisory focus may be considered if AI-related risks become more material, in line with the principles of parity, proportionality, and neutrality.
“For example, due to widespread use of AI applications in critical functions or to replace human decision making. Where relevant, we may explore the need to introduce new regulatory expectations should the need arise in the future,” it said.
The central bank said it closely monitors five technological developments and innovation in the financial sector to shape its future regulatory and supervisory approach on AI.
The discussion paper seeks to share and obtain feedback on BNM’s posture on responsible AI innovation in the financial sector; the proposed regulatory approach for AI, as well as industry guidelines on responsible use; and general development approach including priority areas for greater innovation and industry-led collaboration.
BNM said it aims to facilitate and encourage responsible adoption and use of AI across the financial sector in a manner that will advance better consumer outcomes and its broader policy objectives.
“This means that while new innovations, such as AI, are given the opportunity to flourish, associated risks that may negatively impact system-wide stability, consumer outcomes, and confidence in the financial sector will need to be managed effectively.”
BNM interviewed select local financial industry players throughout 2024 and issued an updated industry-wide survey to gain insights into recent advancements on AI within the Malaysian financial sector. The AI Survey 2024 received responses from 1,207 financial service providers.