KUALA LUMPUR: Malaysian banks and development financial institutions (DFIs) are rapidly adopting artificial intelligence (AI), but many remain cautious about using AI for high-impact business decisions.
This is according to a new study by the Asian Institute of Chartered Bankers (AICB), Ecosystm and the AICB Chief Risk Officers’ Forum.
The ‘AICB-Ecosystm AI in Practice: How Malaysia’s Banks & DFIs are Adopting and Governing AI’ report found that AI is increasingly being deployed in areas such as Know Your Customer onboarding, fraud detection, anti-money laundering, and counter-financing of terrorism, and employee productivity.
“(However,) only 25 per cent of respondents trust AI-generated outputs enough to act on them in key business decisions,” AICB said in a statement.
Launched on the sidelines of AICB’s 4th Malaysian Banking Conference and 2nd Bank Audit Conference, the study drew on responses from 87 senior leaders across Malaysian commercial, digital, and Islamic banks, as well as development financial institutions, and was supported by insights from executive roundtables and interviews.
AICB’s Chief Executive, Edward Ling, said, “Malaysia’s banks and DFIs are no longer asking whether AI has a role in financial services. The question now is whether institutions have the judgement, ethics, governance and professional capability to use AI responsibly in decisions that affect customers, risk and institutional performance.”
AICB Chief Risk Officers’ Forum Chairman and RHB Malaysia’s Group Chief Risk Officer, Chong Han Hwee, said AI introduces a new dimension of complexity because its risks do not reside solely within the model.
“They emerge across the entire ecosystem, from data quality and human usage patterns to the decisions informed by AI and how these factors evolve over time,” he said.
Ecosystm Vice-President of Industry Insights, Sash Mukherjee, said that as AI expands into higher-risk use cases, financial institutions want greater clarity on model risk management, explainability, third-party AI and data governance.
“But regulation alone will not keep pace with the technology. Ongoing collaboration between industry and regulators will be equally critical to ensure governance frameworks evolve alongside AI innovation,” Sash said.
According to the study, 44 per cent of Malaysian banks and DFIs are in the “developing” stage of AI readiness, having moved beyond experimentation but still facing fragmented capabilities across data, skills and operating models.
Only 15 per cent have reached an “established” level of readiness, while just 2 per cent are categorised as “advanced”, where AI is fully integrated into decision-making and contributes directly to competitive differentiation.
“The study also identified key areas where organisations are struggling to establish AI readiness. Only 26 per cent of institutions have a defined strategy linking AI to business goals, while 44 per cent are already developing custom AI solutions, increasing the risk of fragmented initiatives that are difficult to scale or replicate,” said AICB.
Meanwhile, it said 79 per cent report shortages in specialised AI technical skills, while only 20 per cent actively promote AI-driven decision-making across the workforce, highlighting organisation-wide AI capability gaps.
AICB said AI governance remains another major constraint.
“Around 53 per cent of organisations still rely on fragmented or ad hoc governance rather than consistent, risk-based frameworks to determine the appropriate controls, approvals and oversight for different AI use cases.
“Only 33 per cent have established structured AI governance and model risk management, while just 27 per cent apply formal AI risk tiering to tailor oversight based on risk level,” it said.
AICB said the findings provide an important benchmark for the financial sector as institutions move from AI pilots to responsible, enterprise-wide implementation, while underscoring the institute’s mandate and commitment to building industry capacity for the future of banking. – BERNAMA
