Kuala lumpur: Malaysian banks and development financial institutions (DFIs) are rapidly adopting artificial intelligence (AI) technology, yet they remain cautious when it comes to utilizing AI for significant business decisions.
According to BERNAMA News Agency, a new study by the Asian Institute of Chartered Bankers (AICB), Ecosystm, and the AICB Chief Risk Officers' Forum reveals that AI is increasingly being used in sectors such as Know Your Customer onboarding, fraud detection, anti-money laundering, counter-financing of terrorism, and improving employee productivity.
Despite the increasing deployment of AI, only 25 per cent of respondents are confident enough in AI-generated outputs to act on them for key business decisions, as noted in an AICB statement. The study was launched during AICB's 4th Malaysian Banking Conference and 2nd Bank Audit Conference, drawing insights from 87 senior leaders across commercial, digital, and Islamic banks, as well as development financial institutions in Malaysia.
Edward Ling, AICB's chief executive, stated that Malaysian banks and DFIs no longer question AI's role in financial services. The current challenge is whether these institutions possess the necessary judgment, ethics, governance, and professional capability to use AI responsibly in decisions affecting customers, risk, and institutional performance.
Chong Han Hwee, chairman of the AICB Chief Risk Officers' Forum and RHB Malaysia's group chief risk officer, highlighted the complexity AI introduces, noting that its risks are not confined to the model but span the entire ecosystem, from data quality and human usage patterns to AI-informed decisions and their evolution over time.
Sash Mukherjee, Ecosystm's vice-president of industry insights, emphasized that as AI delves into higher-risk domains, financial institutions seek greater clarity on model risk management, explainability, third-party AI, and data governance. Mukherjee added that regulation alone won't keep pace with technological advancements, and ongoing collaboration between industry and regulators is essential to ensure governance frameworks evolve alongside AI innovation.
The study indicates that 44 per cent of Malaysian banks and DFIs are in the 'developing' stage of AI readiness, having progressed beyond experimentation but still facing challenges in data, skills, and operating models. Only 15 per cent have reached an 'established' level of readiness, and a mere 2 per cent are considered 'advanced', where AI is fully integrated into decision-making and contributes directly to competitive differentiation.
The study also identifies key areas where organizations struggle with AI readiness. Just 26 per cent have a defined strategy linking AI to business goals, while 44 per cent are developing custom AI solutions, which risks creating fragmented initiatives that are hard to scale or replicate.
AICB highlights that 79 per cent of institutions report shortages in specialized AI technical skills, while only 20 per cent actively promote AI-driven decision-making across their workforce, indicating significant gaps in organizational AI capabilities.
AI governance remains a major issue, with 53 per cent of organizations relying on fragmented or ad hoc governance instead of 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, and just 27 per cent apply formal AI risk tiering to tailor oversight based on risk level.
AICB concludes that the findings provide an important benchmark for the financial sector as institutions transition from AI pilots to responsible, enterprise-wide implementation, underscoring the institute's mandate and commitment to building industry capacity for the future of banking.