Exploring the impact of ai adoption on the financial performance of the banking industry in Malaysia

Ser, Hui Xin (2025) Exploring the impact of ai adoption on the financial performance of the banking industry in Malaysia. Final Year Project, UTAR.

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Abstract

In recent years, the application of artificial intelligence (AI) has been continuously reshaping the global banking landscape by enhancing operational efficiency, strengthening risk management, and optimizing customer service. This trend has prompted banks to invest in technologies such as machine learning, AI chatbots, and robotic process automation to improve operational effectiveness. While numerous studies have examined the impact of AI adoption in developed countries, empirical evidence remains scarce in emerging markets like Malaysia. This study aims to fill this gap by examining the relationship between AI adoption and the financial performance of Malaysian commercial banks. Employing panel data analysis, the research samples Malaysia's ten major banks from 2015 to 2024. Financial performance is assessed by measuring banks' return on assets (ROA). AI adoption is determined by the application of machine learning, AI-powered chatbots, and robotic process automation. The main findings indicate that AI adoption has mixed effects on bank performance. Machine learning shows a positive impact on profitability after an adjustment period, while AI chatbots do not exhibit a consistent relationship with financial performance. Robotic process automation initially has a negative effect due to implementation costs but contributes positively in the long run. Overall, the results suggest that AI adoption in Malaysia’s banking sector remains at an early stage, with financial benefits becoming more evident over time. This study provides useful insights for bank managers and policymakers regarding the effective adoption of AI technologies in the Malaysian banking industry. Keywords: AI adoption, Machine Learning, AI chatbot, Robotic Process Automation, Financial Performance, Malaysian Banks, Panel Series Data.

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