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Malaysia Payments Market - Growth, Trends, COVID-19 Impact and Forecasts (2022 - 2027)

Malaysia Payments Market - Growth, Trends, COVID-19 Impact and Forecasts (2022 - 2027)

  • October 2022
  • 118 pages
  • ID: 6360566
  • Format: PDF
  • Mordor Intelligence LLP

Summary

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The Malaysian payments market was valued at USD 157.00 billion in 2021, and it is expected to register a CAGR of 10.30% during the forecast period 2022-2027. The development of payment technologies has accelerated significantly over the past ten years. Although cash is one of the primary payment methods in the country, digital transactions are advancing rapidly, which is making the nation a digital nation. The government has established an infrastructure for the smooth functioning of the same.

Key Highlights
Payment systems are an essential component of a country’s economic infrastructure. The Bank Negara Malaysia-owned Payments Network Malaysia Sdn Bhd (PayNet), a payment subsidiary, operates Malaysia’s extensive value payment system, RENTAS, which permits the transfer and settlement of high-value interbank payments and securities. Its failure could trigger a systemic crisis and send shockwaves through the financial system. With RENTAS’s effective operation, transactions may be completed securely and promptly, boosting economic performance.
The country is making significant strides in e-commerce transactions, supported by government efforts and increasing smartphone and internet penetration. Further, private sector financial institutions in the country have also backed the government to increase the digitalization of small and medium enterprises (SMEs) beyond financing to open solutions by digitalizing the full range of SME operations.
Malaysia’s adoption of card-based payments is primarily supported by the gradual rise in consumer spending on online stores as well as Point of Sale, the government’s financial inclusion measures, and increasing preference for contactless payments owing to the convenience and ease it offers.
The country has been witnessing a tremendous uptake in online payments for goods and services, especially for e-commerce transactions both in urban and semi-urban cities during the COVID-19 outbreak. In addition, fintech and e-wallet firms are increasing their efforts to integrate technology into the local shopping experience, enabling access to online payments for consumers in the country. Further, more technological and economic advancements in the coming years are expected to boost the country’s digital payment landscape and robust payment infrastructure.
The e-commerce sector in Malaysia has proliferated in recent years. Due to recent technical developments, the country has a high internet penetration percentage. Due to the COVID-19 pandemic, more customers are using mobile devices to make purchases of goods and services online.

Key Market Trends

Adoption of Card-Based Payments to Drive the Market

Malaysia’s adoption of card-based payments is primarily supported by the gradual rise in consumer spending on online stores and Point of Sale, the government’s financial inclusion measures, and increasing preference for contactless payments owing to the convenience and ease it offers.
Further, the adoption of card-based payments in the country is largely supported by the continuous efforts of the Central Bank. For instance, in December 2021, Malaysia’s Central Bank, Bank Negara Malaysia (BNM), released of Draft of the Payment Cards Framework for a reduction of the interchange fee on debit cards to 0.10% from the previous 0.15% and on credit cards from 1.10% to 0.60%.
In addition, the Draft seeks to ensure that the cost of accepting payment cards remains fair and reasonable, enables merchants to manage their payment card acceptance costs, and addresses other distortions and frictions in the payment card market. Such instances are further expected to strengthen the adoption of card-based payments among consumers as well as merchants across the country.
Further, the volume and value of card-based transactions are rapidly increasing across the country in physical and online transactions on e-commerce. For instance, as per data reported by the Central Bank of Malaysia, the volume of credit card transactions in Malaysia was 510.1 million in 2019, which increased to 556 million in 2021. Further, from Jan 2022 to July 2022, the volume of credit card-based payment transactions accounted for 395.7 million, out of which 179.9 million were online transactions for e-commerce.
Similarly, the volume and value of debit card-based have been witnessing significant growth in the country’s payment landscape. For instance, as per data reported by the Central Bank of Malaysia, the volume of debit card transactions in Malaysia was 371 million in 2019, which increased to 736.8 million in 2021. Further, from Jan 2022 to July 2022, the volume of debit card-based payment transactions accounted for 642.2 million, out of which 152.1 million were online transactions for e-commerce. In addition, the value of debit card-based payments increased from MYR 52,394.1 million in 2019 to MYR 78,212 million in 2021.

Online Sales to Boost the Growth of the Market

In online sales, card payments are one of the prominent payment methods used in the country. In card payments, people use either credit, debit, or charge cards for the payments. Further, the growing digitalization in the country is boosting card payments in the country. According to a recent report by Visa, 70% of Malaysians support the nation moving away from cash payments and toward digital ones.
During the COVID-19 pandemic, Malaysia’s e-commerce industry grew, owing to various circumstances, most notably the government’s encouragement to shop online and stay at home for protection. Many Malaysians have learned how to start shopping online for groceries and other daily necessities after the Movement Control Order (MCO) was implemented. Malaysians use online marketplaces to conduct their business and look for services while staying home to maintain safety and follow SOPs. Additionally, Malaysia’s adoption of electronic and digital payments was expedited by the COVID-19 epidemic.
In Malaysia, e-wallets and digital wallets are becoming more popular as payment options. During the COVID-19 outbreak in Malaysia, when Malaysians were concerned about virus transmission by banknotes and coins, the use of digital wallets and e-wallets increased. E-wallet transactions will be logged digitally and automatically, allowing users to track their spending easily. As mobile phone payments are so convenient in Malaysia, a mobile-first nation, using digital wallets also eliminated the need for Malaysians to carry cash.
With the ability to be used for online and offline transactions, digital wallets and e-wallets have the same flexibility as credit and debit cards. This mode of payment is popular in Malaysia with both the younger, more technologically aware generation and the slightly older, more technologically savvy generation, who actively look for discounts, bargains, and offers that are routinely offered in different e-wallets. In Malaysia, there are currently over 50 different types of digital wallets, each with special characteristics and selling factors.
Digital wallets are gaining significant traction in cross-border payments in the e-commerce sector. Further, the growing collaborations in the country are analyzed to boost digital wallets during the forecast period.

Competitive Landscape

Malaysia’s Payment Market is highly competitive with many local and global players. The major players in the market are leveraging strategic collaborative actions and innovations to improve their market percentage and enhance their profitability.

June 2022 - Samsung Pay introduced Samsung Wallet combining Samsung Pay and Samsung Pass. Moreover, it can also securely save passwords, just like Samsung Pass, as well as monitor its digital assets, such as cryptocurrencies. Moreover, Samsung Wallet will include IDs, driving licenses, and even student IDs.
February 2022 - Huawei partnered with Aleta Planet and UnionPay to support Digital Mobile payments on Huawei Phones. Huawei phone users will now find it a breeze to pay with the new AP-1 / Huawei Pay UnionPay card to make cashless payments.

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