Card payments rise in cash-dominant Malaysia amid Covid-19
Consumers shift to digital tools to avoid exposure to potential disease vectors
25 Sep 2020 | The Asset

Malaysia has traditionally been a cash-dominant society. However, the Covid-19 pandemic has accelerated Malaysia's push towards electronic payments, with card payments at point of sale (POS) terminals continuing to rise.

Card payments in Malaysia, according to GlobalData, will grow by 4.3% to reach 14.4 billion ringgit (US$52.4 billion) while ATM cash withdrawals will increase marginally by 1.3% in 2020.

“Malaysians are increasingly using digital channels for making payments with cash taking a back seat,” says Ravi Sharma, banking and payments lead analyst at GlobalData. “While card payments are on the rise, the growth rate will be impacted due to the decline in consumer spending following Covid-19 pandemic.”

As wary consumers stay at home, they are expected to use online channels to purchase goods. The rise in e-commerce transactions will further support card payments as credit and debit cards account for 36.8% in the total e-commerce value in Malaysia, according to latest 2020 Banking & Payments Survey.

Even while shopping in-stores, consumers are gradually shifting away from cash to digital payment tools to avoid exposure to potential disease vectors like cash and POS terminals.

The central bank of Malaysia – Bank Negara Malaysia (BNM) – has also been playing a key role in promoting card payments in the country. In 2019, BNM capped interchange fees on card transactions making card acceptance cost-effective for merchants. It even waived interchange fees on debit cards for payments of government services in the country until December 31 2020.

Banks, too, are playing a key role in promoting card payments in the country. For instance, in June 2020, Hong Leong Bank launched the Cashless Lagi Senang campaign to provide mobile POS terminals to merchants at a lower cost.

POS installation, and rental fee and merchant service charges, are waived until December 31 2020. This will allow merchants to start accepting all forms of payments (including contactless payments) via debit and credit cards and mobile wallets.

“The Covid-19 crisis has adversely affected the Malaysian economy in the short-run,” Sharma notes. “With the government gradually easing lockdown restrictions, a rise in business activities and consumer spending could be seen, which will further support card payments growth.”

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