Executive Summary

• Improving infrastructure, potential global expansion and a fast-growing e-commerce market are making Malaysia an increasingly attractive market in the region. Despite the growth and increasing potential, however, Malaysia is still dominated by cash. As the government and banks began to provide basic financial and banking services to the unbanked population, by expanding banking infrastructure, launching new branches, promoting agent banking network and making efforts to change consumer payment habits, payment cards gradually became more accepted, with their use consequently growing during the review period (2010–2014).
• Concentrated efforts by the government and emerging investments in e-payment infrastructure led to a steady increase in the banked population. According to the 2014 World Bank Global Findex survey, the percentage of the Malaysian population aged 15 or above with an account at a financial institution increased from 66.2% in 2011 to 80.7% in 2014.

Gradual shift towards electronic payments

• BNM is taking initiatives to encourage cashless and electronic payments, and has been striving to reduce the use of checks, expand merchant acceptance of electronic payments, and increase the adoption of cashless payments by the government, consumers and businesses. Consequently, in April 2014, it announced a reduction in fees for IBG transactions and increased check-processing fees. Other initiatives include the launch of the JomPAY service and the ePIF fund in 2015. With initiatives such as these, and a shift towards electronic payments by banks and participating merchants, card-based payments grew both in value and volume terms.

Debit cards continue to dominate the payment cards market

• In terms of transaction value, debit cards remained the largest with 74.2% of the payment cards market in 2014, and are anticipated to dominate over the forecast period. The rising awareness of the benefits of debit cards, the adoption of security measures by card issuers and sustained government efforts to encourage debt-free payments promoted the use of debit cards. Growths in debit card transaction value and volumes were also supported by advances such as contactless technology. In 2014, the Malaysian Chip Card Specification initiative was launched to migrate to EMV standards. As a result, from 2015 onwards, banks started to gradually replace domestic debit cards with EMV-compliant cards with contactless functionality. According to BNM, complete migration to EMV standards is expected to complete by January 1, 2018.

Rising low-cost POS terminal installations to increase scope for card payments

• Several initiatives are being taken by banks and telecom companies to increase POS terminal penetration. In January 2015, Maybank and Maxis Bhd launched the Maybank mPOS service for SMEs. In December 2014, Telekom Malaysia Bhd announced a cash rebate incentive of US$229.2 (MYR750) for SMEs which install SurePay POS terminals. By the end of 2020, the company plans to target at least 100,000 SMEs. In October 2013, CIMB introduced an EMV-compliant mPOS, Plug n Pay, for a one-time fee US$76.4 (MYR250). These initiatives are anticipated to drive card-based payments.

Growing preference for m-payments

Malaysia’s cards and payments industry moved towards mobile technology during the review period, as telecoms companies moved into payments. The mobile wallet M-money was launched in 2007, and following its rise in popularity, other telecoms companies launched m-payment services, such as Celcom AirCash by Celcom Axiata Bhd in 2013. PayPal launched its Zong m-payment service in 2011. Banks are also launching m-payment services to gain a share in the growing m-payment market.

For more information contact ruben.kempeneer@sg.timetric.com