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Cash or Cashless? Malaysia’s Shifting Payment Landscape
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Cash or Cashless? Malaysia’s Shifting Payment Landscape

As demographics across the world and in Malaysia continue to shift, consumers are increasingly seeking quicker, safer and more convenient methods to pay for goods and services. In Malaysia, 67% of consumers have used some form of cashless payment, with debit cards and online banking being the most preferred non-cash channels.

However, are Malaysians ready to go cashless – or even digital – for all their payment needs?

Our recent syndicated report on Malaysia’s payment landscape indicates that, while a majority of Malaysians make payments using cash, debit cards and online banking, only 27% have used a credit card to pay for their expenses and even fewer use mobile wallets.

To better understand Malaysians’ payment preferences, we grouped consumer expenses into three broad categories:

  1. Regular expenses: utility bills, phone/internet, insurance premiums, rent, car installments.
  2. Day-to-day expenses: eating out, food delivery, clothes shopping, grocery shopping, petrol, public transport, taxis/ ride hailing.
  3. Recreation expenses: sports activities, clubbing/drinking, hanging out with friends, going to the cinema, going to the karaoke, online gaming.

Online banking rules for regular expenses

It is no surprise that Malaysians’ payment preferences shift depending on the type of expense. For regular expenses, which make up close to half of Malaysians’ expenditure, online banking rules. The convenience provided by online banking makes it the most widely used method for recurring expenses such as phone and internet bills (53%), utility bills (47%), car loan installments (38%) and rent (37%).

Interestingly, 1 in 3 consumers still pay for their utilities with cash, indicating that there is a sizable opportunity in this space that cashless payment providers can tap.

For everyday expenses, cash is still king

While 63% of Malaysians have a debit card, its usage for day-to-day expenses remains relatively low as consumers still rely heavily on cash. For example, 93% prefer cash when they dine out, 90% use cash when they buy groceries, 89% use cash for public transport, 81% for petrol and 81% for taxis.

On the other hand, debit cards are used only for ad-hoc offline and online purchases such as shopping for clothes at retail outlets (32%), online shopping (31%) and dining out (28%).

Approximately one in four Malaysians use a credit card, mainly those between the ages of 35 and 64.

“A person’s ability to qualify for a credit card is tied to his or her credit worthiness,” says Anil Antony, Executive Director, Consumer Insights, Nielsen Malaysia. “Malaysia’s younger, more tech-savvy population, which may not have sufficient credit history to qualify for a card, could be more open to using e-wallets for everyday expenses due to the convenience factor.”

Rise of Mobile Wallets

High smart phone penetration and mobile data usage in Malaysia provide a solid foundation for mobile wallets to thrive. Indeed, awareness of mobile wallets in Malaysia is high (88%) as more and more providers enter the space. Existing mobile wallet users cite convenience as the biggest driver of usage, and we believe that adoption will continue to rise driven by the increasing popularity of app-based online shops, ride hailing services, online gaming and cinema ticket booking.

Unsurprisingly, concerns on security and fraud are biggest barriers to adoption; one in two cited security as the main reason for why they do not use a mobile wallet. In fact, among consumers aged 45-54 years old, 34% preferred the cash-on-delivery option even when shopping online, primarily to avoid falling prey to fraudulent sellers.

In addition, one in three consumers were concerned about overspending if they use a mobile wallet. Malaysians, who have historically been prudent spenders, believe that they are better able to control their expenses through the use of cash.

The way forward

The Malaysian Payment Landscape study has raised some very pertinent questions for the industry, particularly cashless payment providers. To spur the cashless economy and drive increasing adoption of cashless methods, we must ask ourselves:

  • Why aren’t more Malaysians using their debit cards, and how do we stimulate debit card usage among Malaysians?
  • Currently, adoption of e-wallets is heavily based on promotions, causing many consumers to download mobile wallet apps without necessarily using them. How can we encourage continuous, sustainable usage of mobile wallets among existing users?
  • What can providers do to alleviate security concerns among Malaysians?

Nielsen’s Malaysian Payment Landscape syndicated report covers:

  • Cash versus non-cash behaviours of Malaysian consumers
  • Brand health and perceptions towards digital payment solutions
  • Drivers for and barriers to the adoption of digital payment solutions
  • Perception and expectations of Malaysian merchants

You can find out more about the report here.