The COVID-19 pandemic has prompted Malaysia’s digital economy to flourish, and for consumers to become more receptive towards digital modes of payment.
The volume of cashless transactions is expected to double in 2020 as compared to the year before said IDC.
The pandemic has resulted in spending behaviours to shift to digital means when the movement restriction orders were enforced. High-contact physical payments involving cash and signatures are avoided, culminating in changes for both sides of the transaction. Micro, small, and medium businesses especially, have started to see the benefits of embracing digital payments.
"It is clear that cashless payment behaviours will likely persist post-pandemic. This increased awareness will come with a silver lining for SMEs who have embraced digital payments by providing transaction trails for businesses who have traditionally been cash-based. These could aid in applying for micro-loans and providing potential creditors more visibility into the business" said Darshiniy Selvaratnam, Senior Market Analyst at IDC Financial Insights.
Source: IDC AP Black Book Live, V2 June 2020
Nevertheless, IDC predicts that Malaysian ICT spending will contract by 3.2% as enterprises freeze their spending to relook their business priorities, and move to targeted digital spending instead. They also foresee a decrease in Malaysian SME ICT spending during the same period, with the 2020 forecast anticipating a –4.4% dip in spending while enterprises examine what are their options.
Despite the predictions, businesses admit to the need to continue through the respective lockdown or semi-lockdown periods, and IDC noticed that SMEs are interested in trying new digital platforms that can help them push their business ahead, creating stability in 2021.
The take up rate for cashless payment methods by SMEs were originally low, with few businesses willing to pay for the Merchant Discount Rates (MDR) required with card machines. As of 2019, only 40% of Malaysia’s transaction volumes were cashless. The current increased receptiveness towards QR-code based payments were aided by the three major e-wallet players, promoting it as the most viable and cost-effective way of accepting digital payments. Moreover, consumers have gotten accustomed to QR codes for contact tracing, making it a smoother transition to accepting QR payments.
The ePenjana initiative that ended in September have also helped with urging SMEs to collaborate more with e-wallet platforms. Apart from encouraging consumer spending via cashbacks, discounts, and rewards, the initiative helped to give the necessary exposure for these businesses as well.
Should the trends observed over the last six months continue in the same direction, Malaysia would be able to meet BNM’s target of 200 e-payment transactions per capita by the end of 2020 (BNM's Financial Sector Blueprint 2011-2020).