Urgent Corrective Action Required to Catalyse Debit Card Usage in Malaysian Retail Industry

Credit cards are held by less than 29 percent of the adult Malaysian population whereas 92 percent have at least one deposit account, of which 90 percent are active accounts. This means that an estimated 83 percent or more of the adult population now has a debit card on hand. Yet, the per capita debit card transaction was only 3.5 in 2016, which is very far from the national target of 30 by 2020. On average, each debit card was used 2.46 times a year in 2016, a stark contrast to the average of 41.8 for credit card. On a positive note, the ratio of per capita credit card transaction to per capita debit card transaction has dropped from 6.7 in 2013 to 3.6 in 2016.

Recent Bank Negara Malaysia (BNM) statistics and the MasterCard Online Shopping Study 2017 also show growth in debit card use at a compound annual growth rate of 25.1 percent and 22.3 percent in transaction volume and value, respectively, over the past 2 years. Frost & Sullivan confirms this; it expects the number of debit cards in Malaysia to reach 45.5 million in 2017 with a total transaction value of RM25.6 billion in 2017.

Frost & Sullivan recently conducted a market survey on use of debit card in Malaysia. Click here for a complimentary view of the results.

The survey revealed that if the respondent had used a debit card in the past but not during January-March 2017, there is a 50 percent chance of them not using it at all, indicating a very high drop-out rate. The prospects get worse when people who have never used a debit card before are taken into account.

“Attention thus far has been focused on building acceptance of debit cards and not on incentivizing and increasing its use,” said Frost & Sullivan Digital Transformation Industry Principal Quah Mei Lee. “Our survey reveals the importance of immediately incentivizing first-time use so that banks and debit card acquirers can unlock the potential of these cards. Cash back on debit card use is already being implemented though its impact has been narrow due to limited reach. Demand for debit cards as an online payment method holds significant potential, which the industry is yet to leverage. Stakeholders need to foster a more user-friendly online experience for customers. The ability to accept debit cards as a payment method will simultaneously boost online retail.”

Once users have tried debit cards, experienced a seamless process across touch points, and realized the benefit of not having to carry much cash, they are more likely to become active users. The retail industry’s push towards 800k terminals by 2020, coupled with higher acceptance of debit card payments among merchants – especially small businesses – due to the lower merchant discount rates (MDR), will transform the retail experience in Malaysia over the coming years. Lower use of cash also means less dependence on security guards, cash handing costs, and cashier staff requirement to man stores.

“If the required corrective action is taken, self-checkout, mobile payments, and online transactions could become the norm in the Malaysian retail experience,” concluded Mei Lee. “Users will also adopt debit cards for smaller ticket items, making it the preferred non-cash payment method for everyday payments.”

About Frost & Sullivan

Frost & Sullivan, the Growth Partnership Company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today’s market participants. For more than 50 years, we have been developing growth strategies for the global 1000, emerging businesses, the public sector and the investment community. Contact us: Start the discussion.

Media Contact:
Carrie Low
Corporate Communications – Asia-Pacific
P: +603 6204 5910
F: +603 6201 7402

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