Frost & Sullivan: M’sia needs to boost debit card usage in retail sector


Market research firm Frost & Sullivan said Malaysia needs to leverage on debit cards usage in the retail segment in order to bolster cashless transactions, coupled with financial inclusion of its remaining 8% unbanked population.

Its digital transformation industry principal Quah Mei Lee noted demand for debit cards as an online payment method holds significant potential, which the industry has 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 realised the benefit of not having to carry much cash, they are more likely to become active users,” she said in a statement yesterday.

Quah added that lower use of cash also means less dependence on security guards, cash handling 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,” said Quah.

Users will also adopt debit cards for smaller ticket items, making it the preferred non-cash payment method for everyday payments, she said. Frost & Sullivan’s recent market survey on the use of debit cards in Malaysia showed that if respondents had used a debit card in the past but not during January-March 2017, there is a 50% chance of them not using it at all, indicating a very high drop-out rate. The findings revealed prospects get worse when people who have never used a debit card are taken into account.

Quah said attention thus far has been focused on building acceptance of debit cards and not on incentivising and increasing its use.

“Our survey reveals the importance of immediately incentivising 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,” she added.

Frost & Sullivan’s data indicated the retail industry’s push towards 800,000 terminals by 2020, in tandem with higher acceptance of debit card payments among merchants — especially small businesses — due to the lower merchant discount rates, will transform the retail experience in Malaysia over the coming years.

The research arm showed debit card transactions accounted for 4% of the US$123 billion (RM528.9 billion) retail market in Malaysia in 2016, while credit card transactions represented nearly 22% at RM118.5 billion.

Credit cards are held by less than 29% of the adult Malaysian population, whereas 92% have at least one deposit account, of which 90% are active accounts.

On average, each debit card was used 2.46 times a year in 2016, a stark contrast to the average of 41.8 times for credit cards.

An estimated 83% 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 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,” Frost & Sullivan said.

Bank Negara Malaysia’s recent statistics showed growth in debit card use at a compound annual growth rate of 25.1% and 22.3% in transaction volume and value respectively, over the past two years.

The number of debit cards in Malaysia is expected to hit 45.5 million in 2017 with a total transaction value of RM25.6 billion in 2017. The data is also supported by the MasterCard Online Shopping Study 2017.