Weathering
the pandemic
PayNet Digital Payments Insights Study 2022

PayNet Digital Payments Insights Study 2022

Content
Foreword

3

Insights and trends

4

Key observations

9

Special Focus 1: SMEs adoption of digital payments

26

Special Focus 2: Relevance of cash

33

Conclusion

38

About PayNet, products and services

41

Appendix – survey questions

45

PayNet Digital Payments Insights Study 2022

3

Foreword
It gives me great pleasure to introduce the PayNet Digital Payments Insights Study 2022,
our inaugural publication focusing on key trends influencing and reshaping thepayments landscape in this country

Peter Schiesser
Group Chief Executive Officer
Payments Network Malaysia
Sdn Bhd

The recent 2 ½ years was unparalleled by any measure.
COVID-19 impacts are still resonating and, in many
respects, have completely transformed our lives.
Movement controls, physical distancing and heighted
personal hygiene concerns jolted rapid adoption ofdigital payments by consumers and digitaltransformation by businesses. Digital payments
continues to be a critical enabler for economic
development and growth.

Two key observations from our fieldwork in Q4 2021
are, firstly, use of cash by consumers in making
payments was not as high as before the pandemic
and secondly, businesses’ payment behaviours acrossthe nation differ. Those in the South and East Coastregions had not noticeably changed their preference
for cash payments. In other regions, particularly theNorth, clear shifts to digital payments since thepandemic can clearly be seen.

Payments Network Malaysia Sdn Bhd (‘PayNet’)commissioned Nielsen IQ to conduct this Study in Q4
last year to gauge the extent of payment behaviourchanges among consumers and businesses throughout
the country.

Our Study also included 2 special focus areas - theextent of digital payments adoption in SMEs’ digitaltransformation agenda and factors driving continued
use of cash for payments.

6 key trends were observed in re-shaping the Malaysianretail payments landscape. Preference for mobile overdesktop banking in making payments, the rise of QR
payments, continued trust in cards (especially debit
cards) for in-store payments and dwindling cheques
usage were noted. An important trend to note from two
key observations is the significant erosion in cash
usage, although it remains the primary payment mode.

Findings from this Study indicate Malaysia is on theright trajectory for mass digital payments adoption
and we conclude with 4 key enablers for sustained
adoption. We trust this Study provides useful
information and valuable insights as we navigate
through the new age of digitalisation.
6 April 2022

PayNet Digital Payments Insights Study 2022

Insights and trends

4

PayNet Digital Payments Insights Study 2022

5

Malaysian payments landscape: 6 key trends

1

Mobile banking preferredover desktop banking

3

Consumers increasingly prefer‘on-the-go’ mobile banking for
payments compared to desktop
online banking, mainly due to theflexibility in catering to both online
and in-store purchases.

2

Rapid rise in
QR payments
QR payments grew the fastest
during the pandemic, with 13%
higher usage. Factors include
convenience (increased merchants’
acceptance), usage promotions byproviders and merchants as well as
its use for disbursing government
payouts.

Cards are trusted forin-store e-payment

5

Card payments are the mostpopular digital payment mode forin-store purchases, mainly due tothe high degree of trust andconvenience (wide acceptance andeasy to use).

4

Lower usage ofcash payments
Malaysians generally use 2-10%
lesser cash compared to before thepandemic. Age, gender, locationand income levels influence
preference. Businesses in Southern& East Coast regions remainstaunch users of cash.

Cash is still the main
payment mode
Despite declining trend, cash
remains the most preferredpayment choice. 78% of Malaysians
still prefer cash, 11% lesser since
the pandemic (89%). 48.4% still pay
by cash on a daily basis, more so in
non-urban areas (nearly 2/3) thanin urban areas (36.2%).

6

Cheque usage continues
to dwindle
Cheques are the least preferredpayment option with only 4% of
Malaysians still using this payment
mode, down 5% from 9% before
the pandemic.

Note: ‘Before pandemic’ or ‘pre-pandemic’ refers to prior to 18 March 2020, ‘currently’ refers to Q4-2021 (when the field study was conducted)
and ‘e-payment services’ refer to JomPAY, FPX, DuitNow, DirectDebit and IBG

PayNet Digital Payments Insights Study 2022

6

Businesses noted their customers
no longer prefer to pay by cash
From companies' perspective, e-payments services are now the most
preferred payment mode, followed by e-wallets. A deep dive on the rise of ewallets is on pages 19-22.

Before Pandemic

Currently

1 Cash

1 E-payments services

2 Credit Card

2 E-wallets

3 E-payments services

3 Cash

4 Debit Card

4 Credit Card

5 E-wallets

5 Debit Card

E-payment services overtook
Cash as the most preferredpayment option since thepandemic

Source:Q17. Could you rank the top 5 payment methods (used by customers) in your company before COVID-19 pandemic?
Q20. Could you rank the top 5 payment methods (used by customers) in your company currently?

PayNet Digital Payments Insights Study 2022

7

Overall use of cash is still highalthough this declined since the pandemic

78%

Malaysians use cash to pay

Down -11% since the pandemic

Consumers’ use of digital payments depends on their age,gender, ethnicity and their location (i.e. urban vs non-urban)

Businesses’ digital payments usage tend to be influenced bytheir customers and supply chain’s preferences, geographicallocation, type and size of business.

Urban and single females who are 18-25 years
tend to prefer digital payments• Businesses in Northern, Central and East Malaysia
are moving to digital payments as the preferred mode

Non-urban and married males who are 61-65 years
tend to still prefer cash

• Businesses in East Coast and Southern regions
tend to still prefer cash

Source:Q18. What kind of payment methods have you used before the COVID-19 pandemic?
Q20. What kind of payment methods are you using currently?

PayNet Digital Payments Insights Study 2022

8

On average 48.4% of Malaysians still use cash for daily expenses,
even more so in non-urban areas
The preference for cash is lesser for payment of daily expenses, with 48.4% daily
expenses in Malaysia still paid in cash.
In this context, the ‘urban-rural divide’ is obvious – only 36.2% living in urban areas andnearly 2/3 living in non-urban areas are sticking to cash payments. Convenience(accepted everywhere) is the main reason cited for paying with cash and for not
wanting to switch to cashless. Refusal to adopt cashless is also due to the perceptionsof technology failure and the notion that it is easier to keep track of personal budget.

Top 3 reasons for pay with cash

Top 3 reasons for not wanting toswitch to digital payments

1 Cash is accepted everywhere (80%)

1 Cash is accepted everywhere(78%)

2 Personal preference(50%)

2 Fear of technology failure(53%)

3 Feels more secure(37%)

3 Easier to stay within budget(38%)

Source:Q21d. Why do you use cash currently?
Q21e. The % of your payments made in cash remain unchanged before COVID-19 pandemic and currently, could you tell us why?

36.2%
urban areas

63.5%
non-urban areas

PayNet Digital Payments Insights Study 2022

Key observations

9

PayNet Digital Payments Insights Study 2022

Malaysia retail payments landscape:the big picture
When movement controls were first imposed in March 2020,
economic activities were deeply impacted.
Many businesses quickly pivoted to digital and remote working
with home delivery options for survival. These changes have sinceremained as many transitioned to a hybrid setting as the country
transitions into an endemic phase.
The accelerated consumer adoption of digital payments has yet to
fully offset the dominance of cash, but our study suggests cash
usage has slowed. The observed behavioural changes since thepandemic are also expected to be largely permanent.

10

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11

The Malaysian digital payment
consumers persona
Age, gender, ethnicity and geographic locations influence payment behaviours. Early adopters tend to be among 18-25 year old
single females living in urban areas, whereas 61-65 year old married males living in non-urban areas tend to be among the last to adopt
or use digital payments. Mainstream users tend to be 18-40 year old males and females living in urban areas.

61-65 year old married males
living in non-urban areas

18-40 year old
living in urban areas

18-25 year old single females
living in urban areas

Later adopters

Mainstream consumers

Early adopters

Based on highest user age group monthly

PayNet Digital Payments Insights Study 2022

12

Adoption and usage drivers
We observed age also influences the choice of digital payment mode.

Credit cards

Debit cards

E-wallets“Allow consumers to borrow funds
to pay for goods and services.”“Deduction of bank balance upon
payment of goods and services.”“A pre-paid account where user’s topup periodically.”

Main user groups:
26 – 30 year old

Main user groups:
36 – 40 year old

Main user groups:
31 – 35 year old

Based on highest user age group monthly

PayNet Digital Payments Insights Study 202213

Choice of digital payment mode is also influenced
by generational attitudes towards technology

Gen Y & Z(“I want to”)

Generation X(“I don’t mind”)

Boomers(“I have to”)

Technology barrier – Low

Technology barrier – Moderate

Technology barrier – High

Digital natives. Technology issecond nature, ingrained in almost
every aspect of daily lifestyle.

Digital adopters/adapters. Uses
technology more for necessity in someparts of their daily lifestyles.

Trust issues with technology, adopting
and using with help or support of techsavvy family members or friends.

Motivation – Perks and rewards(for Gen Y), gamification andinstant gratification (for Gen Y & Z).

Motivation – More substantive
rewards (e.g. cashback, rebatesand discounts) are key attractions forthis Generation.

Motivation – Not motivated by perks or
rewards. Will adopt digital payments
when there is no other choice andextremely simple to use (e.g. contactlesscards, not requiring PIN or TAC).

Influence – Typically relies onsocial media & netizens’comments, tweets, reviews andfeedbacks in decisions to adopt
and/or continue usage. Moreinclined to what is trendy.

Consumer articulation in qualitative focus groups

Influence – Typically relies on ‘word of
mouth' positive experience from own
social and family circles. Adopts anduses only when digital payment isalready mainstream, popular andproven convenient, easy to use with nosecurity or trust issues.

Influence – Typically relies on decisions
made by family members who are also
willing to assist in adoption and usage.

PayNet Digital Payments Insights Study 2022

14

Consumers perspectives of cash usage
Across all demographics, cash usage
decreased since the pandemic.
Male

Leading the change are 18-25 year old
single females living in urban areas. 1835 year old (Gen Y & Z) are the highest
adopters of digital payments.
At the other end of the spectrum, 61-65
year old married males in non-urban
areas (a sliver of the Boomer
Generation) are the slowest to adopt
digital payments.

Currently

Before pandemic

FemaleMalay
ChineseIndianBefore vs After

25.47

24.18

-7.02

17.16

25.89
23.12
23.11

Urban

23.31

Suburban/ Rural

27.01

18 - 25 years old

25.56

-5.83

20.06

-8.69

14.42

24.59

Others

-5.74

19.72

-2.98

21.62

-4.62

18.49

-9.18

14.12
24.74

-2.27
-8.30

17.26

26 - 30 years old

24.04

15.96

-8.08

31 - 35 years old

23.66

15.55

-8.11

36 - 40 years old

24.48

18.25

-6.23

41 - 45 years old

25.29

19.11

-6.18

46 - 50 years old

25.99

21.90

-4.09

51 - 55 years old

24.94

21.13

-3.82

56 - 60 years old

25.49

21.24

-4.25

61 - 65 years old

26.00

Orange font refers to above average changed cash usage
Red denotes lowest change in cash usage

Source:Q19a. How frequently in a month do you use [cash] before COVID-19 pandemic?
Q21a. How frequently in a month do you use [cash] currently?

23.78

-2.22

PayNet Digital Payments Insights Study 202215

Consumers’ digital habits drives
digital payments adoption and growth
Malaysia has a relatively young population
with a median age of 29.6 years. 69.6% areaged 15-64 year old1.
This means that Malaysia has a sizeable
population, who are more likely to opt for
digital payments. Online lifestyles andneeds of the mass digital payment user
segment (i.e. 18–40 year old) can largely
be categorised into 3 main groups.

Shopping
Food & dining
Travel/holidays
Other general services(e.g. beauty, health)• Money transfer••••

Mainstream
and familiar

Essential needs and services
consumed online andrepresents mass digital
payments adopters

Modernand trendy

Early majority, among thefirst to try what’s new and ‘in’,
motivated by FOMO (fear of
missing out)

•
•
•
•

E-hailing/transportation
Entertainment
On-demand services
Other payments (e.g. loans,insurances, rent, utilities)

New andemerging

Innovative e-payments users
in new untested areas,
increasingly gaining traction
as new activities and needs
shape adoption and usage

•
•
•
•

Knowledge/e-learning
GamingHealth & fitness
Home privacy & security

1 Dept of Statistics Malaysia, extracted 16 Feb 2022

Source:Q23. Which mode of payments do you use for making the following types of payment currently?

PayNet Digital Payments Insights Study 2022

16

Different digital payment modes are preferred,depending on context
Debit cards and e-wallets are used more
for out-of-home consumption (e.g. eatingout, retail & groceries spend in-store).
E-payment services are used for utilities
and bills payments, mainly out of necessity(i.e. counter closures due to movement
controls). The habit largely continued evenafter counters re-opened. All types of digital
payments increased in this space, except for
credit cards payments.
Credit card usage behaviours remained
stable, probably due to its relative maturity(mainstream usage).

E-walletE-payment services

Eating out

41%

Utilities bills

37%

Food delivery service

Online shopping

11%
13%

Money transfer

7%
10%

29%

Electronics purchase

6%
9%

29%

Road tax

6%
9%

25%

Health & personal care

16%

Groceries

17%

Utilities bill

76%
60%

36%

65%

Eating out

Health & personal care

82%

34%
34%

82%

Credit Card

Debit Card

Groceries

34%
45%

82%

30%
37%
24%
30%

Eating out
Groceries

18%
18%

Petrol18%
18%

Petrol17%
23%

Consumer electronics
purchase

18%
18%

Online shopping

17%
21%

Health & personal care

15%
16%

Before pandemic

Source:Q22. Which mode of payments do you use for making the following types of payment before COVID-19 pandemic?
Q23. Which mode of payments do you use for making the following types of payment currently?

Currently

PayNet Digital Payments Insights Study 202217

Consumer attitudes toward digital payments
The higher inclination toward digital payments suggest Malaysia is nearing an ‘inflection point’ of consumer mindset transformation.
Behavioural shifts were noted, with preferred digital payment modes depending on the payment contexts.

Before Pandemic

Cash or cheques for over-the-counter paymentsof utility and bills payments

Cash for purchases of F&B, retail or groceries at
hawkers, food trucks, stalls and other micro sellers

QR payments were ‘niche’ (only to those familiar
with QR technology), despite increased awareness& adoption campaigns

Currently>

E-wallets, JomPAY, DuitNow and FPX, especiallysince the movement controls. For over-thecounter bill payments, debit cards and QR
payments are replacing cash>

E-wallets, DuitNow and debit cards, as micro
sellers turned to food delivery apps, online
marketplaces and social media as physicaloperations were stopped>

QR payments reaching mainstream acceptanceas major e-wallets become inter-operable and
DuitNow QR available in mobile banking apps

Source:Qualitative Focus Group Discussion with digital payment users aged 18-65 years old living in Klang Valley

PayNet Digital Payments Insights Study 2022

18

Trust in card payments remains highCards continue to be a trusted digital payment mode.

65%
51%

50%
39%

Convenience

Large payments

Easier to track expenses Merchants acceptance &reward points

31%

Control on spending

22%

Cash is unsafe

Debit and credit cards are among the earliest forms of digital payments and remained the digital
payment of choice for 3 main reasons.
Convenience (accepted at many businesses and easy to use), able to handle large payments and track
expenses are main reasons for using cards. Rewards and cashbacks (more for credit cards and recently,
debit cards) reinforced continued usage.
Source:Q29. Why do you use Debit or Credit Card for your transactions?

PayNet Digital Payments Insights Study 2022

19

E-wallets strong growth
Our study confirmed increasing acceptance of e-wallets.
Out of 64% Malaysians* who use e-wallet apps, all except 4%
are monthly users. Monthly usage frequency on average rose
60% since the pandemic from 10.5 times to 16.8 times. Nonurban users also grew, thanks to government incentives
disbursements via major e-wallets and continuous incentives forusage by e-wallet providers and merchants.

64%

Malaysians* are e-wallets users
BP: 51%

The average per transaction value increased 15% to RM175,
compared to RM152 before the pandemic, mainly due toexpanded features (e.g. bill payments, investments, insurance
and other in-app financial products purchases andsubscriptions) and expanded user groups of 31-60 year old (BP:below 30s).

96%
Use e-wallets monthly
BP: 92%*18-65 year old Malaysians, BP – Before pandemic (prior to 18 March 2020)
Source:Q17. Which of the following statement applies to you?
Q18. What kind of payment methods have you used before COVID-19 pandemic?
Q19a. How frequently in a month do you use [e-wallets] before COVID-19 pandemic?
Q19b. You have mentioned that you spent on [e-wallets] before COVID-19 pandemic, howmuch on average you spend per transaction?
Q20. What kind of payment methods are you using currently? Please select all that applies
Q21a. How frequently in a month do you use [e-wallets] currently?
Q21b. You have mentioned that you spent on [e-wallets] currently, how much on average you
spend per transaction?

Average monthly usage: Average transaction value:

16.8x
BP: 10.5x

RM175
BP: RM152

PayNet Digital Payments Insights Study 2022

20

The e-wallet market is crowded, but consolidating
78% of Malaysians have more than 1 e-wallet but this ecosystem of more than 50 bank and non-bank e-wallets1 iswitnessing users gravitating toward the following top 5 e-wallets:

Top 5 e-wallets downloaded by Malaysians

Top 4 driving factors for e-wallet downloads

83%

58%

49%

Fast and smooth top up
process

Merchant availability

Reward points/cashback

Easy to use interface

50%

49%

45%

36%

43%

43%

Source:1 https://www.bnm.gov.my/list-of-regulates, e-money issuers, extracted 30 March 2022
Q35. You mentioned that you have a e-wallets installed in your phone. Can you please tell us which of the following e-wallets do you have installed in your phone?
Q39. What are the reasons for using [brand] the most?

PayNet Digital Payments Insights Study 2022

21

Consumer sentiments infer need forconsolidation of e-wallets
6 common sentiments observed among Malaysian e-wallet users:
Synonymous withcashless payments

Top-of-mind association for cashless payments

Attractive rewards

Synonymous with rewards and other benefits including
cashback, vouchers, points collections and prize
redemption

Wide acceptanceat many businesses

Wide acceptance across many payment contexts andlocations, regardless of merchant size, especially inurban areas

Convenient

User-friendly, easy to download, set-up, use and top-up

Inter-operable
DuitNow QR

Convenient to have more than 1 e-wallet, as most support
inter-operable acceptance

Too many
providers

Despite inter-operability, there are too many e-wallets
with little differentiation among the brands

The highest feedback received was for Malaysia to have a national consolidated
e-wallet. This indicates consumers’ desire to maintain a single source of fund to
make any QR payments.

Source:Qualitative Focus Group Discussion with digital payment users aged 18-65 years old living in Klang Valley

The rising popularity andadoption of e-wallets are
driven by rewards, flexibility
and convenience but overall
user sentiment is that ewallet is a saturated spacewith too many e-walletplayers

PayNet Digital Payments Insights Study 2022

22

Drivers of e-wallet adoption and usage
Incentives have spurred
adoption and usage
Government-driven incentives
Our study revealed novelty and incentives
tend to drive adoption and usage. After the
upfront reward/incentive is exhausted,some got into the habit, but some also
returned to cash usage.

Commercially-driven incentives
Payers’ choice of e-wallets are driven by
rewards based on their lifestyle needs andusage. Gamification-based rewards tend to
appeal to Gen-Y and Gen-Z.

“I think it is about 2 or 3 years ago. It is an
incentive under the previous government.”- Male, Engineering student, 24,
B40, living in Cheras, Kuala Lumpur“Maybe people start to be aware of all these.
Some don’t know, but because they want to
get the money, then only they start todownload the app, and get used to the app.”- Female, Insurance agent, 36,
M40, living in Semenyih, Selangor“I use A (marketplace platform) because theycome with free delivery and coins. I used thecoins to offset my purchase amount. That is
why I prefer using APay1.”- Female, Housewife, 58,
B40, living in Sri Petaling, Kuala Lumpur“Everyone installed the app to get the RM30.”- Male, Tech follower & Business Analyst,
26, B40, living in OUG, Kuala Lumpur“I first used it to redeem the RM30 incentive,
and from that I started to use it. I then top up
the wallet and link my bank account there.”- Female, Admin Operation Assistant &Tech Savvy, 28, B40, living in Bukit Jalil
Kuala Lumpur“I like to use e-wallet because I like to collectthe cashback and voucher for my next
purchase. That's it. It is easy.”- Female, Admin, 23,
B40, living in Melawati, Selangor“Shop X does not have e-wallet A, I prefer thismore than my bank’s e-wallet because I
realised that they will give me a rewards
through the game in their app.”
Identity of respondents, marketplace platforms and e-wallets anonymised
Source:Qualitative Focus Group Discussion with digital payment users aged 18-65 years old living in Klang Valley- Male, Part-time Hardware Sales-Person,
24, B40, living in Kepong, Kuala Lumpur

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23

Businesses experienced significant customer
payment behaviour shifts
Northern region Central region

East coastSouthern region

East Malaysia

Nationwide
Before pandemic

E-wallet1 CashCredit card

2 Credit Card
3 E-payments services

E-payment

4 Debit Card
5 E-wallets

Debit card

Cash

Currently
Before pandemic

Currently

Businesses report changed customer payment behaviours since the pandemic (cash dropped
from most used to 3rd place). However, the East Coast and Southern regions did notexperience any change in cash preferences. Other regions moved away from cash as the most
preferred payment mode, with the Northern region showing the most pronounced change.

Source:Q17. Could you rank the top 5 payment methods (used by customers) in your company before COVID-19 pandemic?
Q20. Could you rank the top 5 payment methods (used by customers) in your company currently?

1 E-payments services
2 E-wallets
3 Cash4 Credit Card

5 Debit CardPayNet Digital Payments Insights Study 2022

24

Paradigm shifting among businesses
Our study revealed among the challenge todigitally transform is partly mindset change (i.e.
business owners’ own perception that theircustomers doubt safety & security of e-payments)
and partly operating environment (i.e. workers andsupply chains requirements for cash).

“Acceptance among the consumers are great andencouraging. In major cities, growth has been
exponential. Now it is spreading everywhere, nolonger urban focused.”- Senior banking industry professional

Cash or post-dated cheques were reported as being more efficientin businesses that rely mainly on manual migrant workers (daily
wages paid in cash as they do not have bank accounts) as well as
those with cash intensive supply chains. Businesses without these
impediments are steadily shifting to digital payments, to keep up
with customer demands“COVID-19 catapulted into everyone doing
things they never did. It expedited the adoption(of digital payments) from the individual(customers) and among retailers. Worries ontrust issues dissipated.”- Senior banking industry professional“Even my parents who are in their seventies
started to use e-wallets last year. So surprising, I
think COVID-19 expedited it. If there is no
pandemic, no MySejahtera, I don’t think myparents will ever think of using e-wallets.
Because they are so familiar with QR scanning,
there is very little need to educate on how tomake QR payments.”- Senior payment gateway professional

Source:Qualitative Focus Group Discussion with digital payment users aged 18-65 years old living in Klang Valley

PayNet Digital Payments Insights Study 2022

Online presence helped B2C companies
survive during the pandemic
Our study revealed that businesses that survived and thrived
during the pandemic have the following characteristics.

Omni-channel presence
Products and services sold online (own website and/or
marketplaces) and in-store (shops, stalls or kiosks)

E-payments enabled
Able to accept cash and e-payments both in-store & online

Always-on
Open 24hrs/7 days a week (at least online)

Beyond local market
Serves beyond their own locality or area (ships nationwide,
regionally and/or internationally)

Source:Qualitative Focus Group Discussion with e-wallet users aged 18-65 years old living in Klang Valley
Qualitative In-Depth Interview with Business Owners from Education Sector, F&B Sector and Retail Sector

25

PayNet Digital Payments Insights Study 2022

Special Focus 1:

SMEs adoption of digital payments

26

PayNet Digital Payments Insights Study 2022

27

B2C SMEs are rapidly expanding
digital payment options

54%

E-payment services

66%

+12%

49%

E-wallets

15% lesser merchants are
accepting cash compared
to before the pandemic(shifting to e-wallets and other typesof e-payment services)

+12%

61%
69%

Cash

54%

Credit Card

58%
53%

Debit Card

53%
51%
42%
38%

ChequeBefore pandemic-15%

Segments accepting cash payments:
F&B (i.e. restaurants, stalls)

78%

Groceries (i.e. mini markets)

78%

Retail (i.e. clothing stores)

75%

Education (i.e. tuition centre)

59%

E-commerce

45%

Currently

Source:Q16. What kind of payment methods did you offer before COVID-19 pandemic?
Q19. What kind of payment methods are you offering currently? Please select all that applies

Note: Profile of SMEs surveyed included online-only sellers and ecommerce only providers which stopped accepting cash since 18
March 2020 and still do not accept cash at the time of the fieldwork

PayNet Digital Payments Insights Study 2022

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Motivation for digital transformation among SMEs
Business expansion, maintaining growth momentum, staying ahead of competition and brand building are among the main reasonscited by SMEs (especially among those who are more mature) for digitally transforming, including in adopting and offering a range ofdigital payments options. Advanced SMEs recognise the role of digital payments in facilitating business growth for survival. Apart fromthese, SMEs see the following role of digital payments in driving their business goals:
Role of digital payments in driving SMEs’ business goals

Other specific reasons include:

1 Assists in delivering quality service

Business expansion
Facilitates entry into different districts and subsequently scale
to nationwide presence by attending to more customers’
digital payments preferences.
SME (Education), SME (F&B), SME (Retail)2 Increases efficiency and saves time – eliminates
administrative and finance work (reconciliation, easily
monitor and track inflow and outflow of funds)
3 Safety and security – reduces risk of robbery, thefts, cash
shortage and losses from counterfeit notes

4 Expands customer base – cater to payment needs ofomnichannel shoppers, across multiple platforms

Source:Qualitative In-Depth Interview with Business Owners from Education, F&B, e-Commerce &Retail sectors

Sustain business momentum
Obtain information on consumers’ satisfaction with digital
payment mode for continuous improvement.
SME (F&B), SME (Retail), SME (e-Commerce)
Curb competition
Secure competitive advantage with various digital payment
options across platforms, enables regular tracking andbenchmarking of performance.
SME (F&B), SME (Retail)Brand building
Drive traffic as digital transformation elevates the brandthrough social media marketing and search engine
optimisation and easier conversion to sales.
SME (F&B), SME (e-Commerce)

PayNet Digital Payments Insights Study 2022

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Motivation for multiple digital payment modes
among SMEs
Businesses confirmed consumer behaviors and demands have been changed by‘showrooming’1 and ‘webrooming’2, particularly since the pandemic. Forwardlooking SMEs pivoted into omnichannel presence with multiple digital payment
options online and in-store to remain competitive. These became the catalyst forend-to-end SMEs’ digital transformation.

“I believe that most of my customers wantmany kinds of cashless options to pay in
our café. Not long after e-wallets
introduction, people started to ask, when
are we making them available.”- SME in F&B“I get people who say that they don’t want
to see my website and don’t want to go toonline marketplaces.
They just want to transfer funds to me via
internet banking, WhatsApp me theconfirmation and order so that I just deliver
them what they bought.”- SME in e-commerce

1 Shopping behavior where consumers visit physical stores to touch and feel the products but opt to purchase them online
2

The opposite of showrooming

Showrooming & webrooming fuelneed for omnichannel presence andmultiple digital payment modes“My customers will come to the nearest
store that does home deliveries. They arescared to shop in-store due to thepandemic. They are also afraid to handle
currency notes to make payments due tothe risk of contracting the virus.”- SME in RetailPayNet Digital Payments Insights Study 202230

SMEs priorities in 2022
SMEs cite expanding to a digital platform and speeding up digital transformation as their top 2 priorities this year.

Top 2 priorities are on
digital transformation!
56%

Expand business todigital platform

53%

Speed up digitalbusinesstransformation

51%

Quick businessrecovery

Source:Q32. What are your plans for your business in 2022?

50%

Increase customer
base

49%

Focus on digitalmarketing for
improvedawareness

45%

Cost reduction

44%

41%

Prepare employees Recover deficit from(digitalisation, incl
the previous
financialmonths/year
management tools)

PayNet Digital Payments Insights Study 202231

SMEs barriers to adopting digital payments
SMEs do not find fees & charges as top reason for not adopting digital payments.
Our study revealed the following:

Top 5 ‘pain points’:
Too many technical jargons

43%

Too many documentations/paperwork

38%

Lengthy application processes and long time for approvals

33%

Low awareness and education

33%

Confusing digital payment options to choose from27%

Top 5 ‘wish list’:
Simpler onboarding (plain language & shorter forms)
Shorter processes and time to approve applications
On-the-ground support by banks/non-banks
Proper explanation, more awareness and education by banks/non-banks
Recommend digital payments to suit SMEs’ specific needs

Source:Q41. What are the key pain points with the digital payments as compared to the cash/cheque?
Please select all that apply

PayNet Digital Payments Insights Study 2022

32

SMEs reasons for accepting both cards and e-wallets
Security is cited as the main reason for accepting cards whereas convenience is cited as the main reason for accepting e-wallets.
E-wallets, debit and credit cards’ abilities to issue instant receipts and meet customer needs are cited as the 2nd and 3rd reasons for
accepting these payment forms.

E-wallets

58%

Convenient

Debit/Credit Card

54%

Instant payment
receipt

50%

Suit customer
needs

49%

56%
48%

Secure (avoids Catered to techcash thefts)
savvy anddigitally
connected
customers

55%

Secure (avoids Instant payment
cash thefts)
receipt

Source:Q27. Why do you accept Debit or Credit Card for your business transactions?
Q30. Why do you Accept Mobile Wallet Apps (e.g. GrabPay, Boost, TouchnGo e-wallets) for your business transactions?

53%

53%

Suit customer
needs

Convenient

46%

Easy to monitor
and reconcile

PayNet Digital Payments Insights Study 2022

Special Focus 2:

Relevance of cash

33

PayNet Digital Payments Insights Study 2022

34

Average Monthly Usage:
Before Pandemic

Current

Cash

24.78x18.36xE-wallets

10.47x16.82x

E-payments services

7.61x

10.99x

Debit Card

8.99x

10.31x

Credit Card

8.39x

8.29x



The pandemic did not replace cash as the main
payment mode, but usage has been less frequent

Source:Q19a. How frequently in a month do you use [cash/e-wallets/e-payments services/debit card/credit card] before
COVID-19 pandemic?
Q21a. How frequently in a month do you use [cash/e-wallets/e-payments services/debit card/credit card] currently?

PayNet Digital Payments Insights Study 2022

35

Barriers to cashless adoption
from customers perspective
E-walletIt’s easier to pay by cash

49%

I do not understand how e-wallets work

33%

To prevent overspending
Security concerns on e-wallets
Merchant acceptance

1 Habit and fear of overspending is
one of the common main reasons why
cash is still preferred over e-wallet,
Debit or Credit Cards

30%
26%
22%

2 Perceived security or fraud concerns
is also cited as a usage barrier

Debit & Credit Card
Fear of overspending

46%

Used to cash

Do not want to incur any debts

39%
30%

Concerns on fraudulent usage

25%

Security concerns

24%

Source:Q27. Why do you not use e-wallet for your transactions?
Q24. Why do you not use Debit or Credit Card for your transactions?

Our study confirmed businesses andcustomers do not face any barriers inaccessing Online or Mobile banking.
However, in using e-wallets, Debit andCredit Cards, cited the following:

3 Lack of merchant acceptance for notusing e-wallets (from slightly morethan 1 in every 5 consumers)

PayNet Digital Payments Insights Study 2022

36

Barriers to cashless adoption
from SMEs perspective
E-walletUnsure if customers will have mobile wallet

37%

Concerned about the security of mobile wallet

34%

Concern on commission rate

25%

It’s easier to get paid by cash

24%

Don't have the knowledge to use mobile wallet

23%

Unsure if it is directly linked to my business bank a/c

23%

Debit & Credit Card
High transaction fees

41%

Concerned about my company security

32%

Maintenance cost of the machine

32%

Stringent requirements for small industries

27%

Poor connectivity/access to machine

26%

Tedious paperwork and documentation25%

Source:Q22. Why do you not accept Debit or Credit Card for your business transactions?
Q23. Why do you not accept e-wallet for your business transactions?

SMEs believe their customers
still preferred cash because they
believe their customers do nothave e-wallets, and perceptionsof high card transaction fees andconcerns over security

PayNet Digital Payments Insights Study 2022

37

What is cash being used for?

71%
BP: 82%

Roadside food stall51%
BP: 61%Groceries50%
BP: 59%

Sharing cash withfriends and family

46%
BP: 57%

Health and personal care(i.e. pharmacies)68%
BP: 80%Eating out at budget place(i.e. food court, mamak)50%
BP: 66%

Eating out at fast food49%
BP: 59%Paying for petrol

Top 8 payment contexts where cash is still widely used are in
everyday spend, but cash usage is lesser since the pandemic.
Some payers remained staunch cash users mainly due tohabit, lack of familiarity, reluctance and bad experience
when paying with other methods:
1 Used to pay in cash
2 Cash is preferred payment method, always
3 Feels secure with cash
4 Not familiar with other payment methods
5 Reluctant to learn/adopt new payment methods
6 Bad experience when paying with other methods

33%
BP: 45%Eating out at mid range
restaurants

BP – Before Pandemic (prior to 18 March 2020)
Source:Q22. Which mode of payments do you use for making the following type of payment BP?
Q23. Which mode of payments do you use for making the following types of payment
currently?

PayNet Digital Payments Insights Study 2022

Conclusion

38

PayNet Digital Payments Insights Study 2022

The future of digital payments in Malaysia:
a promising outlook
Malaysia is on the right digital payments growth trajectory.
The awareness among businesses, including SMEs, of the need to undergo
digital transformation for survival and to remain competitive is fuelingadoption of digital payments. Businesses we spoke to generally do not
face difficulty in accessing desktop online banking or mobile banking for
payments. However, they did cite several process-related pain points which
can be overcome. At the consumers’ end of the spectrum, their demands
for specific forms of digital payments are driving businesses to offer morethan one payment mode. Neither businesses nor customers cited lack ofsuitable digital payment products as the reason for still using cash or not
wanting to use digital payments – the top reasons cited are habit (used to
paying with cash) and convenience (accepted everywhere).
However, there are clear ‘urban-rural’ and generational divides observed.
In urban areas where infrastructure limitations are minimal, cash usage
will reduce if the mindset and habits for digital payments are inculcated byincreasing familiarity through awareness. Some city areas (e.g. lower
income areas) still have low merchant acceptance. In non-urban areas,apart from basic digital payments infrastructure and expanding acceptancepoints, digital financial literacy is key to reducing cash usage. Different
engagement modes should be used to effectively reach different
generations. For younger generations, social media advocacy is more
effective but for the older generations (Gen X and older), face-to-faceinteractions yield better results. Adoption of digital payments has
accelerated significantly since the pandemic and the increased familiarity is
expected to sustain the growth momentum.
The adoption curve will shorten with focus on 4 key drivers (next page).

39

PayNet Digital Payments Insights Study 2022

40

4 key drivers for sustained
digital payments adoption

Education and awarenessAcceptance points

Continuing awareness programs on the benefits of digital
payments as well as education on safety and security,
including prevention of fraud and scams are needed for
consumers and businesses.

Enabling businesses (including SMEs and micro-SMEs) andpublic amenities (mass transport, bill payment kiosks, public
hospitals and mass parking facilities) where there is highpayment frequency (regardless of value) would increase
accessibility to digital payments.

Public sector and regulator support

Central payments infrastructure and ecosystem

Continued support from the following are critical:

Central payments infrastructure that is accessible, reliable,
secure and inclusive is essential for the nation’scompetitiveness and efficiency and to build trust andconfidence in digital payments.

• Bank Negara Malaysia, in ensuring a conducive andfacilitative environment for digital payments to prosper
as laid out in the Financial Sector Blueprint 2022-2026.
• Government, to set in place essential infrastructureneeded to embrace digital payments as planned under
the MyDigital Economic Blueprint.

Having an ecosystem of diverse participants ensures all
business and customer segments are served, including
those in the underserved segments.

PayNet Digital Payments Insights Study 2022

About PayNet

41

PayNet Digital Payments Insights Study 2022

42

Payment Network Malaysia
Payments Network Malaysia Sdn Bhd is the national payments network andshared central infrastructure for Malaysia’s financial markets.
As the national provider of financial market utilities, PayNet aims to build
inclusive, accessible and efficient payments and financial eco-systems for
Malaysia.
In line with this developmental objective, PayNet’s shareholders do not receive
dividends, and surplus profits are instead re-invested to ensure that the nation’s
financial market infrastructures and payment eco-systems are resilient,competitive and accessible to all.
Bank Negara Malaysia is PayNet’s single largest shareholder, with eleven
Malaysian’s financial institutions namely, Malayan Banking Berhad, RHB Bank
Berhad, Public Bank Berhad, CIMB Bank Berhad, AmBank (M) Berhad, Hong Leong
Bank Berhad, Affin Bank Berhad, Alliance Bank Malaysia Berhad, Bank Islam
Malaysia Berhad, Bank Muamalat Malaysia Berhad and Bank Kerjasama Rakyat
Malaysia Berhad, as joint shareholders.

Vision:Empowering Malaysia’s digital economy

Mission:Trusted enabler of inclusive andcollaborative financial ecosystems

PayNet Digital Payments Insights Study 2022

43

Product and services• Sistem Penjelasan Informasi Cek Kebangsaan secara
Elektronik (eSPICK) – Malaysia's national cheque clearing
system.
• Interbank GIRO (IBG) – A funds transfer system that allows
account-to-account credit transfers between 43 participatingbanks in Malaysia.
• JomPAY – Malaysia’s national bill payment scheme where
customers can pay any registered biller from Internet or
Mobile banking. Billers need only sign up with one bank tocollect payments via 42 banks.
• MyDebit – Malaysia’s domestic debit card scheme, whichallows point-of-sale payments using ATM cards issued bybanks in Malaysia.
• FPX – Direct-to-bank Internet payment gateway, whichfacilitates Internet payments and e-commerce purchases.
• Direct Debit – Allows billers and merchants to debit aconsumer’s bank accounts on a periodic basis to collectrecurring payments.

• DuitNow Transfer – Pay instantly to any account or to a
DuitNow ID such as mobile number or NRIC number.
• DuitNow QR – Malaysia’s National QR Standard where any
compliant QR Code can take payments from any participating
Banks and e-wallets mobile apps.
• Shared ATM Network and MEPS ATM – Enables bankcustomers to conveniently access their funds anywhere from
more than 10,000 ATMs of participating banks.
• Cross-Border Cash Withdrawal – This service offers
participating banks’ customers the convenience of making
cash withdrawals via ATMs in participating countries.
• Smart Card and Certification Services – Provides functionaland security testing as well as certification of chip cards,
acceptance terminals, mobile payment products and payment
systems.
• Currency Notes Processing – Banknotes processing whereused banknotes are collected for sorting and redistribution.

PayNet Digital Payments Insights Study 2022

NielsenIQ
Arthur C. Nielsen, who founded Nielsen in 1923, is the original
name in consumer intelligence. After decades of helping
companies look to the future, we are setting the foundation for
our future by becoming NielsenIQ. We continue to be theundisputed industry leaders as evidenced by our experience andunmatched integrity. As we move forward, we are focused onproviding the best retail and consumer data platform, enabling
better innovation, faster delivery, and bolder decision-making.
We are unwavering in our commitment to these ideals andpassionate about helping clients achieve success. For more
information, visit niq.com.

44

PayNet Digital Payments Insights Study 2022

45

Appendix:survey questions answered by consumers
Demographic/Screener

Main Questionnaire (Continue)

Q2c
Q3
Q4
Q6
Q7
Q7a
Q8
Q9
Q10a
Q10b
Q11
Q12
Q13
Q14
Q15

Q26
Q27
Q28
Q29
Q30
Q31
Q32
Q33
Q34
Q35
Q36
Q37
Q38
Q35 - Q38
Q39
Q40
Q41
Q42
Q40 - Q42
Q43
Q44
Q45
Q46
Q47
Q48
Q49
Q50
Q51
Q52
Q53
Q54
Q55
Q56
Q57
Q58

Decision-making on financial related matters
State
RegionUrbanization
Age
Age group
GenderEthnicity
Monthly Personal Income (MPI)
Monthly Household Income (MHI)
Occupation
Relationship Status
Highest attained education level
Currently use banks
Bank/ Non-bank user

Main Questionnaire
Q16
Q17
Q18
Q19a
Q19b
Q19c
Q19d
Q20
Q21a
Q21b
Q21c
Q21d
Q21e
Q22
Q23
Q24
Q25

Products/ services currently use/ owned
Statement applies
Payment methods used (Before COVID-19 pandemic)
Frequency (Before COVID-19 pandemic)
Spent (Before COVID-19 pandemic)% of payments made using cash (Before COVID-19 pandemic)
Reasons to use Cash (Before COVID-19 pandemic)
Payment methods used by customer (Currently)
Frequency (Currently)
Spent (Currently)% of payments made using cash (Currently)
Reasons to use Cash (Currently)
Reasons of same cash usage
Mode of payments (Before COVID-19 pandemic)
Mode of payments (Currently)
Barrier to Use (Debit/ Credit Card)
Barrier to Use (Online Banking)

Barrier to Use (Mobile Banking)
Barrier to Use (e-Wallet)
Barrier to Use (e-payment services)
Reason to Use (Debit/ Credit Card)
Reason to Use (Online Banking)Reason to Use (Mobile Banking)Reason to Use (e-wallet )Reason to Use (e-payment services)
Concerns about security of e-payment services
e-wallets (Aware of)
e-wallets (Used before)
e-wallets (P1M)
e-wallets(MOUB)
e-wallets (Funnels)
Reasons to Use as MOUB
e-payments services (Aware of)
e-payments services (Offered before)
e-payments services (Past 1 month)e-payments (Funnels)
NPS (e-payments)
Reasons for NPS score
Improvements to get 10 out of 10
Source of awarenessFrequency of using e-payments (Before COVID-19 pandemic)
Frequency of using e-payments (Currently)
Biggest obstacles (Aware but not use)
Aware of making cashless payments in daily transactions
Source of awareness for cashless payments
Aware that Debit Card is ATM card
Statements on cashless payment
Reasons (Satisfied with cashless payment)
Reasons (Not satisfied with cashless payment)
Circumstances to pay with cash
Parties who should initiate the change in payment system
Approaches to encourage the adoption of cashless payments

PayNet Digital Payments Insights Study 2022

46

Appendix:survey questions answered by businesses and SMEs
Demographic/Screener

Main Questionnaire

Q3
Q4
Q5
Q6
Q7
Q8
Q9
Q9a
Q10
Q10a
Q11
Q12
Q13
Q14
Q15

Q16
Q17
Q18
Q19
Q20
Q21
Q22
Q23
Q24
Q25
Q26
Q27
Q28
Q29
Q30
Q31
Q32
Q33
Q34
Q35
Q36
Q37
Q38
Q39
Q40

Industries
Operating years
Involvement in company
Annual sales turnoverSize of company
Level of seniority in company
State
RegionAge
Age group
GenderEthnicity
Highest attained education level
Currently use banks
Bank/ Non-bank user

Q41
Q42
Q43
Q44
Q45
Q46
Q47
Q48
Q49
Q50

Payment methods offered (Before COVID-19 pandemic)
Payment methods used by customer (Before COVID-19 pandemic)
Amount received (Before COVID-19 pandemic)
Payment methods offer (Currently)
Payment methods used by customer (Currently)
Amount received (Currently)
Barrier to Accept (Debit/ Credit Card)
Barrier to Accept (Online Banking)
Barrier to Accept (Mobile Banking)
Barrier to Accept (Mobile Wallet)
Barrier to Accept (e-payment services)
Reason to Accept (Debit/ Credit Card)
Reason to Accept (Online Banking)Reason to Accept (Mobile Banking)Reason to Accept (Mobile Wallet )Reason to Accept (e-payment services)
Plans for business in following year
Top 3 challenges in managing payment related issues
e-payments services (Aware of)
e-payments services (Offered before)
e-payments services (Past 1 month)
NPS
Reasons for NPS score
Improvements to get 10 out of 10
Source of awarenessKey pain points with digital payments/e-payments as compared to cash/
chequeStatements on cashless payment
Reasons (Satisfied with cashless payment)
Reasons (Not satisfied with cashless payment)
Satisfaction towards financial service providers
Reasons (Satisfied with financial service providers)
Reasons (Not satisfied with financial service providers)Parties who should initiate the change in payment system
Approaches to encourage the adoption of cashless payments
Rating towards current digitalisation in Malaysia

PayNet Digital Payments Insights Study 2022

Payment Network Malaysia Sdn Bhd
200801035403 (836743-D)

Tower 2A, Avenue 5
No.8 Jalan Kerinchi, Bangsar South
59200 Kuala Lumpur

www.paynet.my