2019 J.P. Morgan Global Payment Trends

2019 Global Payments Trends Report - Malaysia Country Insights

MALAYSIA INSIGHTS REPORT


Malaysia’s e-commerce market has grown rapidly in recent years, fuelled by rising smartphone penetration and a willingness by shoppers to buy from overseas. Merchants new to the country can take advantage of growing regulatory and physical infrastructure designed to ease e-commerce in this exciting market. To help our clients locate, attract and keep their customers, we have tracked and assessed e-commerce developments in 34 mature and emerging markets around the globe.

Introduction

 

Driven by a relatively high internet penetration rate, the e-commerce market in Malaysia is going from strength to strength and is forecast to grow at a compound annual growth rate of 24 percent a year.1 Overall, economic growth in the country in 2019 is broadly positive and is expected to reach 4.4% year-on-year, compared with an estimated 4.7% in 2018.2 But the combination of slowing external demand and easing fixed investment could weigh on domestic sentiment. How sentiment evolves will also be an important determinant of whether the tax refunds, worth 2.2% of gross domestic product, will be saved or spent.3

This document is based on projected figures and is subject to change at any time.

 

High growth prediction for a fast-growing market

 

Malaysia’s $4 billion e-commerce market is notable for its explosive growth in recent years. Annual sales have expanded significantly since 2015, jumping 47.8 percent in 2017 alone.14 Looking ahead, the market is expected to expand at a compound annual growth rate of 24 percent to 2021.15

Despite a four-year period of rapid growth, there is still plenty of room for the market to continue to expand. At present, just under half the population is yet to shop online, meaning there are almost 16 million as-yet untapped e-shoppers.16 The nation is also young: the average age is 28.7 years, and 44.2 percent of the population is aged 24 and under, offering a generation of tech-savvy potential customers. 17

Internet penetration, at 80.1 percent, is higher than many other south east Asian countries.18 The government has ambitions to raise this level to 90 percent, which will widen access to online shopping.19 The Malaysian government’s work to introduce frameworks for e-commerce should also support sales. The country’s National E-commerce Strategic Roadmap outlines plans to double Malaysia’s e-commerce growth rate and contribute RM211 billion to gross domestic product by 2020.20

Malaysia has three major annual national shopping events – Malaysia Super Sale (March 1-31), Malaysia Mega Sale Carnival (June 15-Aug 31) and Malaysia Year-End Sale (Nov 1-Dec 31).21 International discount shopping event Singles Day on 11 November is also increasing in popularity.22

Key online shopping categories include travel, which makes up 39 percent of the total e-commerce value, consumer electronics (17.3 percent) and furniture and household goods (13 percent).23 The top e-commerce sites are platforms Lazada, 11street and Shopee.24 Average annual basket spend, at $242, is currently lower than many of the countries included in our report series* and offers both a challenge (driving up spend) and an opportunity to merchants.25

 

Strong cross-border spending and growing last-mile delivery infrastructure

 

Cross-border spending is high in Malaysia, accounting for four out of 10 of all e-commerce transactions in the country.26 Malaysian shoppers are willing to buy from international e-commerce sites, with 48 percent having already made a purchase from overseas.27 The top three countries for cross-border sales are China (first), Singapore (second) and Japan (third).28 International retail giants are making moves to capitalize on the opportunities presented by Malaysia. Chinese conglomerate Alibaba has announced plans to create a regional distribution hub in the country.29 The company’s cofounder Jack Ma has also been named as Malaysia’s digital economy advisor.30

However, it should be noted that the Malaysian government has announced plans to introduce a digital tax for cross-border e-commerce from 2020, which could have ramifications for international sellers of digital products. While detailed information is yet to be announced, sellers of digital goods such as film, music streaming and video streaming  are expected to be required to report sales and pay a levy to the Malaysian government for sales of certain goods.31

When it comes to delivery, 90 percent of Malaysians expect their purchase to be delivered within a week, and for 46 percent, delivery within three days is expected.32 International couriers are investing in their Malaysian last-mile offerings. DHL, for instance, has set up domestic last-mile delivery operations.33 Global brands including IKEA, Nestlé, Tesco, Zalora and Lazada have all recently invested in Malaysian distribution hubs in an effort to expand their e-commerce footprint in the country.34,35

 

Malaysians swift to adopt shopping on the go

 

Despite being a modestly sized e-commerce sector, at an early stage of development in comparison with major markets like the U.S. and UK, consumers have been quick to adapt to mobile commerce. Approximately 62 percent of smartphone users now use their devices to shop online.36 Shopping via mobile devices now accounts for 47 percent of all e-commerce transactions,37 and shopping via mobile devices is expected to increase at a compound annual growth rate of 31.4 percent to 2021, to reach a value of $5.6 billion.38

Citizens are using their smartphones for everyday activities such as browsing, shopping and researching, backed by the state’s efforts to ramp up digital engagement.39 Malaysia is a nation of smartphone lovers, but there is still a significant part of the population yet to own a device, with penetration currently standing at 63.9 percent.40

Apps are the primary mobile commerce sales channel, used for 64 percent of transactions, or $1.2 billion in sales in 2017.41,42 Social media is another key way to reach would-be customers. Facebook is the most popular platform, with WhatsApp, WeChat, Instagram and Twitter all also popular.43 Domestic banks offering mobile banking and payment services are also helping drive mobile commerce uptake. However, concerns persist around the level of security and customer satisfaction when shopping via mobile devices.44

 

Bank transfers dominate as digital wallets rise in prominence

 

Bank transfers are the most-used e-commerce payment method in Malaysia, accounting for almost half (46 percent) of all transactions or $1.8 billion in 2017.45 Use of this method is forecast to continue to grow, at a compound annual growth rate of 25 percent to 2021, when it is expected to retain its top position and account for 48 percent of the e-commerce payments market.46 Transfers are completed by the shopper logging in to their online bank account to complete payment, or by paying in person in-branch.47

Cards are in second place, taking a 29 percent share of transactions.48 Credit card use is low, at 0.3 cards per capita, suggesting a reluctance to take on card-based personal debt. There are far more debit cards in circulation, at 1.44 cards per capita.49

Cash is used in seven percent of transactions.50 The use of cash is expected to be overtaken by digital wallets by 2021, but the ongoing prevalence of cash-on-delivery providers throughout Malaysia will continue to support this method.51

 

International players moving into Malaysian digital wallets market

 

Digital wallets, known as dompet digital in Malaysia, are the fourth most-used payment option, accounting for just seven percent of transactions.52 However, this method is expected to be the fastest growing between 2019 and 2021, with uptake increasing at a compound annual growth rate of 53 percent to 2021, by which point it will take a 16 percent share of the Malaysian payments market.53 The uptake of this payment option will be driven by rising smartphone penetration and digital wallet players seizing on the relatively underdeveloped Malaysian market.54 At present, there are 39 businesses with an e-money license in the country, including international players PayPal®, Alipay, WeChat and Google Pay.55

Payments Network Malaysia launched Malaysia's first real-time retail payments platform in January 2019, which is expected to boost electronic payments by modernizing Malaysia's payments infrastructure. Features include instant credit transfer via mobile number and national security number to both citizens and businesses. Further features are set be rolled out in the coming years, including real-time debit transfers and e-mandates.56

Low online fraud rates reported

 

Malaysia’s e-commerce fraud rates appear positive: digital payment provider iPay88 reported fraud occurring in just 0.02 percent of transactions in 2018, a drop from 0.03 percent in 2017. 57 The introduction of the Consumer Protection (Electronic Trade Transactions) Regulations in 2012 is thought to have assisted in cutting down on incidences of e-commerce fraud.58

 

Key takeaways

 

International merchants are benefitting from the rapid expansion of the Malaysian e-commerce industry. Cross-border spending makes up a significant proportion of a sector that is enjoying explosive growth. Having announced plans to create a regional distribution hub in Malaysia, Chinese conglomerate Alibaba is just one example of the international brands moving to capitalize on the opportunities available.  However, the Malaysian government has plans to introduce a digital tax for cross-border e-commerce in 2020, which could have ramifications for international sellers of digital products. Malaysian consumers prefer to use bank transfers to pay for online shopping, a payment method that accounts for almost half of all e-commerce transactions.

 

Data may vary from historical figures, due to certain categories being re-stated as new information sources have become available.

*J.P. Morgan 2019 Payments Trends – Global Insights Report series includes the following countries: Australia, Brazil, Canada, China, Hong Kong, India, Indonesia, Japan, Malaysia, Mexico, New Zealand, Singapore, Thailand, Turkey, U.S., Vietnam.

 

Global Payments Trends Reports

International e-commerce success can hinge upon understanding the needs, nuances and growth patterns of individual nations. J.P. Morgan’s Global Payments Trends Reports aims to offer merchants the knowledge they need for global success through in-depth, country-by-country analysis.

For more information, please contact:

Your J.P. Morgan Relationship Manager or visit: https://www.jpmorgan.com/country/US/en/merchant-services/payment-insights

 

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© 2019 JPMorgan Chase & Co

 

1 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via SEA Google report, 2017.

2 Economic Research, J.P. Morgan Chase Bank, March 2019.

3 Economic Research, J.P. Morgan Chase Bank, March 2019.

4 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

5 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via CIA World Fact Book, 2017.

6 World Bank Open Data. ‘Malaysia.’ Accessed March 2019.

7 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Department of Statistics Malaysia, Statista, Nikkei Asian Review, EC Insider, iPay88, SEA Google Report, EDC Analysis, 2017.

8 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via EDC Analysis, 2017.

9 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via DHL, iPay88, ThinkwithGoogle report on Mobile Apps in APAC, 2017.

10 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

11 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via McKinsey report, The Digital Archipelago, 2018.

12 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

13 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Department of Statistics Malaysia, 2017.

14 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Department of Statistics Malaysia, Statista, Nikkei Asian Review, EC Insider, iPay88, SEA Google Report, EDC Analysis, 2017.

15 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via SEA Google report, 2017.

16 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via eShopworld, 2017.

17 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via CIA World Fact Book, 2017.

18 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World Bank, 2017.

19 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via World of Buzz: Government to ensure internet penetration rate in Malaysia. February 2018.

20 DHLSME.com, 2017. ‘All Eyes on Malaysia for the Next Ecommerce Boom.’ Accessed March 2019.

21 Export.gov, July 2018. ‘Malaysia – eCommerce.’ Accessed March 2019.

22 BusinessInsider.my, November 2018. ‘Malaysians’ interest in 11.11 Singles’ Day sales is skyrocketing – here are the types of promotions on every top online shopping site.’ Accessed March 2019.

23 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista, 2017.

24 AseanUp, March 2019. ‘Top 10 e-commerce sites in Malaysia 2018’. Accessed March 2019.

25 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via EDC Analysis, 2017.

26 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Cross-Border eCommerce in Asian Markets: Singapore and Malaysia and ecommerceIQ: What are shoppers looking for across borders in Southeast Asia?, 2017.

27 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Cross-Border eCommerce in Asian Markets: Singapore and Malaysia and ecommerceIQ: What are shoppers looking for across borders in Southeast Asia?, 2017.

28 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via eShopworld, 2017.

29 DHLSME.com, 2017. ‘All Eyes on Malaysia for the Next Ecommerce Boom.’ Accessed March 2019.

30 DHLSME.com, 2017. ‘All Eyes on Malaysia for the Next Ecommerce Boom.’ Accessed March 2019.

31 ValueWalk.com, December 2018. ‘Malaysia Influences SEA To Introduce The Digital Tax.’ Accessed March 2019.

32 DHLSME.com, 2017. ‘All Eyes on Malaysia for the Next Ecommerce Boom.’ Accessed March 2019.

33 DHLSME.com, 2017. ‘All Eyes on Malaysia for the Next Ecommerce Boom.’ Accessed March 2019.

34 TheEdgeMarkets.com, March 2019. ‘Fast-growing e-commerce driving demand for industrial properties.’ Accessed March 2019.

35 VulcanPost, March 2019. ‘Behind The Scenes At The 470k Sqft e-Fulfillment Hub Of E-Commerce Giant Zalora.’ Accessed March 2019.

36 Export.gov, July 2018. ‘Malaysia – eCommerce.’ Accessed March 2019.

37 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via DHL, iPay88, ThinkwithGoogle report on Mobile Apps in APAC (2016).

38 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via EDC Analysis, 2017.

39 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Fluence: To which countries are smartphones penetrating the most and why?, January 2017.

40 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via McKinsey report, The Digital Archipelago, 2018.

41 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via DHL, iPay88, ThinkwithGoogle report on Mobile Apps in APAC (2016).

42 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via EDC Analysis, 2017.

43 Export.gov, July 2018. ‘Malaysia – eCommerce.’ Accessed March 2019.

44 Export.gov, July 2018. ‘Malaysia – eCommerce.’ Accessed March 2019.

45 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2019.

46 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2019.

47 PaymentWall.com, 2019. ‘Bank Transfer Malaysia.’ Accessed March 2019.

48 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2019.

49 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Department of Statistics Malaysia, 2017.

50 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2019.

51 My.ta-q-bin.com, 2019. ‘What is cash on delivery.’ Accessed March 2019.

52 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2019.

53 J.P. Morgan 2019 Payments Trends – Global Insights Report: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, 2019.

54 ECInsider.my, December 2018. ‘The e-wallet infinity war in Malaysia - Everything you need to know about e-wallet starts here.’ Accessed March 2019.

55 BNM.gov.my, 2019. ‘List of Regulatees.’ Accessed March 2019.

56 TheStar.com.my, January 2019. ‘PayNet launches real-time retail payment platform.’ Accessed March 2019.

57 DigitalNewsAsia, February 2019. ‘Malaysia’s Ecommerce Still Going Gangbusters.’ Accessed March 2019.

58 ToughNickel.com, March 2018. ‘Malaysian Regulation and Consumer Protection of eCommerce and Online Business.’ Accessed March 2019.

 

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