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E-commerce Payments Trends

2020 E-commerce Payments Trends Report: Malaysia 


After years of robust sales growth, Malaysia is maturing into a key Asian e-commerce market, backed by enthusiastic consumers and a government committed to resolving growing pains

Key Takeaways

 

Malaysia takeaway

Malaysia’s outstanding e-commerce sales growth, rising basket spend and a dynamic, digitally savvy population makes the country full of opportunity for merchants. However, infrastructure issues persist with outdated payment methods, unreliable delivery and incidences of fraud. Merchants should reassure customers that they have the resources and know-how to avoid these problems. 

Malaysia takeaway

The ongoing use of cash on delivery can make the last mile of delivery, providing good customer service and receiving payment difficult for international merchants. Emphasizing the security and flexibility of card payments will help mitigate this. 

Malaysia takeaway

The Malaysian government is paying close attention to the development of e-commerce. It is introducing new taxes, regulations and domestic incentive schemes accordingly. Newcomers will be entering a market that is rapidly evolving and may benefit from working with expert payments and regulatory advisers.

 

Malaysia takeaway

Malaysia’s e-commerce market is characterized by rapid growth and all the challenges that can represent. As with other developing e-commerce markets, growth is outpacing established markets: the nation’s business-to-consumer e-commerce value increased 39 percent in 2019 alone.1 Malaysia is now playing catch-up to bring its e-commerce infrastructure, including product availability, payments, delivery and regulatory requirements, in line with more established online shopping markets.

At the moment, large seller platforms dominate the market. Malaysia’s top-three e-commerce sites by traffic are marketplaces Shopee, Lazada and PG Mall.2 Western brands eBay and Sephora also make the top 10. Malaysia has three major annual national shopping events—Malaysia Super Sale (March 1–31), Malaysia Mega Sale Carnival (June 15–August 31) and Malaysia Year-End Sale (November 1–December 31).3 International discount shopping events Singles’ Day and Black Friday in November are also rising in popularity.4,5

Post-COVID-19, the Malaysian government is prioritizing e-commerce development. Increasing e-commerce is named as a part of the government’s national economic recovery plan, and two separate state investment campaigns totaling US$33 million launched in 2020, to develop domestic e-commerce sites.6,7

 

Good Business-to-Consumer Market Growth is set to Continue Despite COVID-19 Pressures

  • After three years of excellent growth, the Malaysian business-to-consumer e-commerce market is expected to continue to grow at a slower, but still strong, compound annual growth rate (CAGR) of 17 percent to 2023.8 This reflects economic pressures created by the 2020 COVID-19 pandemic and the associated impacts on trade, manufacturing and consumption.
  • At 82.3 percent, Malaysia has one of the highest internet penetration rates in south-east Asia.9 However, growth is not rising significantly. The majority of citizens without internet access are in rural areas.10 E-commerce is concentrated in regions; for example, east Malaysians are 2.6 times more likely to shop online than peninsular Malaysians.11
  • The most popular e-commerce product categories are travel (63 percent), consumer electronics (10 percent) and fashion (9 percent).12 The travel segment will drop in 2020 but is expected to recover in the coming years. The average annual basket spend is MYR2,004 (US$484).13 The average annual online spend per consumer almost doubled between 2017 and 2019.14

 

Mobile Commerce is Expanding Faster than Overall E-commerce

  • Malaysia’s mobile commerce growth is expected to outpace overall e-commerce, rising at a compound annual growth rate of 19.7 percent to 2023, to become a US$8.9 billion market.15
  • The preferred device for accessing e-commerce in Malaysia is smartphones (52 percent), followed by desktops (42 percent) and tablets (6 percent).16 Smartphone penetration is at 57 percent, just below China’s 60 percent but lower than neighboring Singapore’s 78 percent.17
  • The most popular shopping apps in Malaysia are run by major seller platforms Shopee, FanMart and Lazada.18

 

Social Media Use is High, Suggesting Strong Social Commerce Opportunity Ahead

  • Malaysia is a mobile-first e-commerce arena, with 56 percent of transactions completed on a mobile device.19 Merchants should optimize their mobile sites and prioritize app development—apps are preferred over browsers.20
  • Social media is part of everyday life in Malaysia, with 81 percent of the population active social media users in 2020, an increase of one third on 2016. Facebook is the most popular platform, followed by Instagram, Facebook Messenger and LinkedIn.21
  • One in six Malaysians spend more than nine hours a day on social media.22 As these sites integrate commerce into their offerings, social media represents a key opportunity to reach Malaysian consumers.

 

Offer Bank Transfer and Card Payments to Reach Lion’s Share of Malaysian Online Consumers

  • Bank transfers dominate as the primary e-commerce payment method in Malaysia, accounting for 44 percent of all transactions.23 Bank penetration is at 85 percent,24 and domestic banks have launched a range of own-brand bank transfer options such as Maybank2u and CIMB Clicks, which are widely used to pay domestic bills. Use is expected to remain static to 2023.
  • Cards are the second-most used payment option online, taking 36 percent of the market. Debit is preferred over credit. There are 1.33 debit cards per capita, compared with 0.32 credit cards.25 Usage is expected to rise to 2023.
  • Cash on delivery is the third-most popular option, taking an 11 percent share of the payments market.26 Digital wallets take only 6 percent, with global brands PayPalTM, Visa® Checkout and Masterpass all recognized and used options. A digital money license issued by the government is required to operate digital wallets in the country. Other licensed international players include Alipay, WeChat and Google Pay.27

 

China Rules as Top Overseas Shopping Destination, with over Half of Malaysian Online Shoppers Already Spending Overseas

  • Cross-border e-commerce is already an important and established part of the Malaysian online shopping experience. It accounts for 44 percent of overall e-commerce sales, with more than half (52 percent) of Malaysian online shoppers spending cross-border.28
  • China is the leading overseas shopping market,29 due to its sophisticated e-commerce experience, advanced social commerce options and wide range of products.
  • International merchants are increasingly establishing depots in Malaysia to expedite delivery and improve customer service and product availability in the country. Global brands including IKEA, Nestlé, Tesco, Zalora and Lazada are investing in Malaysian distribution hubs in an effort to expand their e-commerce footprint in the country.30, 31

 

 

Regulations are Emerging to Establish Firm E-commerce Tax and Payments Rules for Both Domestic and International Merchants

 

  • Regulation/trends
    From 1 January 2020, all digital services purchased by Malaysian consumers from foreign service providers (registered) are subject to a 6 percent service tax.32 Examples of digital services include streaming services, mobile apps and video games.33
  • Barriers or benefits to e-commerce market entry
    The government’s National eCommerce Strategic Roadmap states that the Malaysian e-commerce fulfilment experience can be frustrating. Delivery processes do not adequately take account of working and lifestyle patterns. This has led to the risk of items being returned to the seller, or shoppers being inconvenienced by having to pick up parcels from a depot.34

Looking ahead, the government has partnered with China’s Alibaba to create a Digital Free Trade Zone, with the goal of making Malaysia a regional and global e-commerce logistics hub.35

A local entity is recommended to do business in Malaysia.36

  • Factors driving the cost of payment acceptance
    The Payment Card Reform Framework was introduced in 2015 to regulate card fees, in part to encourage merchant uptake. The ceiling for credit card interchange fees was lowered to 1–1.1 percent of the transaction value. For debit card transactions the ceiling was lowered to 0.21 percent of transaction value, or MYR0.70 plus 0.01 percent. The framework is set to be reviewed in December 2020.
    37

Bank transfers are generally cheaper to accept than card and digital wallet transactions, which supports their ongoing use.38

 

J.P. Morgan has analyzed 34 e-commerce markets to decipher the trends and challenges driving global e-commerce in 2020. To access our insights on a country-by-country basis, click here.

 

1. J.P. Morgan 2020 E-commerce Payments Trends Report: Data has been provided to J.P. Morgan by Edgar, Dunn & Company, 2020.
2. statista.com, April 2020. ‘Top 10 e-commerce sites in Malaysia as of 1st quarter 2020, by monthly traffic.’ Accessed July 2020.
3. export.gov, July 2018. ‘Malaysia – eCommerce.’ Accessed July 2020.
4. 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.
5. black-friday.global, 2020. ‘Black Friday 2020.’ Accessed July 2020. 
6. malaymail.com, June 2020. ‘MDEC rolls out micro and SME e-commerce campaign.’ Accessed July 2020.
7. freemalaysiatoday.com, July 2020. ‘The changing face of e-commerce.’ Accessed July 2020.
8. J.P. Morgan 2020 E-commerce Payments Trends Report: Data has been provided to J.P. Morgan by Edgar, Dunn & Company and WPL, 2020.
9. J.P. Morgan 2020 E-commerce Payments Trends Report: Data has been provided to J.P. Morgan by Edgar, Dunn & Company via the Department of Statistics Malaysia, 2019.
10. J.P. Morgan 2020 E-commerce Payments Trends Report: Data has been provided to J.P. Morgan by Edgar, Dunn & Company, 2020.
11. export.gov, August 2019. ‘Malaysia – eCommerce.’ Accessed July 2020.
12. J.P. Morgan 2020 E-commerce Payments Trends Report: Data has been provided to J.P. Morgan by Edgar, Dunn & Company via Statista and Google-Temasek, 2019.
13. J.P. Morgan 2020 E-commerce Payments Trends Report: Data has been provided to J.P. Morgan by Edgar, Dunn & Company, 2020.
14. J.P. Morgan 2020 E-commerce Payments Trends Report: Data has been provided to J.P. Morgan by Edgar, Dunn & Company via Janio Asia, 2019.
15. J.P. Morgan 2020 E-commerce Payments Trends Report: Data has been provided to J.P. Morgan by Edgar, Dunn & Company and WPL, 2020.
16. J.P. Morgan 2020 E-commerce Payments Trends Report: Data has been provided to J.P. Morgan by Edgar, Dunn & Company via Ecommerce Foundation, 2019.
17. J.P. Morgan 2020 E-commerce Payments Trends Report: Data has been provided to J.P. Morgan by Edgar, Dunn & Company via Statista, 2019.
18. similarweb.com, July 2020. ‘Mobile App Ranking – Malaysia.’ Accessed July 2020. 
19. J.P. Morgan 2020 E-commerce Payments Trends Report: Data has been provided to J.P. Morgan by Edgar, Dunn & Company, 2020.
20. J.P. Morgan 2020 E-commerce Payments Trends Report: Data has been provided to J.P. Morgan by Edgar, Dunn & Company, 2020.
21. statista.com, February 2020. ‘Active social media users as percentage of the total population in Malaysia from 2016 to 2020.’ Accessed July 2020. 
22. statista.com, February 2020. ‘Active social media users as percentage of the total population in Malaysia from 2016 to 2020.’ Accessed July 2020.
23. J.P. Morgan 2020 E-commerce Payments Trends Report: Data has been provided to J.P. Morgan by Edgar, Dunn and Company, 2020.
24. J.P. Morgan 2020 E-commerce Payments Trends Report: Data has been provided to J.P. Morgan by Edgar, Dunn & Company via World Bank, 2018.
25. J.P. Morgan 2020 E-commerce Payments Trends Report: Data has been provided to J.P. Morgan by Edgar, Dunn & Company via Bank Negara Malaysia, 2020.
26. J.P. Morgan 2020 E-commerce Payments Trends Report: Data has been provided to J.P. Morgan by Edgar, Dunn and Company, 2020.
27. BNM.gov.my, 2019. ‘List of Regulatees.’ Accessed March 2019. 
28. J.P. Morgan 2020 E-commerce Payments Trends Report: Data has been provided to J.P. Morgan by Edgar, Dunn & Company, 2020.
29. J.P. Morgan 2020 E-commerce Payments Trends Report: Data has been provided to J.P. Morgan by Edgar, Dunn & Company via Janio Asia, 2019.
30. theedgemarkets.com, March 2019. ‘Fast-growing e-commerce driving demand for industrial properties.’ Accessed March 2019.
31. vulcanpost, March 2019. ‘Behind The Scenes At The 470k Sqft e-Fulfillment Hub Of E-Commerce Giant Zalora.’ Accessed March 2019.
32. kpmg.com, March 2020. ‘Malaysia: Service tax and digital services.’ Accessed July 2020.
33. aseanbriefing.com, February 2020. ‘Malaysia’s new digital service tax: impacting foreign providers.’ Accessed July 2020.
34. J.P. Morgan 2020 E-commerce Payments Trends Report: Data has been provided to J.P. Morgan by Edgar, Dunn & Company via Janio Asia, 2019.
35. 3wnews.org, July 2020. ‘Malaysia Freight and Logistics Market Industry Status and Detailed Analysis 2020-2025.’ Accessed July 2020. 
36. J.P. Morgan 2020 E-commerce Payments Trends Report: Data has been provided to J.P. Morgan by Edgar, Dunn and Company, 2019.
37. J.P. Morgan 2020 E-commerce Payments Trends Report: Data has been provided to J.P. Morgan by Edgar, Dunn & Company via Bank Negara Malaysia, 2014 and JomPay, 2019.
38. J.P. Morgan 2020 E-commerce Payments Trends Report: Data has been provided to J.P. Morgan by Edgar, Dunn & Company via Bank Negara Malaysia, 2014 and JomPay, 2019.