Malaysians are increasingly preferring digital payments, and enterprises need to keep up with demand (Photo by JIMIN LAI / AFP)

Malaysians are increasingly preferring digital payments, and enterprises need to keep up with demand (Photo by JIMIN LAI / AFP)

Real-time digital payments are winning the hearts of Malaysians

  • Half of Malaysians are using real-time payments in 2021
  • 32% have reduced reliance on cash, credit and debit cards
  • Compared to before covid, 45% are moving towards real-time payments

It comes as no surprise that the days of cash transactions are numbered. Changing payment necessities and preferences as a result of Covid-19 seems to have brought this dramatic shift towards digital payments.

In the Asia Pacific (APAC) itself, almost half of consumers have shown a preference for digital payments. In fact, card payments are also being overtaken by digital payment options.

But not all digital payments are the same. Whilst digital payments rely on technology, not all of them are instantaneous like real-time payments. 

Real-time payments (RTP) are essentially digital payments that can be initiated and completed instantaneously or near instantaneously. This is different from, say, credit or debit card payments that will take longer to process as they go through layers of queries and approvals.

Cash not gonna be King for long

Consumer demand for real-time payments is on the rise in Malaysia as the pandemic accelerates digitization of payments, according to new research from ACI Worldwide and YouGov. 

The research found that over half of Malaysian consumers (52%) in Malaysia preferred real-time payment methods such as DuitNow. This is behind only cash (62%), and e-wallets requiring cash or card top-ups (62%).

A little over a third (32%) of Malaysian consumers have reduced or stopped using credit cards, debit cards, and cash since the pandemic started. Because of this, almost half (45%) are using real-time payments now as opposed to before the pandemic.

Although cash transactions are instantaneous, the rise of digitalized preferences has pushed real-time payments to the fore. Applications that give users real-time notifications on settlements and payment history are some of the features that cash transactions, although instantaneous, cannot provide.

“This fundamental shift in consumer demand and payment expectations sets forth a challenge for Southeast Asia’s banks, financial institutions, and merchants,” said Leslie Choo, managing director – Asia, ACI Worldwide. 

Real-time digital payments a result of rapid digitalization

Due to rapid technological change, consumers now expect mobile-first and real-time experiences, a facet of the financial industry that has often lagged behind.

Real-time payment systems enable consumers, merchants, and financial institutions to pay friends and customers, settle bills and transfer money instantaneously and effortlessly.

“These organizations can ill-afford to put their modernization projects on hold, despite the challenges caused by COVID-19. 

On the contrary, they can drive growth by joining the region’s emerging real-time payments ecosystem, which will improve their ability to innovate and transform while reducing the cost of infrastructure and operations.”, added Choo.

Consumers expect real-time payments abroad 

As consumers are becoming more reliant on real-time payments domestically, there is, of course, the expectation that this convenience will translate to payments beyond domestic borders. This is especially true once movement restrictions are relaxed, and people are able to more freely travel again.

In fact, almost half (49%) of Malaysian consumers who have previously traveled internationally expect increased usage of RTPs the next time they can travel. 

A whopping 70% expressed that it would be important if their preferred RTP can be used abroad. Consequently, a quarter (25%) expect that their reliance on traditional payments such as cash or credit cards will reduce.

The research also showed that three-quarters (76%) of Malaysian consumers prioritize payment safety and fraud prevention, whereas 67% think that transparency in exchange rates is more important.

A quarter (25%) of Malaysians are buying more online from regional Southeast Asian (SEA) merchants during the start of the pandemic, whereas international online shopping stands at around 23%.

According to the report, Malaysians who choose international sellers do so because they are reassured that their payment and personal data are safely transmitted, secured, and stored (36%); are able to pay with their preferred domestic payment method (24%), and are presented with a wider range of payment options as compared to SEA merchants (24%).

Real-time digital payments and their benefit to enterprises

Whilst cash may still lead slightly as a payment option, it is clear from these figures that the consumer demand for RTPs is dramatically rising. RTPs, with their convenience and speed, are emerging as a preferred form of payment, besides other digital payments such as e-wallets.

As domestic demand for RTP increases, so will regional and international demand. This demonstrates an urgent need for payment modernization not just in Malaysia, but across SEA as well.  

Doing away with cumbersome legacy payment systems can optimize and speed up payments and improve customer satisfaction. 

It is thus imperative that regional players work together to form a coherent, regional cross-border RTP ecosystem, which can boost trade and economic growth down the road. In fact, Malaysia and Thailand already have a cross-border RTP system, using QR codes.

But of course, the safety and security of personal data that are transmitted and stored should be equally prioritized in designing collaborative systems. 

In addition, RTPs can work alongside central bank digital currencies (CBDCs), which a number of Asian countries are exploring. This includes Japan, Singapore, Malaysia, China, Hong Kong, and Cambodia.

It’s not just online merchants that will benefit from RTP solutions, however. Brick and mortar sellers, even mom-and-pop stores, will find it wise to digitalize with RTP as well. 

And come to think of it, RTPs could even pave the way for the future of non-consumer payments too.

Typical payment pain points such as ‘cheque clearing’ that take days; administrative delays caused by manual or technical errors, or delays by layers of management approval can be addressed when parts of the business’ financial processes are digitalized.

Coupled with the automation of business and financial processes within a robust, physical and cyber-secure ecosystem, B2B transactions can also reap similar benefits and drive increased growth.