Malaysia has seen an influx of e-wallets hit the payments scene over the last year or so, coupled with efforts to increase e-wallet usage through government programmes like the e-Tunai Rakyat. Despite the entry of another cashless payment method in the country, credit cards are seeing positive growth on a number of fronts.
As you will see from the data below, the increased demand for credit cards prevails even though there are more e-wallet issuers than there are credit card issuers. Currently, there are 44 non-bank and 6 bank e-wallet issuers, while there are only 27 credit card issuers in Malaysia.
According to figures by Bank Negara Malaysia, principal credit cards in circulation have gone up by 26% between January 2015 and January 2020 – increasing from 7.2 million credit cards to 9.1 million. The volume of credit line extended has increased by 22% from RM124 million to RM151.8 million. Meanwhile, the number of credit card transactions increased by almost 42%, standing at 510 million transactions compared to 359.6 million in 2015. However, while current balances have also increased, the recorded growth here is lower at 11%.
“Credit cards are still popular despite e-wallet issuers getting aggressive in their marketing in recent years,” said Siew Yuen Tuck, CEO and co-founder of Jirnexu, the company behind RinggitPlus. “They both have their pros and cons.” Siew added that according to data, the transaction volume of e-wallets is higher than credit cards, but the value of credit card transactions surpasses that of e-wallets multifold.
Maybank Banking Berhad head of cards B Ravintharan agreed that credit cards will continue to be relevant in the digital age and complement e-wallets in the market. “Customers will still need credit cards for big-ticket item purchases,” said Ravintharan. He added that credit card issuers have also been leveraging on digitalisation to improve their offerings, such as enabling merchants to accept credit card payments without a point-of-sale terminal.
Furthermore, Ravintharan pointed out that contactless credit card payments were rising in popularity, with half of the total face-to-face transactions recorded by Maybank being contactless in nature. Moreover, he said that the convenience of using a credit card for e-commerce transactions has fuelled the increased usage of credit cards; Maybank’s e-commerce billings grew by 30% last year.
In terms of actual credit card spending, growth is seen to be healthy as well. OCBC cards spending achieved a record growth of 17% year-on-year in 2019, and average card spending per customer also increased at 10%. “OCBC’s card spending comes primarily from insurance, shopping, utilities, travel, groceries, and dining,” said OCBC Bank Berhad head of consumer lifestyle finance Ryan Kong.
Unsurprisingly, said Kong, the primary category with a drop in spending since the start of the Covid-19 pandemic is travel. However, Kong revealed that OCBC cards spending still grew healthily at the 17% year-on-year rate even when the pandemic became more critical in January, with the shopping category recording the highest percentage of year-on-year spending growth increase.
Overall, it can be said that 2019 was a good year for credit cards, but it remains to be seen whether 2020 will be able to continue on the previous year’s growth curve. The Covid-19 pandemic and its effects will pose a challenge that banks and other businesses alike should be ready to embrace.
(Source: The Edge Markets)