Online Retail Payments in Malaysia and Buy Now Pay Later service — Cultivate Trends
Online shopping is becoming more and more common in Malaysia. According to Statista, the penetration rate of online shoppers is 62.9% and e-commerce market amounts to USD4.3 billion in 2020. It foresees the e-commerce sales to grow at a CAGR 2020–2024 at 8.4%, resulting in the market value of USD6.0 billion by 2024.
Malaysia e-commerce is highly driven by price-sensitive, tech-savvy and mobile-first consumers who are searching for better value and choices as well as fast delivery service.
E-commerce platforms provide rich product information, enable deals and bargains, eliminate travel time and opens round-the-clock. Besides, user-friendly experience and secure payment gateways help to stimulate customers’ online transactions.
E-wallets expand the online presence
Online banking, direct bank transfer, debit and credit cards are primary payment methods in online retail platforms. As e-wallets become popular in recent years, the two leading e-commerce platforms in Malaysia, Lazada and Shopee, have been aggressively pushing adoption rates of their e-wallets, Lazada Wallet and ShopeePay.
Both Lazada Wallet and ShopeePay offer attractive discounts and cashback. They provide easy top-ups through local bank transfer and cash-based payments at retail store partners. Also, in line with the Malaysia aspiration towards a cashless society, Lazada phased out cash on delivery (COD) last year.
Apart from e-commerce platforms, Boost is among the most active e-wallets driving online presence in retail payments. Axiata Digital expanded Boost e-wallet acceptance across industries including online retailers (e.g. Zalora, Taobao, Fave), online food and service delivery (e.g. Dahmakan, DeliverEAT, EasyParcel), e-hailing (e.g. Ezcab), online telco bill payment (all major providers including Digi, Maxis, Celcom), and online utility bill payment (e.g. Indah Water).
Yet, cash-based payments are still available online. Retailers such as Shopee and Sephora accept COD. Customers can pay for their online goods, telco and utility bills through convenience stores such as 7-Eleven or petrol stations. Malaysians also purchase at 7-Eleven gift cards and vouchers of online entertainment and gaming such as Spotify, Joox, and MY Sony PS+.
Instalment Plan Payment is commonly available
Instalment Payment Plan (IPP) is common in major e-commerce platforms, including Lazada and Shopee. Credit cardholders issued by major banks are mostly eligible to checkout by instalment payment method.
Ikea Malaysia also introduced checkouts to provide in-store and online customers with an option of zero-interest Instalment Payment Plan (IPP). This service is available to credit cardholders with a minimum purchase transaction of MYR500.
GHL, one of the top merchant acquirers in the ASEAN region, partnered with Splitit Payments, a leading global monthly instalment payments solution provider, to offer Splitit’s instalment solution to more than 2,000 online merchants in Malaysia, Thailand, Indonesia and the Philippines.
GHL merchants will be able to offer their customers Splitit’s instalment payment solution to pay for online purchases with an existing credit card, splitting the cost into interest and fee-free monthly payments.
Buy Now Pay Later service reinvents affordability
Buy now, pay later service reinvents consumer’s affordability by splitting the retail product value into equal instalments and repayment is spread over a short-term monthly period without any interest or processing fees. This concept helps retail merchant to improve conversion rates, increase repeat purchases or customer loyalty, and grow basket size.
For example, instead of paying a lump sum RM1,000 for an electronic device today, you can purchase on BNPL for RM250 every month over the next four months, at no extra cost — late fees apply if users fail to pay on time. This payment arrangement creates a win for you, the retailer and the payment service provider.
According to research firm Statista, 80% of online shopping cart abandoned in 1st half of 2019, and fashion items such as jewellery and clothing recorded the highest rates.
With BNPL services on the checkout page, it instantly removes the barriers to shopping, as it doesn’t require a consumer to part with a large sum of money up-front.
The simplicity of frictionless one-click shopping online helps to generate higher conversion rates and loyal customers for retailers.
Grab introduced PayLater
According to Bank Negara Malaysia (BNM), there were 10 million credit cards in circulation as at the end of 2019, registered a small decline from 2018. In contrast, the number of debit cards in circulation increased by 1.8% to 43.3 million. International debit card with domestic PIN-based applications dominate in debit card types. As such, BNPL service to consumers without credit cards represents a vast untapped segment.
Following its release in Singapore, Grab introduced ‘PayLater’, a new post-paid service for Grab rides, GrabFood orders, and GrabExpress deliveries to Malaysians. With PayLater feature activated in users’ Grab app, instead of paying for the trips and services via GrabPay e-wallet or payment cards, users receive a single bill after the end of each month, with no extra charge or interest. Selected Grab users are given pre-approved credit limits based on their usage, leveraged machine learning to minimize default risks.
Hoolah — a fintech provides Buy Now Pay Later service
Singapore-based fintech company, , entered Malaysia, following its success in Singapore. Hoolah’s buy now pay later service allows consumers to pay for their purchases in three monthly instalments interest-free and fee-free.
Hoolah positions itself as a payment service that helps consumers to achieve their aspired lifestyles, creating possibilities for consumers to invest in products that are durable and higher quality. Product categories include fashion apparel, personal accessories, electronics, cosmetics, baby products and home and living.
How it works exactly? Hoolah appears as one of the payment methods on its partnered retailers’ checkout platforms. Customers select Hoolah as the payment method, submit payment details and the purchase amount is deducted automatically from users’ debit or credit cards on a short-term monthly basis.
Is Buy Now Pay Later suitable for Malaysia market?
“Innovations in payments doesn’t necessarily need new technology, however, it has to serve the customer’s convenience in the omnichannel environment. “ IMRG
BNPL service that helps you to get the things you want now, even if you run out of disposable cash. This is captivating as smaller payments are seemingly more affordable. It is now thrust into the faces of millennials and Gen Z’ers. Social media influences consumer personalities, pushing lifestyle, products and instant gratification.
There are potential worries that young people enter into BNPL payment arrangement without fully understanding the consequences of default repayment. Even so, retailers are open to offering BNPL service, serving more Malaysian consumers with the ‘reinvented affordability’ and seamless auto-repayment method.
In a way, this is encouraging Malaysians to spend money they don’t have, especially young consumers are known for impulsive-buying behaviour and relatively weak in managing personal finance. Because of this, consumer education is crucial. Malaysia is a market with multiple consumer segments that have diverse shopping behaviour and value mindsets.
BNPL providers are accountable for encouraging responsible shopping behaviour among consumers. Hoolah strategizes on the right content marketing, leverages machine learning to study customer profiles, and forms strategic retail partnerships and provide BNPL service to the right consumer segments.
Nonetheless, in the future, BNPL service is payment method with potential for more expensive purchases such as airline tickets, home furnishing and appliances and even healthcare services. In the Philippines, Cebu Pacific partnered with Cashalo, a microfinancing mobile app, and launched the first airline ticket financing service — Fly Now Pay Later.
Originally published at https://cultivatetrends.com on March 13, 2020.
