The Current Landscape
Malaysia is experiencing a dramatic shift in payment preferences. Digital payment transaction values increased by over 13 billion US dollars in 2023 and are forecast to reach around 207 billion US dollars by 2025. The country has become the second leading country in Southeast Asia with the highest rate of cashless payments adoption.
What’s driving this change? The pandemic accelerated what was already an inevitable trend. The average eWallet usage rate in Malaysia is at 64%, only second to China, and the government is targeting 90% cashless transactions by 2025.
Key Payment Methods Malaysian Consumers Are Using
1. E-Wallets (Digital Wallets)
- E-wallet transactions reached RM69 billion in 2022 and are expected to climb to RM95 billion by 2025
- Leading platforms: Touch ‘n Go eWallet, GrabPay, Boost, ShopeePay
- Digital payments captured 51.28% of Malaysia’s fintech market share in 2024
- Most popular for: food delivery, ride-hailing, retail shopping, bill payments
2. Bank Transfers & Online Banking
- Direct bank transfers remain highly popular, especially for B2B transactions
- FPX (Financial Process Exchange) enables real-time online banking payments
- Growing integration with e-commerce platforms
3. Credit & Debit Cards
- Over 10 million credit cardholders in Malaysia
- More than 70% of card-present transactions in major urban centers are now made via contactless methods
- Visa and Mastercard dominate the market
4. QR Code Payments
- DuitNow QR has become ubiquitous across retail
- ePayment usage has already far exceeded the Twelfth Malaysia Plan’s target to have 15,000 merchants adopting cashless payments by 2025
- Even small hawker stalls and rural retailers are accepting QR payments
5. Buy Now Pay Later (BNPL)
- BNPL transactions rose by 320% between 2020 and 2023, reaching RM2.9 billion
- Particularly popular among younger consumers (millennials and Gen Z)
- Major players: Atome, FavePay Later, ShopBack Pay Later
6. Cash – Still Relevant?
- 48.4% of Malaysians still use cash for daily purchases
- 63.5% of non-urban residents rely on cash, compared to 36.2% in urban areas
- Reality: Malaysia is transitioning, not yet fully cashless
Why This Matters for Your Business
1. Consumer Expectations Have Changed
Modern Malaysian consumers, especially younger demographics, expect multiple payment options. 78% of online merchants now offer at least three digital payment options. If your business only accepts cash or a single payment method, you’re likely losing customers to competitors.
2. Government Support & Incentives
- The government has disbursed over RM2 billion through six national eWallet subsidy schemes since 2020
- Retail Digitalisation Initiative (ReDI) provides support for businesses to go digital
- SME Digitalisation Grants can subsidize payment gateway adoption
3. Operational Benefits
Businesses adopting digital payments report:
- Reduced cash handling and reconciliation time
- Lower risk of theft and human error
- Faster settlements and improved cash flow
- Better financial tracking and reporting
- Access to valuable customer data and insights
4. Expanding Customer Base
- Accept international tourists through Alipay+ network (Alipay, GCash, Kakao Pay)
- Access tech-savvy Gen Z and millennial consumers who prefer online shopping to cash transactions
- Enable online sales and e-commerce capabilities
Common Concerns & How to Address Them
“Isn’t it expensive to set up?”
- Modern payment terminals and gateways have become much more affordable
- Government grants can subsidize up to 50% of costs
- The long-term benefits (reduced cash handling, fewer errors, increased sales) typically outweigh initial investment
“What about security?”
- Perceived technology security has a strong relationship with the adoption of cashless payment
- Use PCI-DSS compliant payment providers
- Modern systems have built-in fraud prevention and encryption
“My customers still prefer cash”
Reality check: Consumer preferences are changing rapidly. The best approach? Offer both. This hybrid model ensures you don’t lose existing cash customers while attracting the growing digital-first demographic.
“What about rural areas or older customers?”
Valid concern, but the gap is closing. Government initiatives have improved internet connectivity even in rural areas like Pulau Pangkor, and ePayment transactions per capital increased from 343 in 2023 to 409 in 2024.
The Bottom Line
Malaysia isn’t choosing between cash and digital – we’re in a transition period where offering both is essential for business success. However, the trajectory is clear: digital payments are rapidly becoming the norm, especially among younger consumers and in urban areas.
Businesses that adapt early gain competitive advantages: faster transactions, better record-keeping, access to broader customer bases, and positioning for future growth. Those that resist risk being left behind as consumer preferences continue to shift.
