Debit card usage rises as consumers turn more cautious on spending

  • Business
  • Saturday, 20 Aug 2011

THE popularity of debit cards is fast catching up in Malaysia and more so with the current global economic uncertainties where people are looking at ways to have a better grip on their expenses.

The Association of Banks in Malaysia (ABM) says it expects the debit card market to see a 50% to 70% growth in terms of usage this year from stricter credit card measures aimed at reducing household debts.

With about 99% of businesses comprising small and medium enterprises (SMEs), industry observers expect debit cards usage among this segment to increase as this sector accounts for 32% of the country's gross domestic product (GDP).

Banks, at the same time, are looking to roll out debit cards targeting the SMEs as they view them as potential market to grow their business. One such bank that recently did that was Standard Chartered Bank Malaysia Bhd when it launched the SME Business Debit Card.

Standard Chartered general manager for SME Banking Vishal Shah says although credit card still remains a popular payment option for businesses, including SMEs, over the years the shift towards debit cards has become more apparent, especially for individuals and organisations that prefer to spend with their existing available expenses for greater financial control.

As the first bank to introduce debit card for SMEs, he says the bank is certain that the product will drive the usage of debit cards and introduce a new trend in Malaysia's payment card industry.

Through the launch of this card, Vishal says the bank aims to issue a total of 12,500 cards by next year to deepen penetration rate and increase debit card spending in Malaysia, adding that it expects a double-digit year-on-year growth in the number of cards issued over the next few years.

He says the card launch is part of the bank's proposition for SMEs to address their changing needs, and contribute to its ongoing ambition to achieve 20% year-on-year growth in its overall SME Banking business.

“What sets debit card apart is the ability to manage cashflow more effectively. The SME Business Debit Card has extended this value to the next level by enabling a feature to preset transactional limits for individual cardholders according to customers' needs. It is also a more secure option to mitigate risk associated with carrying large sums of money for company expenses.

“Cardholders are also assured of global recognition and convenience with cash withdrawals and transfers at over one million ATMs, plus the ability to make payments at over 30 million establishments worldwide. The product was first launched in other markets, and received positive response from the SME customers. In India, debit cards have had a 20% penetration rate in the SME segment,'' Vishal notes.

Malayan Banking Bhd executive vice-president and head of cards, wealth and payments B. Ravintharan says the bank sees strong growth in overall debit card billings, which grew 61% last year.

“Maybank currently leads the market in debit card billings with a market share of 60% and has over eight million debit cards in circulation, he adds.

He says it is continuously looking at opportunities to extend the convenience of payment by cards for customers and studying new options for the different market segments. “We recently introduced a credit card for the SME segment, namely the MAS American Express Business card, and will laucnh a debit card for this segment in due course.''

Meanwhile, SMI Association of Malaysia national president Chua Tiam Wee says although he expects more SMEs to use debit cards as an electronic payments to increase productivity, reduce paperwork and real time monitoring of expenses, there are downsides to it.

The SMEs will not be able to enjoy the line of credit they would otherwise have by using credit cards. There may also be usage limit. This is not useful for businesses and the merchant network for debit card is still not fully extensive for seamless transactions.

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