E-payment companies for better times

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PETALING JAYA: Earnings of electronic payment companies in the third quarter of 2022 (3Q22) are set to improve with the reopening of international borders which should lead to an increase in tourist and foreign arrivals.

Companies in this space should also benefit from higher transactions captured by retail merchants and terminal sales as banks replace their old electronic data capture terminals, said UOB Kay Hian (UOBKH) Research.

Foreign tourists, he noted, contributed 15% to 20% of Malaysia’s total transaction payment volume before Covid-19.

Nonetheless, the research firm expects a lower operating margin, given that most of the transactions captured would primarily come from retail sub-sectors such as department stores, supermarkets, convenience stores and convenience stores. food and beverage companies.

UOBKH said there could be potential catalysts for the 2023 budget.

“We expect the government to provide cash incentives such as the e-Tunai Rakyat program and e-Belia credit, which would benefit the electronic payment industry with higher transaction volumes,” he said. stated in an industry update.

He also expects the government to continue to support digital transformation, which could lead to an increase in the number of electronic payment terminals and transactions per capita.

However, a recession, should it occur, could weaken consumer confidence.

“We assume a 10% decline in total deal value in 2023 if the market experiences a recession, with both GHL Systems Bhd and Revenue Group Bhd’s revenue could fall by 35% and 10%, respectively,” he added.

Regarding the regulation of buy-it-now, pay-later (BNPL) activities, the UOBKH said that this could indirectly affect electronic payment companies that partner with BNPL players to offer customers options of payment from the BNPL.

However, he sees this regulation as neutral for the sector, as consumers may have other means of payment.

“The two (electronic payment) companies under our coverage, GHL and Revenue Group Bhd, are partnering with BNPL players to offer consumers BNPL payment options,” he said.

On the other hand, he expects some consolidation among BNPL players. There are currently 19 BNPL players in the country and some of the big players are Atom, Split, Hoolah, Grab and SPAyLater by Shopee.

The Consumer Credit Act (CCA) aims to regulate companies that provide credit or credit services to individuals and micro and small businesses.

To this end, a public consultation document has been published, which could see BNPL players regulated under the CCA by the end of 2023.

Other entities include factoring and leasing companies, buyers of impaired loans and debt collection agencies.

According to UOBKH, based on a survey of 10 non-bank BNPL providers, BNPL market transaction value skyrocketed to RM1.49 billion in 2021, contributing about 0.5% of the total value of transactions in the country.

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