KUALA LUMPUR: A majority or 92 per cent of domestic small and medium enterprises (SMEs) accept digital payments from their customers, especially since the pandemic.

A report by PayPal entitled ''Accelerating small and medium-scale enterprises (SMEs) Digitalisation in Malaysia' also shows that 57 per cent of SMEs stated that Covid-19 lockdowns influenced their decision to digitise their business.

However, 44 per cent of SMEs noted challenges in the information technology (IT) expertise and support as the most common hurdle to digitalisation.

Over 70 per cent of SMEs noted impacts on the bottom line as benefits of digitalisation. 

PayPal surveyed 1,000 SME owners across Malaysia to examine the digital readiness, analyse the progress of their digitalisation efforts, assess the impact digitalisation has had on their ability to sell cross-border, and identify solutions to address challenges and capture new opportunities.

The report noted that despite the uptake of SMEs to digitise their operations, 43 per cent of SMEs did not see a business need to digitalise.

The report was launched by the American Malaysian Chamber of Commerce (AMCHAM Malaysia).

"Digital payments became the key driver for digitalisation during the pandemic.

"While the report found the majority of Malaysian SMEs are domestically focused, an increasing number of SMEs are pivoting to cross-border trade and internationalisation for new customers, expansion, and growth," said AMCHAM Malaysia.

The report also revealed that 67 per cent of SMEs accelerated digital payments for health and safety concerns, 57 per cent for instantaneous receipt of payments, and 53 per cent to enhance customer experience.

About 58 per cent of SMEs had digitised their ability to make and receive payments, followed by advertising, marketing, and customer service, while 92 per cent of SMEs accepted some form of digital payment from their customers.

Over 40 per cent of SMEs sell to international customers, whereby the Asia Pacific region has the highest share of cross-border sales for SMEs at 48 per cent, followed by 42 per cent global and 39 per cent across Southeast Asia.

For SMEs who conduct cross-border business, the report noted that nearly 70 per cent agreed that having digital payment options enhanced their brand's trust and credibility and attracted international customers.

AMCHAM Malaysia chief executive officer Siobhan Das said SMEs are an integral part of the ecosystem.

"They not only stand on their providing products and services to the local economy but are also a critical part of the global supply chain.

"Multinational corporations rely on the resilience and growth of SMEs to ensure continuity and stability in their ability to deliver value to global clients.

"This requires predictability and standardisation to ensure compliance. This can only be achieved if they adopt digital technologies," she said in a statement.

PayPal international head of government relations Steven Chan said digitalisation has helped SMEs make better decisions based on digital solutions to grow their business, network, and profit margins.

"It is an ongoing process that involves different technologies to serve unique purposes and requires continuous optimisation.

"SME digitalisation is key to long-term resiliency of Malaysia'sMalaysia's growing digital economy, and it requires a concerted effort and enhanced public-private partnerships between universities, non-profits, businesses, and policymakers," he added.