The making of Malaysia’s cashless society

At present, the central bank has approved 5 banks and 26 non-bank operators as e-money issuers


IF YOU don’t have a smartphone, or don’t believe that you need to have one, you are exempted from reading this article.

Nevertheless, no matter how technologically impaired you are, you can’t help but admit that the smartphone is easily one of the most useful (if not powerful) tools at the moment.

Information can be shared; narcissists get to post their latest photos online; games can be downloaded and played; and yes, bills can be paid. At any time.

The emergence of various digitised services, such as e-hailing and online banking, have certainly revolutionised consumers’ lifestyles.

Now, Malaysians are getting themselves attuned to the idea of cashless and cardless transactions.

With an increasing number of digital players launching their e-payment platforms, the new mode of payment has received good response by the local retail ecosystem and banking industry.

As such, the development in digital payment would also realise the idea of turning Malaysia into a cashless and cardless society, with various partnerships among operators such as the deal with China’s leading financial technology company, Ant Financial Services Group.

The idea is also supported by the government. Recently, Bank Negara Malaysia (BNM) governor Tan Sri Muhammad Ibrahim had said the online banking instant transfer fee of 50 sen will be waived for up to RM5,000 per transaction, effective from July 1, 2018.

On the other hand, beginning Jan 2, 2021, the cheque processing fee would be doubled to RM1 from 50 sen as a sign of higher processing cost.

Last December, Treasury Secretary General Tan Sri Dr Mohd Irwan Serigar Abdullah also announced that a pilot project for e-wallet service, Take Action Pay (TaPay), will be carried out in Cyberjaya, making it the first cashless city in Malaysia.

Digital payment, or e-wallet, is essentially a form of electronic payment that has the capacity to expedite the traditional payment process through the transaction of e-money.

As each provider has various ways of introducing its e-wallet with ancillary products to attract users, the payment methods all carry a common concept which involves users scanning a quick response (QR) code provided at the payment counter via the provider’s mobile application.

According to BNM, e-money is a payment instrument containing monetary value that is paid in advance by the user to the e-money issuer, and can be issued in different forms — such as card-based and network- based — which is accessible via the Internet or other devices.

At present, the central bank has approved five banks and 26 non-bank operators as e-money issuers.

The new mode of payment has made its way along other digitalisation phenomena that have moved many industries.

Chan says 10 more e-wallets are expected to be launched in Malaysia in 2018

Online payment provider iPay88 Sdn Bhd ED Chan Kok Long said 10 more e-wallets are expected to be launched in Malaysia in 2018.

He said 80% of the transactions in the country are currently still by cash, while 20% are done via online banking and credit cards.

“The e-wallet is going to replace this 80% portion. It covers consumers from a very broad spectrum, as it can be from corporate consumers, down to pasar malam (night market) hawkers.

“The moment e-wallets can accept payment from a wide spectrum of merchants, we will no longer need cash,” Chan said.

Meanwhile, a banker said although an e-wallet has the tendency to be exposed to personal data breach, it still allows banks to cut cost on security and cash handling.

“The security of customers’ personal information has never been downplayed by any banks, but e-wallet would be a cost-cutting measure in terms of handling the cash as supposed to handling virtual money.

“Banks no longer have to engage with security firms as much to send the cash to branches or automated teller machines (ATMs), in addition to the usage of ATMs being reduced,” he told The Malaysian Reserve.

While many countries already have an established e-money system, Malaysia might have to wait as the new form of payment pervades the locals.

“It is an idea started from transacting using virtual money, which has evolved from credit cards to online banking.

“As the technology is more appealing to the youths, it might have to take a while for it to take off before the youths would hold the most purchasing power,” he said.

According to a 2017 report by comScore Inc, Malaysian digital users between the ages of 15 and 24 mostly access the Internet via mobile devices only, while those between the ages of 24 and 35 are multi-platform users, including desktop computers and mobile devices.

Below are some of the top e-wallets in Malaysia:

Operated by Ant Financial, Alipay is an online payment platform introduced by the e-commerce behemoth, Alibaba Group Holding Ltd in 2004. In 2013, it surpassed PayPal as the world’s largest mobile payment platform.

The e-payment method was brought over to Malaysia in May 2017 with Berjaya Corp Bhd’s 7-Eleven Malaysia Holdings Bhd being the first retailer to accept the transaction.

To allow an in-store or online transaction, users are required to have a bank account that recognises the Alipay service, which will act as the settlement bank to facilitate the transaction.

For online shoppers, the transaction is similar to regular online payments, where users will be redirected to another Alipay payment page.

However, in-store customers need to launch the mobile application and scan the QR code provided at the payment counter, and enter the billed amount to complete the transaction.

AirAsia Bhd recently launched its digital payment platform, BigPay, which is capable of giving at least 4% savings on travel cost and exchange rates.

The low-cost airline carrier said the e-wallet service is part of AirAsia’s digital strategy to tap into its 63 million passengers’ database.

The mobile application serves dual functions, which comprise a prepaid based BigPay MasterCard and mobilebased e-wallet.

BigPay also supports peer-to-peer transfers among other BigPay users. According to BigPay’s website, a prepaid card carries a limit of RM10,000 for in-store and online purchases.

To be rolled out in Malaysia in the first half of 2018, ride-hailing service provider Grab had announced its latest e-wallet service, GrabPay.

To be introduced in stages, the service will have a similar payment model as the product launched in Singapore.

The mobile application has received good response in Singapore, as it is accepted in food establishments, which include hawker stalls and small retailers.

GrabPay works as a prepaid based payment method, where users have to restore funds in the system’s account in order to use it for transaction.

The e-payment service will also be included in the existing Grab mobile application.

With the extra features, the mobile application requires a six-digit personal identification number (PIN) as a second-factor authentication.

Users with a certain amount of credit in their GrabPay account are required to activate the PIN, particularly when it detects unusual activities.

Another mobile based digital payment service launched in Malaysia that provides a quick payment transaction is MPay.

Launched by ManagePay Systems Bhd, the application applies prepaid system, where users need to restore credit into their MPay’s accounts.

Users also have the option to apply to use the prepaid-based MPay MasterCard or e-wallet. It said in the website that funds are able to be easily transferred between the MPay e-wallet and MasterCard.

Since the launch in April 2016, the mobile application has been updated to not only serve purchase transactions, but bill payments, telco prepaid reloads, domestic remittance services and delivery service.

At present, MPay has more than 3,000 merchants that recognise its e-payment transaction.

Touch ‘n Go
Touch ‘n Go Sdn Bhd (TNG) recently received BNM’s approval to offer a mobile-based payment service through its subsidiary, TNG Digital Sdn Bhd.

The service will provide a cashless and cardless payment and gives benefits to its 18 million active TNG card users in the country.

The application is expected to leverage on the QR code to perform online transactions, bill and retail payments, and peer-to-peer fund transfers.

TNG said the new move is in line with the government’s aspiration to accelerate the creation of a robust yet secure digital payment environment.

Formerly known as Groupon, Fave — a deals and discounts service provider — introduced its digital payment called FavePay.

Operated through its existing mobile application, the merchants for the e-wallet are mostly food and beverage outlets in the Klang Valley.

To activate the e-wallet, users need to establish a payment method by linking the FavePay account to a credit card or online banking account.

To make a purchase, users have to launch the mobile application and scan the QR code provided at the payment counter and enter the billed amount to complete the transaction.