E-wallets on the rise, but users still favour banking transactions

Many users are still reluctant to rely solely on e-wallets, as conventional debit card transactions prove to be easier for them


Malaysia has been riding the financial technology (fintech) wave for at least half a decade now. With nearly 60% of the population aged below 35, and the high mobile penetration rates, the country is a hotbed for e-wallet players.

The is backed by the increasing number of e-money issuers from 28 in 2016 to 44 in 2018. The higher number of e-wallet players had prompted warnings of a financial revolution that would render banks irrelevant.

If you ask any millennial today on how many e-wallets they have on their mobile devices, chances are they would have a few, with GrabPay being a common favourite.

However, the fact is, e-wallets have been slow to take off in the country.

Many users are still reluctant to rely solely on e-wallets, as conventional debit card transactions prove to be easier for them.

For Noorfarida Filzah, 28, a part-time lecturer working in Cyberjaya, the hassle of having to make bank transfers to reload e-wallet credits has affected how she uses the service.

“You tend to forget to top-up sometimes. Other times, you reload more than what you need. I would prefer linking the account to my debit card instead of performing several transactions,” she told The Malaysian Reserve.

An additional setback, she said, is the disjointed way e-wallets operate.

“Each app serves a specific function, and they each have their own panel retailers. I don’t want to have so many e-wallets on my phone,” Noorfarida said.

Another e-wallet user, 29, who works at a printing company in KualaLumpur, said he found e-wallets to be unintuitive. “I don’t find it seamless, especially to pay bills. I would rather make online transactions with my Internet banking account,” he said, declining to be named.

“I would love to go cashless, but right now, it is difficult. It is good that there are more merchants now, but we need to have a complete ecosystem for e-wallets to fully work,” he added.

Undisputedly, e-wallet transactions have more than doubled over the period, from 921 million transactions in 2012 to 1.92 billion transactions in 2018 — exceeding the total number of transactions for credit card, charge card and debit card combined each year. But the value of transactions remains minimal.

Statistics by the central bank showed that the value of credit card transactions was high at RM135.2 billion in 2018, followed by debit card at RM40.3 billion, charge card (RM12.5 billion) and e-money (RM11 billion). E-money, or electric money, is essentially cash in virtual form used by e-wallets.

In other words, the use of e-wallets remains limited in Malaysia as many still opt for credit and debit cards to make payments. Local e-wallets are also mostly restricted to transactions for food and beverages, transportation and entertainment, unlike in China, where “quick response” codes are found at wet markets and even on the street to tip a busker.

It would be a long way for Malaysia to catch up with Chinese-based “killer apps” like Alibaba Group Holding Ltd’s AliPay or Tencent Holdings Ltd’s WeChat Pay that blend social media, e-commerce, payment and other finance functions into a single app and user-friendly ecosystem in China. This seamless connectivity allowed Beijing to record US$15.4 trillion (RM63.02 trillion) worth of mobile payments transacted in 2017 — more than 40 times the amount processed in the US.

MIDF Amanah Investment Bank Bhd senior banking analyst Imran Yassin Yusof sees China’s current reality as a distant future for a traditional market like Malaysia.

“In terms of acceptance, there is still a lot that needs to be done in the country. Some people are only starting to trust Internet banking, but perhaps, with the new generation going into the workforce, maybe we’ll see a change. But not in the near future,” Imran said.

Another analyst at a local bank described e-wallets as having “no impact” to the banking industry at the moment despite initial fears that banks would lose over 20% of their revenues to fintech firms.

In recent years, local lenders such as Malayan Banking Bhd, AmBank (M) Bhd and CIMB Bank Bhd have introduced their own mobile wallet payment platforms. Each bank has also teamed up with selected fintech companies so as to not lose out on the mobile payment wave.

With all the groundwork being laid out, it is safe to say that local banks are anything but complacent.

As the number of e-money issuers continues to grow, with tie-ups becoming a necessity in the mobile payment industry, it is possible that Malaysia will one day have its own super app, although it is still a distant dream. But when it does arrive, you can bet that millennials will be around to make use of it.

“I’m open to the idea of a multi-function app,” said Noorfarida. “I’m not too worried about security risks as I used to, as now I’m familiar with e-wallets. In the end, if it makes life easier, why not?”