Mobile payment not a threat to banks


The increasing popularity of mobile payment in Malaysia is not a material threat to local banks, said RAM Rating Services Bhd (RAM Ratings).

The rating agency also said due to wider availability of other more established electronic payment methods such as credit and debit cards, mobile payment in Malaysia is unlikely to attain the level of ubiquity that it enjoys in China.

According to RAM Ratings’ latest commentary, “Mobile payment in Malaysia — not a threat to Malaysian banks,” the firm acknowledges that mobile payment is mushrooming throughout the world. China is the global hub for mobile payment while varying levels of adoption are observed in other countries.

Still, the agency said although mobile payment is still in its nascent phase in Malaysia, market competition is intense as Bank Negara Malaysia (BNM) has granted licences to 48 non-bank e-money issuers.

“To foster its adoption, BNM has introduced the Interoperable Credit Transfer Framework, under which all mobile payment players that have reached a certain size will have to operate on a shared payment network known as the Real-time Retail Payments Platform (RPP),” it added.

According to RAM Ratings, only a few mobile payment players dominate the field although there are currently 48 licence holders where most of them are owned or supported by high-profile companies.

Boost is owned by Axiata Digital Services Sdn Bhd, while Touch n Go eWallet is jointly owned by CIMB Group Holdings Bhd and Ant Financial Services Group.

“Partnerships with banks are also common for many mobile payment players as they seek to expand their merchant base. Nonetheless, most of them are still loss-making,” RAM Ratings stated.

Mobile wallet users are able to take advantage of having a single wallet that enables them to pay a variety of mobile payment players operating via the RPP.

“With the aid of BNM, mobile payment players made headway in promoting this payment method as the number and value of non-bank mobile payment transactions had risen to 31.1 million and RM1.3 billion in 2018 respectively (2017: One million and RM240.3 million),” said RAM Ratings.

Some of these players do not charge the merchants any payment processing fees in the beginning because they prefer to expand and hold on to their merchant base. At the same time, they need to endure high operating expenses to promote the adoption.