Has cashless finally arrived in Malaysia? Not really
By Dzof Azmi May 1, 2018
- BNM launched the ICTF this year to enable banks and wallet companies to interoperate.
- 80% of transactions in Malaysia are still in cash, 10% on credit cards, 10% online
MALAYSIA has laid the groundwork for e-wallets to become mainstream, but the pieces are not yet quite clicking into place, with one obstacle being a public seemingly reluctant to wean itself from using physical cash.
This was the consensus of the panel that convened to discuss the subject "e-wallets - Is cashless finally here?" organised by the Global Entrepreneurship Movement (GEM).
The regulatory perspective of the issue looks optimistic. Tan Nyat Chuan (pic, above), Bank Negara Malaysia's (BNM) director of Payment Systems Policy, outlined a strategy that stretched back several years to encourage Malaysians to migrate to online forms of payment, by making it more expensive to use cheques, while lowering the costs of using credit cards and online payments.
This year saw the launch of the Interoperable Credit Transfer Framework (ICTF), to bring together onto the same network 48 wallet companies in the market, with the ones offered by five Malaysian banks.
"ICTF is about bringing the players to a common network," explained Tan, where banks and the private sector cooperate on infrastructure while competing on services.
An example of an advantage is that merchants no longer need to display a different QR code for each scheme they use. "If you are an e-money scheme that is eligible and you've been onboarded onto the shared infrastructure minimally, you must offer your customers, the merchants or your account holders a common QR."
"What we are trying to do is foster inclusion. We want to find a formula that brings about cost savings to the country. We want to find a formula that penetrates the lower-tier merchants and not have them priced out of the market. That's what the ICTF seeks to do."
One revelation was that long-time players who have had decades to establish their presence seemed to be not taking their first-mover advantage to power ahead of their competition.
Syahrunizam Samsudin, Touch 'n Go Sdn Bhd's chief executive officer, admitted that while the ubiquitous transit payment card had been operational since 1997, there were obstacles slowing down progress in the form of ageing legacy systems and the complexity of existing services.
Nevertheless, Touch n' Go has ambitions. In January the company obtained BNM's approval to offer mobile e-wallet services in Malaysia. They are also planning to roll out a new gateless gantry toll system which provides the advantages of speed, convenience – and interoperability.
"If the RFID system is launched by the government, you don't have to worry about reloading (cards) anymore," enthused Syahrunizam. "Any wallet essentially is linked to your Tag."
Meanwhile, Remy Khoo (pic, above), Maybank's head of Digital Innovation and Strategy, said that although they launched QRPay last year and is accessible to their already-existing network of thousands of merchants, at the moment they are only targeting the lower-tier ones. "Traditionally they would need to apply for a terminal, but now they can even do it with a mobile POS for example, or even accept payments via a mobile app."
Kevin Lee (pic, below), GHL Systems Bhd head of Corporate Sales, says that merchants need to be aware that the future is currently a balance of many forms of payment. "Don't just think about accepting cards. Think about the whole omni-channel acceptance: credit cards, debit cards, (and) wallets."
Cash is still king
Perhaps the most surprising moment of the evening at a forum about e-wallets was that half of the audience admitted they would be more willing to use cash than an e-wallet for small purchases.
Syahrunizam adroitly pointed out that 51% of those who use the train in KL, buy their tokens using cash. This is despite Touch n' Go offering a 20% discount on all trips and half-price tickets for those who use the train before 7am.
Eighty percent of all transactions in Malaysia are still in cash, with 10% on credit cards and 10% online.
"I think the challenge for wallets is that cash is intuitive. We need to make technology intuitive," he concluded, while conceding that "cash is anonymous and people have to realise that with e-wallets, nothing is anonymous".
Aiza Azreen, Boost director of Strategic Development agreed that e-wallet companies need to move beyond the mantra of a "cashless" society and instead accept that the future is more likely to be "cash less".
This is borne of her experience marketing Boost to local universities and colleges. "If you are thinking about millennials, they are probably the ones who are going to use less scan and pay, because these are the ones that don't spend that much," she said. Instead, Boost now highlights other features such as the ability to send and receive money, as welll as vouchers for the online game platform Steam.
Nevertheless, ongoing education seems to be still important going forward. The public doesn't necessarily appreciate that using physical money is expensive, and that there is a cost to cash. However Tan is pragmatic enough to appreciate progress as it comes. "We may not kill cash completely (but) we can make it less of a king."