RAM Ratings: Rise of mobile payment not a threat to banks

KUALA LUMPUR: The increasing popularity of mobile payment is not considered a material threat to Malaysian banks, said RAM Rating Services Bhd (RAM Ratings).

It said in a statement yesterday given the wider availability of more established electronic payment methods such as credit and debit cards, mobile payment in Malaysia was unlikely to attain the level of ubiquity that it enjoyed in China.

The rating agency said even if increased payment volume via mobile wallets might reduce banks’ credit card transactions, the fee income earned from card transactions only accounted for a minor proportion of the overall earnings.

“While a handful of mobile wallet providers have expanded into areas such as lending, the loan amounts are relatively low. Borrowers are usually small merchants and entrepreneurs that are typically not the banks’ target clients.”

RAM Ratings acknowledged that mobile payment was mushrooming throughout the world.

It said although mobile payment was still in its nascent phase in Malaysia, the market competition was intense as Bank Negara Malaysia had granted licences to 48 non-bank e-money issuers.

The central bank’s undertaking to promote mobile payment was consistent with its aspiration of building a cashless society, as embodied in the Financial Sector Blueprint 2011-2020.

To foster its adoption, Bank Negara 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).

The RPP will be an enormous boon to mobile wallet users as they can have a single wallet that pays various mobile payment players.

RAM Ratings said with the help of Bank Negara, mobile payment players made headway in promoting this payment method as the number and value of nonbank mobile payment transactions had increased to 31.1 million and RM1.3 billion, respectively, last year, compared with one million and RM240.3 million in 2017.

“While this budding industry has 48 licence holders, only a handful dominate the field,” it said, adding that almost all were owned or backed by high-profile businesses.

Among them are the Touch ’n Go e-wallet, which is jointlyowned by CIMB Group Holdings Bhd and Ant Financial, and Boost, established by Axiata Bhd.

Partnerships with banks were common for many mobile payment players as they sought to expand their merchant bases, said RAM Ratings.

“Nonetheless, most of them are still loss-making. Some do not charge merchants any payment processing fee in the interest of expanding and retaining their merchant bases.

“Moreover, many of them have to bear high operating expenses to promote adoption.”

Given all these developments, the rating agency said industry consolidation was very likely.