Cashless is king
Covid-19 is accelerating Malaysia’s cashless transformation. But in our move towards a cashless society, we must make sure that no one gets left behind.
The Covid-19 pandemic has boosted the adoption of electronic money. The government and e-wallet providers are working hard to ensure that no one gets left behind as Malaysia moves towards a cashless society.
RETIRED teacher May C. never saw the need for cashless transactions.
Until Covid-19.
“I used to trust hard cash for all my shopping, food, bills, everything. I was worried about the security of the system and the transactions – what if someone steals my data or hacks into my account or e-wallet?
“But when the pandemic struck, I got scared about handling money. Who knows where it has been or who has touched it. You just can’t tell if the coronavirus is on it.”
With her son’s help, the 65-yearold signed up for an e-wallet. Now May cannot imagine leaving home with cash.
She is not the only new “cashless convert” due to the Covid-19 pandemic.
A changing consumer landscape
As a growing number of consumers shy away from cash transactions due to fears of virus transmission, the pandemic is accelerating Malaysia’s migration towards electronic payments.
According to Bank Negara Malaysia, there were a total of 89.86 million e-money users as at October 2019, out of which 47.11 million are network-based. In April 2020, the number jumped to about 93 million e-wallet accounts, either card or network-based.
From January to October last year, statistics by Bank Negara showed that the transaction value for e-money surged to RM13.9bil with a transaction volume of 1.72 billion, surpassing the RM11bil figure that was recorded for the whole of 2018 out of 1.92 billion transactions. From January to April this year, 557 million transactions worth RM8.2bil were conducted using e-wallets.
A June 2020 report, eCommerce Unleashed, by market research company Ipsos found that the pandemic has forced the market, society and businesses to look at cashless transactions on a more permanent basis.
The report, conducted from May 14 to 27 in the midst of the Covid19 outbreak, found that 27% of Malaysian respondents have used more contactless payment at in-store checkouts when shopping. Conversely, only 18% said they used less contactless payment while 53% noted no change.
Nearly a quarter (23%) said they used contactless payment at in-store checkouts for the first time in the past four weeks while about one in five 19% said they have never tried contactless payments but are considering it.
The study looks into consumer behaviour in Malaysia, Vietnam, Mexico, Thailand, Indonesia, Spain,
Columbia, the United States and Canada and sampled approximately 1,500 individuals in each country. The sample in Colombia, Indonesia, Malaysia, Mexico, Thailand and Vietnam is from a more urban, more educated and/or more affluent pool than the general population of the countries.
“In terms of age, the study found that for the “elder community” that is already familiar with online shopping, the shift to going cashless will not be a major issue. The challenge will remain, regardless of age, for those not exposed or encouraged to use technology,” says IPSOS Country Lead (Malaysia) for Innovation and Market Strategy & Understanding (MSU) Pakee Charoenchanaporn.
All in all, Charoenchanaporn explains that there has been a behaviour shift among Malaysians to shop and purchase differently since Covid-19.
Cashless future is nigh?
While the shift has been gradual over the past few years, the pandemic really expedited the adoption of cashless transactions, concurs Universiti Sains Malaysia (USM) economist Dr Loke Yiing Jia, whose area of interest is consumer behaviour, financial literacy and payment systems.
One of the attractions of e-wallets is that it makes small value transactions more convenient, allows users to track their spending and introduces financial incentives and rewards by e-wallet providers, says Loke. The government’s eTunai and ePenjana initiatives have also succeeded in drawing in more people to download e-wallet apps.
The ePenjana incentive provides e-wallet credit worth RM50 to eligible Malaysians starting July 31. Earlier, the Budget 2020 provided RM30 to e-wallet users aged 18 and above earning less than RM100,000 annually in the e-Tunai Rakyat initiative. This is in line with Bank Negara’s push to make e-payments the preferred medium of economic transactions in Malaysia.
This observation is backed by data. A study released in May by Visa’s Consumer Payments Study showed that over 70% of Malaysians are supportive of the country going cashless while 62% believe it can be achieved within the next five years. Malaysia also leads Southeast Asia in mobile or digital wallet usage. The Mastercard Impact Study 2020 published in June found that Malaysia’s e-wallet usage is at 40%, ahead of neighbouring countries like the Philippines (36%), Thailand (27%) and Singapore at (26%).
Ensure access for all
Loke nonetheless points out that while the results of the Visa and Mastercard surveys look positive, there is still a small segment of society that may be left out in this migration to electronic payment.
“The communities that may struggle to catch up with cashless payment would be the elderly, the lower income groups and those who are less technologically savvy,” she says.
To ensure that no one gets left behind, it is important to identify and provide access to communities that have yet to adopt digital payments. An integral step is to make infrastructure available to all segments of society. This means that good internet must be made available throughout the country.
“Generally in urban areas the connectivity is good but if you look into rural areas you cannot deny that the digital divide can be an obstacle,” Loke says, pointing out that this barrier has the biggest effect on small traders.
Connectivity is key
Internet speed plays a large role, particularly for mobile devices. According to MCMC’s Industry Performance 2018 report, Malay ranks 32nd in the world in average fixed broadband speed. One of the targets of the National Fiberisation and Connectivity Plan (NFCP) 20192023 is to have average speeds of 30 mbps in 98% of populated areas by 2023.
On Aug 29, Prime Minister Tan Sri Muhyiddin Yassin said the government would develop a digital infrastructure plan known as Jendela in a bid to improve the country’s digital communications under the 12th Malaysia Plan (2021-2025).
The plan will lay the foundation for comprehensive and high-quality broadband coverage facilities as well as prepare the country for the transition towards 5G technology.
However, smartphone access is also important. According to the The Malaysian Communications and Multimedia Commission (MCMC)’s Handphone Users Survey (HPUS) 2018, only 30.6% of
Malaysians above 65 years old use smartphones. Low income earners also face access barriers as only 60.9% of those with a monthly income of RM1,000 and below use smartphones. There also exists a rural-urban divide with smartphones being used by only 67.3% of people living in rural areas compared to 83.8% of urban dwellers. As e-wallets are a form of prepaid cashless payment, the need to put in a certain amount of money into the e-wallet account upfront can also be a deterrent for poorer individuals.
“If they are really constrained with money, even putting RM30 in their e-wallet may not be appealing,” says Loke, while making a comparison to debit cards which deduct money directly from the bank account.
However, the fact that e-wallets are convenient for small value transactions coupled with the availability of incentives and cashback options makes it attractive to the lower income groups.
Dr Loke explains that although digital transactions are beneficial in financial management and eliminating fraud, some consumers are still worried about data protection and privacy.