December 9, 2023


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Digital payments give users more bang for their ringgit

9 min read
Digital payments give users more bang for their ringgit

Value-added features, hygiene concerns and business initiatives are accelerating the shift to a cashless society

The adoption of digital payments in Southeast Asia has reached an inflection point and is projected to cross the US$1 trillion milestone by 2025, according to a 2019 report, titlede-Conomy Southeast Asia, by Google, Temasek andBain & Co.

The surging levels in the adoption and usage of digital payments are in line with other internet economy sectors such as ride-hailing and e-commerce. Digital payments will account for almost half of all money spent in this region by 2025, says the report. In addition, e-wallets are expected to grow even faster, from US$22 billion in 2019 to US$114 billion in 2025.

The Covid-19 crisis is likely to accelerate these digital trends as consumers’ daily habits, consumption patterns and ways of thinking have begun to change during this crisis.

“The adoption of e-wallets saw a sharp uptake during the Movement Control Order (MCO) period and we continue to see an uptrend as people become increasingly comfortable with digital payments. Post-Covid-19 user behaviour will continue to be positive for us whereby a greater push for cashless payments, which reduces physical contact, is expected,” says Effendy Shahul Hamid, CEO of group ventures and partnerships at CIMB Group Holdings Bhd.

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The future looks favourable for digital payments. The Touch ‘n Go eWallet will continue to be positioned in payments but more importantly, we have plans to introduce financial services. – Effendy

CIMB Group wholly owns Touch ‘n Go Sdn Bhd (TNGSB). TNGSB and Ant Financial — the world’s highest valued fintech company and an affiliate of China’-based Alibaba Group — own e-wallet provider TNG Digital Sdn Bhd, which operates the Touch ‘n Go eWallet.

GrabPay, one of the country’s leading e-wallet providers by dominant ride-hailing company Grab, the region’s first unicorn, concurs that the MCO has accelerated the use of cashless payment methods.

“I believe that this mode of payment is here to stay. This outlook is also supported by studies that indicate a huge behavioural shift and an acceleration in digital payments, with over 75% of consumers in Asia-Pacific continuing to use digital payments after the pandemic,” says Priyanka Madan, head of GrabPay Malaysia.

According to the Mastercard Impact Study 2020, Malaysia leads the region in mobile and digital wallet adoption. The country has a mobile wallet usage of 40%, ahead of other countries such as the Philippines (36%), Thailand (27%) and Singapore (26%).

In Malaysia, the number of e-wallets has been on the rise in recent years. Today, there are more than 40, including popular ones such as the Touch ‘n Go eWallet, Boost (by Axiata), GrabPay and Maybank e-wallet.

The move towards cashless methods has incentivised businesses to accept digital payments. The Touch ‘n Go eWallet saw a spike in e-commerce volumes and online transactions during the MCO. period.

“The ability to transact digitally has proved to be a crucial point during this period. As users became more receptive, the e-wallet has become an important component for small and medium enterprises (SMEs) and entrepreneurs in digitalising their payment avenues and connecting better with their consumers,” says Effendy.

“This crisis has accelerated the realisation and adoption rate among merchants and the rate continues to be high today. From a trend perspective, if our numbers are anything to go by, industry acceptance of e-wallets is certainly heading in the right direction.”

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We see a convergence of digital payments, social media and e-commerce as more merchants are selling their products and services through social media platforms. – Priyanka

Meanwhile, Grab announced an expansion of GrabPay’s merchant-partners to include household brands from all essential categories such as groceries, pharmacies, food, electronics and hardware across the nation in early July. “The growth in cashless [payment] adoption shows that it is advantageous to both users and businesses. The latter can be offline or online merchants. We see digitalisation being at the forefront for businesses to survive and scale their reach in the new normal,” says Priyanka.

Addressing pain points and growing markets

SMEs are often the last to jump on the technology bandwagon. This is especially true for mom-and-pop stores run by a generation of founders who may never have used a smartphone before or do not understand how cashless payments work. To encourage these smaller businesses to adapt to new technology, e-wallet providers are looking to address their pain points by introducing initiatives that can further increase their market share.

CIMB Group’s Effendy points to the value proposition that the Touch ‘n Go eWallet offers merchants. “For example, we have helped multiple merchants manage the difficulties associated with cash-handling. More efforts will continue in that vein. We will add more value by helping them know more about their customers on the back of superior analytics.

“We are seeing a huge pick-up in micro-merchants and smaller traders coming into our ecosystem as their customers move away from cash. Static QR solutions are quick to deploy and secure. At the same time, we make good use of our scalable technology platform to perform e-KYC (electronic Know Your Customer) and speed up business processes.

“It all comes down to delivering value and our teams are focused on that. We believe that our compelling ecosystem of users, merchants and use cases contributed to the resilience of the Touch ‘n Go eWallet during the pandemic. This has laid the foundation for us to aid businesses in recovery and accelerate the transition to a cashless economy. Continued efforts to increase use cases and grow the ecosystem with high-value services is the key to sustaining this trend.”

GrabPay has a number of initiatives to encourage traditional businesses and users that have been slow to adopt digital payments. According to Priyanka, the company is looking to create additional income opportunities for its ecosystem of merchants and partners.

“We see a convergence of digital payments, social media and e-commerce as more merchants are selling their products and services through social media platforms. Given the change in consumer behaviour, we saw a need to support offline merchants that lack digital payment options and/or tech infrastructure so that they are not left behind. This is even more apparent among small independent merchants such as hawkers and neighbourhood shops, which may lack the resources and knowledge to transition their business online,” she says.

“We introduced initiatives such as remote GrabPay Link for merchants to sell and accept payments through social platforms and digitised Ramadan bazaars by partnering local councils. We also launched wet markets, including the Chowrasta market (Pasar Chowrasta) in Penang on GrabMart.”

Payments for the fresh produce, poultry, seafood and meat bought from traders at these wet markets via the Grab app can be made using the consumer’s GrabPay e-wallet.

Onboarding these markets to Grab’s platform is said to have contributed to safeguarding livelihoods during the MCO period. In March and April, GrabPay saw new user growth of more than 60% with over 8,000 new merchants signing up for its digital services. There was also an increase of 15% in merchant sales via the GrabPay link.

“Moreover, our partnership with the government’s digital payment initiatives such as the e-Tunai Rakyat programme, launched earlier this year, saw over 70% of claimants spending their incentives on merchants in our ecosystem. And over 50% of these users continue to use GrabPay after the MCO,” says Priyanka.

More reasons to use less cash

Across the world, the coronavirus outbreak has prompted second thoughts about potential hygiene issues around cash handling. Regardless of whether there is a real risk, the “psychological factor” of cash as being unclean can change how consumers choose to pay, says Bain & Co in a news report.

In the US, the Federal Reserve has changed how it handles the greenback. As a precautionary measure, the Fed has increased the minimum holding period for bills coming from Asia and Europe to the US to a minimum of 10 days. The previous minimum was five days.

Here, e-wallet providers have been quick to add more merchants to their ecosystem to offer consumers the option of buying all their daily essentials on their platforms. These companies are looking to launch features that will give greater value to their users, thus more reasons to go cashless.

“We have advocated safe, convenient and seamless digital payments since the MCO. Apart from adding more GrabPay touchpoints, we have enhanced our app’s interface and safety measures to make it even more user-friendly and safer. Some enhancements include a sleeker interface, a six-digit pin code to protect the user’s information on the app and an option to pay with GrabReward points in-store,” says Priyanka.

“Going forward, we will introduce more safety features and enhancements to give users even more incentive to go cashless. This will include helping users to manage their spending with real-time information on the latest deals anywhere in Malaysia that is near to them. This is done through an in-app merchant discovery function and users can use their points to pay for their online shopping.”

Digital payments are currently used alongside debit and credit cards, cash and bank transfers and an “all-of-the-above” approach to payment acceptance is starting to emerge among merchants in the country (see box story).

This means that an e-wallet competes with other e-wallets as well as other payment methods. “Choosing an e-wallet can be a challenge with numerous players operating in Malaysia. The winners are likely to be the ones backed by a robust ecosystem that appeals to the majority of the population. There is a wide range of technology and digital platforms that are not typically uniform and this can make it challenging to onboard an e-wallet customer. A well-applied innovation and the strength of the user experience go a long way in delivering a cut-through. This is also true to compete with traditional means of cashless payments such as [credit or debit] cards, which are fairly well penetrated,” says Effendy.

“Our teams are constantly engaged with communities and we have a range of campaigns and incentive-driven initiatives to promote usage across various segments. For example, users who were able to claim the e-Penjana initiative using the Touch ‘n Go e-wallet can use the RM50 credit for their toll payments. The key to sustained adoption is the ability to orchestrate an ecosystem that is valuable to users and merchant partners. At the same time, this ecosystem must deliver a level of intuitiveness that perpetuates usage of the e-wallet platform, for example, by proving insights on the back of analytics.”

Effendy believes that digital payments are the tip of the iceberg with regards to the use of the e-wallet. To offer more value to consumers, financial services should be made available on this platform.

“The future looks favourable for digital payments. The Touch ‘n Go eWallet will continue to be positioned in payments but more importantly, we have plans to introduce financial services,” he says.

“Essentially, the eWallet will be developed into a ubiquitous platform with a comprehensive set of services. We are starting to focus more on enabling SMEs to conduct their business on our platforms. These are potential game changers that we believe will enable a world-class technology platform.”

A place for all payment methods


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Is a cash-free future edging closer? While the coronavirus pandemic has clearly accelerated the shift towards cashless payments, it still looks like cash will be around for a long time.

“Over centuries, people have developed a deep-rooted trust in paper and coins during uncertain times. Today is no different. For example, the trade war between the US and China has led notable investors to increase their cash holdings. Our survey shows that people also like cash because it allows them to easily track their spending,” says a Deutsche Bank research report, titled Part II. Moving to digital wallets and the extinction of plastic cards.

The report adds that while cash will still be around, the coming decade will see digital payments growing at the speed of light and that will result in the death of plastic (bank) cards. “In emerging markets, the effect could arrive even sooner. Many customers in these countries are transitioning directly from cash to mobile payments without ever owning a plastic card.”

At this juncture, however, Malaysians seem to appreciate all payment modes, with bank transfers (performed over, the largest bank in the country) being the most popular. This is according to the results of Rapyd’s 2020 Asia Pacific eCommerce and Payment Study. The study also found that e-wallets such as the Touch ‘n Go eWallet, Boost, PayPal and GrabPay are growing in importance while cash-on-delivery remains a valid payment method. About 65% of users in Rapyd’s survey claimed to have used this method in the month prior to the Movement Control Order.

Rapyd, a London-based global fintech company, conducted its research in March and April, surveying 3,500 online consumers (500 respondents each in India, Indonesia, Singapore, Japan, Malaysia, Taiwan and Thailand).

“One notable difference [among consumers in Malaysia] is a preference for credit cards, which could reflect a desire to buy now and pay later. With multiple popular payment methods, an “all-of-the-above” approach to payment acceptance is important for selling in this country,” says the study.

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