Caution, lack of investment curb mobile payments in Malaysia

KUALA LUMPUR - Tolls are a common sight in Malaysia, greeting drivers with various payment options. But by the end of this year, drivers will see the cash option struck out at all 31 highways across the country, with concessionaires ditching hard money for cashless payments via prepaid Touch n' Go cards.

Efforts are being made to promote a cashless economy in Malaysia, with banks encouraging use of debit cards for shopping. Malaysia's e-commerce is growing at nine per cent a year, with last year's revenue at US$894 million (S$xxx). But that is a fraction of all transactions and cash is still dominant.

In 2010, McKinsey consulting firm said that 92.5 per cent of Malaysia's transactions were made in cash. The government aims to reduce that to 63 per cent by 2020.

While Malaysians purchase items like electronics through cashless payment, daily meals at a coffeeshop are still paid in cash.

"The obstacles now are business readiness and investment in e-wallet readers," said Chan Kok Loong, head of iPay 88, an online payment systems provider used by vendors selling goods and services in Malaysia.

Mr Chan said that while the central bank wants more payment card terminals and readers to be deployed, the cost is too high for businesses.

"At the same time there is no single e-wallet that is prominent in Malaysia," he added.

The US has Apple Pay, Google Wallet while China widely uses AliPay and WeChat. In Malaysia, AirPos was launched in April last year (2016) for small and medium-sized businesses to accept cashless payments. But mobile wallets are still nascent in Malaysia, with little response thus far from consumers.

Despite being heavy users of the internet, three quarters of Malaysians are concerned about mobile payments due to security issues, a survey by Nielsen found. Mobile payments are likely to increase if security features are enhanced and incentives are given.

"Malaysians have an inherit distrust of online payments, so moving to cashless payment through mobile phones will take a little longer than in other countries," said Richard Hall, Country Manager for Nielsen Malaysia in a report published last year.