BNM: E-Wallets Need to Move Beyond Cashbacks to Be Sustainableby Vincent Fong August 1, 2019
During his keynote speech at the “Malaysian E-Payments Excellence Awards” Assistant Governor Adnan Zaylani Mohamad Zahid outlined the state of e-payments in Malaysia and the key strategic focus for Malaysia’s payments journey.
Some key progress that we’ve made that was highlighted in his speech was:
- Cheque usage was reduced by half to 101 million
- POS terminals have more than doubled to 16 terminals per 1,000 inhabitants
- Over 400,000 merchants have been recorded to accept QR payments
- E-Payment transactions have almost tripled
- Mobile Payments transaction increased twenty-fold from 2 million transactions to over 34 million transactions
Yet despite all the progress Assistant Governor Adnan also pointed out that studies have shown 80% of Malaysians are still using cash in majority of their daily spend such as F&B, groceries and fuel.
Against this backdrop, he laid out 3 key areas to that the industry should focus on:
A more inclusive e-payment adoption
Specifically he highlighted the unevenness of e-payment adoption; he stressed that the industry needs to work together to drive adoption beyond just urban centres and to also have an increased focus towards low-tier merchants like hawkers and night markets which are often frequented by Malaysians.
He pointed out that new technologies that are readily available in Malaysia like “Tap-On-Phone” and Paynet’s DuitNow QR goes a long a way to serving this market. “Tap-on-phone” refers to a mobile solution that enables merchant to accept card payments without any additional hardware and DuitNow QR refers to a common QR standard that enables merchants to accept e-wallet payments using only one QR code.
He added that another dimension to help drive this change would be to digitise salary payments, and payments to suppliers, wholesalers and distributor which will make it more compelling for merchants to keep using e-payments.
Providing more value to users beyond just offering cashbacks
Assistant Governor Adnan called upon the industry rethink their strategy and focus on putting customers at the core of innovation to address real pain points and drive greater value creation.
He pointed out that some players are offering generous rewards including cashback to stimulate usage among users and cautioned that while such practice may be effective in driving e-wallet adoption at the initial stage it might not be sustainable in the long run.
He also shared that e-wallets and mobile banking apps should provide seamless ways for users to track their expense, which would include budgeting features, instant notifications and possibly smart money management tools. Some of these enhancements may be small tweaks with a potentially big impact to get users to be more comfortable with e-payments.
To that end, he highlighted that Bank Negara Malaysia’s virtual banking framework is one of the central bank’s strategy to enable players to provide value proposition to its ends users beyond just payments and cashbacks.
Future proofing Malaysia’s payments landscape
The assistant governor stressed that payment systems of the future not only need to be inclusive, it must also be able to accommodate the speed of change for implementing new solutions at scale.
He highlighted the launch of the Real-time Retail Payments Platform as one the initiatives to achieve that goal. It is designed to be more scalable, flexible and open to support new use cases such as Proxy Payments, Request-to-Pay, e-Mandates and services to support more seamless customer onboarding processes.
Alongside that, Assistant Governor Adnan also highlighted several other key initiatives like the Interoperable Credit Transfer Framework which provides fair and open access for banks and non-banks to shared payment infrastructures such as the RPP, the Open API framework, adoption of the ISO20022 standard, and its recently issued Risk Management in Technology policy as some of the measure that the central bank has taken to future proof Malaysia’s payments landscape.