I can’t remember the last time I had cash in my wallet. Since the rise of cashless payments in Malaysia, I’ve hardly needed it. Whether grabbing a coffee or paying for parking, everything is done through my phone.

The convenience is undeniable. I no longer have to worry about running to an ATM, fumbling for exact change, or even carrying a wallet at all. It’s quick, seamless, and feels like the natural evolution of financial transactions in the modern world.

According to Ipsos, more than half of Malaysians now use non-cash payment methods in the past three months of 2024 (from September 2024 to November 2024). E-wallets saw the highest surge when being compared to other cashless payments, with over 40% (a 14% increase) of users relying on them.

This shift aligns with the government’s push toward a digital economy that aims for a 90% cashless payment rate by the end of this year.

The advantages of going cashless are undeniable. Digital transactions offer convenience, security, and efficiency. Consumers no longer need to carry large amounts of cash, which reduces theft risks. Contactless payments also speed up transactions, making them ideal for busy urban environments.

Moreover, businesses benefit from cashless transactions as they streamline accounting processes, reduce the risks associated with handling cash, and minimise revenue leakage. Governments can also see some real advantages in digital payments. Mostly, this includes enhancing tax compliance and providing greater transparency in financial transactions.

In theory, a cashless society is more efficient, safer, and economically progressive.

The Flip Side of a Cashless Society

Well, that’s why a theory always remains a theory.

I’ve been thinking a lot lately. Cashless is a convenience, well, for me at least. But a part of me believes that Malaysia’s enthusiastic adoption of digital payments has led to a quite unintended consequence. An overcorrection, if I may, where some businesses and retailers refuse to accept cash entirely.

While cashless transactions offer security and convenience, they have also created some sort of a barrier for certain groups, particularly the unbanked and underbanked populations.

In 2023, according to industry estimates, approximately 15% of Malaysia’s 23 million adults are unbanked, meaning they lack access to formal banking services. An additional 40% are considered underbanked, having limited access to financial products such as credit cards and long-term savings.

These individuals mostly rely heavily on cash for their daily transactions. Forcing cashless payments only can effectively exclude them from participating in the formal economy, making it harder for them to purchase goods and services.

Moreover, a fully cashless environment presents challenges for elderly individuals who may not be comfortable with digital technology. The transition also disproportionately affects small vendors and informal workers who depend on cash transactions.

When Cashless Becomes the Only Option, It May Render Problems

The over-reliance on cashless payments within Malaysia also raises concerns about resilience, especially during natural disasters. Malaysia experiences severe flooding almost annually, particularly in the East Coast states. During these emergencies, power outages and network disruptions may render digital payment systems unusable.

For instance, the monsoon season in December last year displaced over 83,000 people, although there was no cited news of it causing problems with access to financial services for those reliant on e-wallets and card transactions, but should we wait until it will?

I mean, a similar situation occurred in China when Typhoon Doksuri struck, and it had devastating effects on areas that had gone largely cashless. Citizens were seen struggling to buy essential supplies due to widespread network failures, highlighting the critical need for cash as a backup payment method.

The push for a cashless economy also assumes that everyone has equal access to the necessary infrastructure, but that is not always the case. Digital payments rely on stable internet connections, smartphones, and banking services. All of which are not universally available or even attainable for some.

In rural areas, where internet connectivity is sometimes unreliable, digital payment systems can be difficult to use. Even in urban centres, network outages can always happen and disrupt cashless transactions. This has left customers stranded without any backup payment option.

And don’t get me started on trying to even use QR or online payments at 12.00am during an emergency. Believe me, been there, done that.

Additionally, while younger Malaysians are comfortable using digital payments, the same cannot be said for older generations or those with limited digital literacy. A fully cashless economy risks marginalising individuals who struggle with digital transactions, reinforcing financial exclusion rather than alleviating it.

Cash and Cashless Payments Can Coexist But Need To Strike Balance

Going digital does not mean eliminating cash entirely.

Countries like Sweden, often cited as the poster child of cashless economies, still somewhat ensure some access to cash transactions, especially for necessities-related products.

It’s the same thing for Malaysia. A more balanced approach is needed.

This involves promoting digital payments while maintaining cash as a viable option for those who prefer or rely on it. However, this balance requires coordinated efforts from both regulators and businesses alike to ensure that cash can remain as an accepted payment method.

Regulators and businesses should consider policies that prevent the outright refusal of cash. Encouraging merchants to accept both digital and cash payments ensures inclusivity.

Moreover, financial institutions must work towards better serving the underbanked by providing affordable digital banking solutions and financial literacy programs.

While Malaysia’s transition to a cashless society is commendable, making digital payments the only option is not the solution. An over-reliance on cashless payments risks excluding a significant portion of the population, particularly the underbanked and elderly.

Moreover, natural disasters and infrastructure failures demonstrate the risks of a fully digital financial system. A more inclusive financial ecosystem should focus on integrating digital solutions while maintaining the accessibility of cash.

Striking the right balance will ensure that financial progress benefits all Malaysians, rather than leaving some behind.

In the end, I just want to stand up for the little guy.