Consumers and businesses alike are responding well to the convenience of using e-wallets and cashless payment options. -YAP CHEE HONG/The Star
PETALING JAYA: When it comes to cashless payments, e-wallets are Malaysians’ favourite way to pay.
Electronic money (e-money), which includes e-wallets and mobile banking apps, has recorded the biggest number of transactions, compared with other electronic payment (e-payment) tools.
A total of 3.65 billion financial transactions were done through e-money from January to September this year, based on data from Bank Negara Malaysia.
This makes it the most popular e-payment method.
Debit cards came in second at 1.45 billion, followed by credit cards at 678.4 million transactions in the same period.
Only cheques and charge cards showed a declining trend in usage over the past five years.
Here’s a closer look at these payment instruments and how popular they are:
E-money is a payment instrument that contains money paid in advance by the user, either in the form of physical cards or online apps.
The number of e-money users or cards in circulation shot up by 116% from 78 million in 2019 to 169 million last year.
As of September this year, the figures continued to rise to 179.33 million users, according to Bank Negara.
Economist Dr Yeah Kim Leng said the spike in e-money usage was a positive development of the economy going cashless and transforming digitally more quickly.
“The rising adoption of e-wallets and increased usage of credit cards can be attributed to factors like the government’s digital thrust and financial sector’s use of digital technologies to reduce cost, improve services and enhance competitiveness,” he said.
Watch how the usage of e-money has continued to spike through the years here:
Yeah, who is also the president of the Malaysian Economic Association, said consumers and businesses alike were responding well to the convenience of using e-wallets and online services.
“Importantly, the relative safety and security of digital-based financial services have strengthened consumer trust and confidence – and this has spurred the higher transaction volume,” he said.
Economist Dr Geoffrey Williams said the growth of e-payments in Malaysia was in line with global trends.
“The two main drivers are convenience and government policy such as the RM100 e-wallet scheme and welfare payments through MyKad,” he said when contacted.
Last year, the government rolled out its e-wallet initiative, which saw 10 million eligible adults under the B40 and M40 groups receiving a one-off e-wallet credit worth RM100.
The data showed that the increase in e-money usage mainly involved network-based apps, rather than physical prepaid cards.
Plot twist: Cheques bounce back
When it comes to the value of financial transactions, the story is flipped.
Cheques had the highest transaction value among other e-payment tools, logging a total of RM681.1bil from January to September this year.
In comparison, transactions through e-money only amounted to RM114bil within the same period.
Cheques have also consistently recorded the highest cumulative value of transactions throughout the past five years:
However, the reality remains that the usage of cheques is on a decline.
The data shows that the value of cheque transactions, although still exceeding the rest, has been shrinking over time.
Meanwhile, the value involving credit cards, debit cards, e-money and charge cards keeps growing through the years.
On why cheques recorded the highest transaction value, Williams said such payment tools were still being used at the moment because of old accounting practices.
“But with compulsory e-invoicing and incentives for e-payments, it will decline quickly.
“Cheques are likely to be discontinued due to e-payments, e-commerce and e-invoicing,” he said of its future.
Concurring, Yeah said the usage of cheques is expected to decline rapidly.
“It’s likely to become extinct when the facility is no longer offered by financial institutions due to availability of cheaper and more convenient cashless substitutes,” he said.
So, is cash still king?
Experts believe that going cashless is a good thing for our country.
However, cash will likely still be king in the years to come, or at least remain a relevant form of payment in Malaysia.
It was reported that Malaysia aims to achieve 90% cashless payments by 2025, but some consumer groups have urged businesses to maintain cash payment options.
Because changing into a fully cashless society will take time, Yeah said cash will still remain an important component of the country’s financial system.
“But its importance will diminish in line with the pace of the country’s digital transformation,” he said.
Prof Yeah said it would be quite an achievement if we could raise the portion of total financial transactions to being 50% cashless by 2030.
“Cashless transactions rose by 32% in 2022 and 21% to RM11.5bil in 2023.
“Despite the double-digit growth, cashless transactions accounted for only 1% of the country’s total consumption spending in 2023.
“The miniscule share suggests the huge potential for further digitalisation of the country’s payment system due to the advantages of greater convenience, efficiency, and traceability over traditional cash-based transactions.
“The transformation into a cashless society is expected to accelerate in the coming years given the rising penetration of mobile phones, Internet access and banking services coverage,” he said.
For now, the data shows that the amount of cold, hard cash withdrawn from automated teller machines (ATMs) has dropped compared with 2019, before the Covid-19 pandemic.
The amount shrank by 7.3% from RM427.8bil in 2019 to RM396.4bil in 2023.
Fewer transactions are also being performed through ATMs, with 797.7 million cash withdrawals last year compared with 845.9 million in 2019.
Williams, who is the founder and director of Williams Business Consultancy Sdn Bhd, said there were benefits to the rise in e-payments but also serious concerns that have to be considered.
“First, technology outages can close down payments leaving people unable to buy essential items at critical times.
“Second, cybersecurity issues expose the entire economy to the risk of collapse if the e-payments system is hacked.
“Thirdly, individuals can be "debanked" by e-payments providers suspending their accounts without obvious safeguards.
“Unless people hold and use cash, they can easily find themselves without the means to pay for day-to-day essentials, which is a very dangerous risk,” he said.
As such, Williams said cash will still be relevant because of the risks involved.
“In other words, it is important to continue to require acceptance of cash as legal tender,” he said.
The future of money
But overall, Yeah said the economic benefits of going cashless will outweigh its costs.
However, this is as long as the risks of system failures, money laundering, scams and security breaches can be contained.
“Going cashless is certainly good for the economy as it raises efficiency and lowers transaction costs besides enhancing convenience and flexibility for consumers and businesses.
“The eventual integration of cross-border payments and financial transactions will further increase the benefits to include regional and international trade, investment and financial integration,” he said.
Williams also pointed out that one key benefit was that it allowed an e-payments tax (EPT), which could replace SST and GST.
“An EPT is a tiny tax on every e-payment at the point of transaction. A 2.25% EPT can replace SST, for example.
“However the risks of a cashless society are huge and it is not advisable to completely end the use of cash,” he said.
Another behavioural risk with electronic payments was that people budgeted less with e-payments than with cash.
“When you pay in cash, you count it out for each transaction and are more aware of prices and how much you have left.
“With e-payments you just swipe and take less notice of the price, only becoming aware of how much you spent when you reach your limit.
“This allows stealth inflation and leads to high credit card bills which become unpayable leading to debt problems,” he said.
