COVID-19 pandemic accelerates adoption of cashless transactions

KUALA LUMPUR — Malaysia’s financial technology eco-system has enabled the seamless adoption of cashless transactions, be it e-payment or e-wallet, especially when the movement control order (MCO) was imposed to curb the COVID-19 pandemic.

According to Visa country manager for Malaysia, Ng Kong Boon, the health crisis and subsequent lockdown led to a boom in cashless payments within the span of only a few months, equivalent to three years’ worth of growth.

“Monthly contactless transactions have quadrupled compared to three years ago, and it is likely to continue growing post-COVID-19 and remain as a preferred mode of payment in the near future,” he told Bernama.

The shift towards cashless transactions was obviously supported by the high smartphone penetration rate in the country.

World Economic Forum’s 2019 Network Readiness Index ranked Malaysia high among the 139 countries surveyed—ahead of Italy, China, and Chile—and first among countries in emerging and developing Asia.

 

COVID-19 A BOON FOR E-COMMERCE SECTOR

Mastercard Malaysia and Brunei country manager Perry Ong said even prior to COVID-19 pandemic, digital payments were already on the rise in Malaysia.

According to Bank Negara Malaysia (BNM), 1.72 billion e-money transactions worth RM13.9 billion were recorded between January and October 2019, compared with RM11 billion in 2018.

Ong said the pandemic intensified the necessity and adoption of digital payments due to safety concerns and the need to access essential items in light of the lockdowns and movement restrictions.

The Mastercard Impact Studies, which was held in May, revealed that Malaysia reported higher cashless payment transactions compared with other Southeast Asia markets.

“In April 2020, the number of Malaysian consumers doing cashless payments increased by 18 per cent, with credit and debit cards being the main beneficiaries of Malaysia’s cashless trend.

“During the same period, cash usage declined significantly by 64 per cent, and the number of people using their contactless credit and debit cards increased by 22 per cent and 26 per cent, respectively,” said Ong.

 

BENEFITS OF E-PAYMENTS

Ong said among the major benefits of digital payments is the reduction in cost of handling cash and peace of mind for consumers and sellers while performing their transactions.

“Besides, it also enhances transparency, and e-payment also provides better data access for financial management as it allows you to monitor your financial activity in real-time, as well as better earning trackers,” he said.

He said e-payments also support small and medium-sized enterprises’ profitability as it allows them to engage in financial transactions with customers, suppliers and governments in a faster, more secure and cost-effective manner.

The trend is in line with BNM’s Financial Sector Blueprint 2011-2020 which earmarked e-payments as one of the nine focus areas to increase the efficiency of the nation’s payment systems.

BNM said studies have shown that shifting from paper-based to a more electronic-based payment system can generate annual savings of up to one per cent of gross domestic product (GDP).

 

E-COMMERCE, ECONOMIC COST REDUCTION

Juwai IQI chief economist Shan Saeed said Malaysia will continue to benefit from e-payment, with the government and private sector focusing on promoting a cashless society.

He said Malaysia’s e-commerce market will grow by about 10 to 15 per cent per annum, which is good and at par with the growth of global e-payment and cashless societies in many economies such as China, Singapore and Sweden.

“This will benefit many people, create new jobs as well as enhance Malaysia’s productivity, going forward,” he said.

According to JP Morgan 2019 Payments Trends Report, the e-commerce market in Malaysia is growing from strength to strength and is expected to grow at a compound annual growth rate of 24 per cent a year.

Shan also predicted that the e-payment service would reduce economic cost.

“The economic cost may go down by 25 to 30 per cent with Malaysia moving towards a cashless society and using e-payment for economic and financial transaction,” he said.

Additionally, he said in the next three to five years, the economy would become more technology savvy, boosting productivity and lowering costs.

“Once the labour force is tech-savvy, it will boost productivity and GDP growth at the same time,” he said.

 

TRANSPARENCY IN DIGITAL PAYMENTS

Deloitte Malaysia chief executive officer and Malaysian Institute of Certified Public Accountants council member, Yee Wing Peng said the total transparency and digital paper trail in e-payments provides the government a useful tool to curb tax evasion and money laundering.

“The authorities will have better access to data on individuals’ spending habits, tax payments and movements.

“Cashless transactions would also improve indirect tax compliance, as under-declared service tax cases frequently involves cash transactions. For example, cash transactions received by certain restaurants may go unreported,” he said.

Yee said electronic payments allows easier tracing of digital services that are subject to service tax, and it may result in a reduction of the shadow economy, given that electronic payments are traceable, unlike cash transactions.

 

— BERNAMA