Friday 29 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on July 16, 2018 - July 22, 2018

THERE are a few simple ways to go cashless. Internet banking, credit and debit cards — which remain popular in Malaysia — followed by cheques, bank drafts and gift cards.

But the buzzword for the payment industry in the years ahead will be the electronic wallet (e-wallet). Tech firms, retailers, banks and telco companies are all muscling into what has become an increasingly crowded e-wallet market in Malaysia.

A quick check on Bank Negara Malaysia’s website shows a list of at least 35 non-bank entities that have received approval to issue e-money via their mobile apps.

These players include AEON Credit Service (M) Bhd, Axiata Digital eCode Sdn Bhd, ManagePay Services Sdn Bhd, PayPal Pte Ltd, iPay88 (M) Sdn Bhd, and XOX Com Sdn Bhd. In addition, five banks — AmBank (M) Bhd, Bank of China (M) Bhd, CIMB Bank Bhd, Malayan Banking Bhd and RHB Bank Bhd — have also received the green light from the central bank to become e-money issuers.

For perspective, there are two types of e-money schemes — the small and the large scheme — which are determined by the purse size and the outstanding e-money liabilities. The large scheme allows a maximum purse size of RM1,500, whereas the small scheme limits the purse size to RM200.

According to industry experts The Edge spoke to, many of these e-wallet players will not survive and some consolidation in the crowded e-wallet market is to be expected. Touch ’n Go Sdn Bhd, Alipay Malaysia Sdn Bhd and WeChat Pay Malaysia Sdn Bhd are widely anticipated to be among the few players that will likely survive.

What challenges will e-wallet players face? Will they eventually replace banks? What about card scheme providers such as Mastercard, Visa and American Express (Amex), as well as payment service providers and merchant acquirers, such as locally-listed GHL Systems Bhd and Revenue Group Bhd? Is the e-wallet a threat or opportunity for them?

Mastercard Asia/Pacific Pte Ltd Malaysia and Brunei country manager Perry Ong acknowledges that the e-wallet is indeed a threat, but it is the card scheme provider’s job to protect its own market and remain relevant in the payment industry.

“Obviously, we see them [e-wallet players] as competitors, but we will continue to bring consumers mobile applications that are as frictionless as possible through the banks. We give them [the banks] digital capability, we give them the journey mapping of customers, we give them technology that is faster and safer. At the end of the day, consumers may not need to use an e-wallet,” he says.
 

A different world here

Describing Alipay and WeChat Pay as the “rock-star” and “blockbuster success” respectively, in China, Ong is, however, of the view that the two giants may find it difficult to replicate their “perfect success stories” in Malaysia.

He says WeChat has an existing pull factor to hook its users in China as it is a messaging platform doubling as a payment app. But when these players come to Malaysia, their users would start searching for WeChat Pay merchants.

“The problem with WeChat Pay and Alipay here is that Malaysians don’t use them to pay at their merchants. There is a disconnect between the e-wallet and the current acceptance playground,” he says.

Ong highlights that the current e-wallet players are mainly catering to proprietary, closed loop acceptance. In other words, a user of one particular e-wallet can only make payments to merchants of that same e-wallet provider.

“Will the person buy a RM10 souvenir and use WeChat Pay? Yes, sure, they will. But will they buy a RM10,000 handbag and use WeChat Pay? I don’t think so. They are going to use the traditional Mastercard, Visa or Amex, which have hundreds of thousands of merchants. It is a different world here,” he says.

Revenue Group managing director and CEO Eddie Ng Chee Siong is hopeful that e-wallet players can be successful in Malaysia, as the adoption of e-money should benefit the company, which is scheduled to list on Wednesday.

“They need to have deep pockets to burn money. It’s a chicken and egg situation. When you go to the merchants, they would ask you how many users you have. Likewise, when you go to the users, they would want to know which merchants you have,” he says.

Ng believes that e-wallet players will always remain e-wallet players, as they can never replace the role the banks play. He adds that to be successful, one cannot be a pure e-wallet player.

“If you look at GrabPay and WeChat Pay, they did not start as e-wallet players,” he says.

Interestingly, Ng concedes that e-wallet players could bypass cashless payment solutions providers like Revenue Group during the transaction process but, realistically, they still need merchant acquirers.

“Without us, they need to knock door-to-door and invest heavily to acquire merchants. Our direction is simple — continue to acquire more merchants. We enable more features in our device. If they are not successful, we won’t be affected. If they are successful, it is a bonus for us,” he says.

Commenting on the possible industry consolidation, GHL Systems CEO Danny Leong says it is all about the network size — the number of subscribers, transactions and merchants.

“From what we understand, at least 40 licences have been issued so far. I do foresee industry consolidation but not so soon, because all the players are still very gung ho about their plans. After they build up their portfolio and valuation, only then will the consolidation happen,” he says.

On the reception of e-wallet payments by merchants, Leong says it can only get better because once more people use them, the more the awareness of e-wallets will grow.

“The more informed, sophisticated merchants usually understand how e-wallets work. The others can be a bit more sceptical. But that will change once they themselves start using it. It’s a cycle between getting the subscriber base and the merchant base, it drives each other. I think it’s a positive trend,” he says.

Meanwhile, Touch ’n Go CEO Syahrunizam Samsudin says one of the challenges in creating an e-wallet ecosystem is the behaviour profile of Malaysians, who are very attached to using cash.

“However, we don’t see this as unusual. Instead, we see it as part of a ‘payments evolution’ that has taken place in many markets around the world,” he says.

It is worth noting that CIMB Group Holdings Bhd’s 52%-owned Touch ’n Go signed a joint-venture agreement last year with Ant Financial Services Group to develop a mobile wallet ecosystem for Malaysians.

The agreement is an extension of the collaboration between CIMB and Ant Financial, which owns Alipay, after they first introduced the mobile and online payment platform for Chinese tourists at selected tourism sites in Malaysia.

“Touch ’n Go’s e-wallet allows users to transfer money to friends and family in seconds, top up mobile prepaids and pay their bills. It also gives the user the convenience of purchasing movie and flight tickets and pay with the QR code payment system at our growing list of merchants,” says Syahrunizam.

For the e-wallet industry to develop quickly, says Green Packet Bhd CEO Tan Kay Yen, it makes sense to have the right mix of existing players and start-ups.

“Given the population of Malaysia, which was around 32.1 million in 2017, all entities will have their own communities or markets that they serve. It depends on who delivers a compelling product,” he says.

Green Packet piloted its very own Kiple application, which functions as an e-wallet. It is powered by Webonline, which operates a payment gateway and e-wallet service under the brand Webcash.

While Tan is also of the view that industry consolidation will happen one day, he stresses that at this point, different parties should come together with their separate domain expertise and deploy something local for the respective markets to strengthen their base and proposition.

“E-wallets are generally suitable for small or micro transactions, replacing the cash in your physical wallet. Hence, there will be a co-existence with banks, card schemes as well as the payment service provider and merchant acquirers at this stage,” says Tan.

In the long run, he says, it is not just about improving ease of payment but building a collaborative ecosystem to benefit the customers and merchants.

Shankar Kanabiran, the financial advisory services leader of Ernst & Young Advisory Services Sdn Bhd, highlights that the choice is good for consumers.

“If you look at the e-wallet players, they tend to have a single minimum viable product. For instance, Touch ’n Go is transit-centric. Ultimately, you need to get the market to compete and innovate so the consumer ultimately gains,” he says.

Kanabiran agrees that industry consolidation is an expected outcome, but it is not so simple as selling databases as there are rules, such as the Personal Data Protection Act, governing this. 


 

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