Ong: In China, where the population is at 1.4 billion, there are only two e-wallets. Malaysia’s population is only 30 million, so, if you ask me, two are probably the maximum. Photo by Kenny Yap
Hamirullah: A focus on enhancing user experience will be more sustainable for businesses, instead of merely relying on incentives to attract customers.
KUALA LUMPUR: Consolidation in Malaysia’s e-wallet sector, a space so crowded that DiGi.com Bhd’s vcash was forced out of the game last November, looks increasingly inevitable. In fact, expectations are strong that it could happen as early as this year.
“It (e-wallet) is a very expensive game, so consolidation will come because some [smaller] players will just fall off, while some bigger players may look into mergers and acquisitions,” said TNG Digital Sdn Bhd chief executive officer (CEO) Ignatius Ong.
“In China, where the population is at 1.4 billion, there are only two e-wallets. Malaysia’s population is only 30 million, so, if you ask me, two are probably the maximum,” he said in a recent interview with The Edge Financial Daily.
“Probably in 2020 you will start seeing consolidation — though maybe not early in the year. [But] you will start to see some e-wallets cannot sustain themselves,” he added.
TNG Digital operates the Touch ’n Go eWallet, the largest provider of such services in Malaysia, with 6.5 million registered users and about 110,000 merchants accepting payments from the e-wallet.
The Touch ’n Go eWallet, together with Axiata Group Bhd’s Boost and Grab Holdings Inc’s GrabPay, are the three major e-wallet service providers in Malaysia that have been selected to participate in the federal government’s RM450 million e-Tunai Rakyat initiative.
Boost CEO Mohd Khairil Abdullah, meanwhile, expects market consolidation to happen in the next three years.
“We think there will be three to five remaining mass market e-wallet players [after that], as well as a couple of smaller, closed loop or niche e-wallets,” he added.
Closed loop payment solutions are those that enable consumers to load money into a spending account linked to a payment device to make purchases from a single company. In contrast, an open loop mobile payment solution allows users to pay at many different locations from one centralised, digital wallet. And unlike their closed counterparts, open platforms are connected to a personal account — a credit card for example — and do not require a prepaid amount to exist in the system.
In the meantime, competition will get even more intense, Mohd Khairil said, noting some banks have expressed interest in launching their own e-wallets.
Nevertheless, Boost will welcome them as it believes in an open and fair market, said Khairil, which drives competition and is good for industry innovation.
“To us, competitors are also cashless ecosystem builders,” he said, adding more players would mean greater effort in raising awareness and educating consumers on e-wallets, which help accelerate cashless adoption in the country. “That’s a win-win situation for the e-wallet ecosystem and its players,” he added.
In the 11 months between January and November last year, Boost’s user base grew 40% to nearly five million, while it has doubled its merchant base to over 125,000, comprising both online and offline merchants nationwide.
At the rate it is going, Khairil said Boost is on track to turn profitable in 2021.
The DuitNow factor
But the existence of DuitNow QR as the universal QR standard for electronic payments in Malaysia may put off consolidation, according to Maybank’s head of community financial services in Malaysia, Datuk Hamirullah Boorhan. DuitNow will allow seamless interoperability between participating e-wallets and their merchants, said Hamirullah.
“[So] a focus on enhancing user experience will be more sustainable for businesses, instead of merely relying on incentives to attract customers,” he said.
DuitNow will also level the playing field for banks, Hamirullah said, as all banks that are part of the DuitNow QR ecosystem will be able to offer e-wallet services, which will only benefit customers, though it will intensify competition in the e-wallet space.
As at November 2019, over 1.1 million users have signed up for the Maybank e-wallet or MAE, which is accepted at over 300,000 merchants nationwide, he said.
DuitNow QR or Malaysia’s National QR Standard was established under Bank Negara Malaysia’s Interoperable Credit Transfer Framework, which mandates that Payments Network Malaysia Sdn Bhd — as the country’s shared payment infrastructure provider — implement an interoperable and common QR standard for Malaysia.
This means participating e-wallet services will be able to use a single QR standard for payment for goods and services, rather than having a stretch of different QR codes for different e-wallet service providers. GrabPay adopted the DuitNow QR last November, making it the first e-wallet to do so.
Meanwhile, as competition continues to heat up further, e-wallet operators must start differentiating their offerings to make a place for themselves in the market, said Setel Ventures Sdn Bhd CEO Iskandar Ezzahuddin. Setel, Malaysia’s first petrol e-payment solution, is wholly owned by Petronas Dagangan Bhd.
While Iskandar believes the Malaysian e-wallet industry can thrive with a variety of e-wallet operators, he too thinks the space is on the verge of seeing consolidation.
“[So] moving forward into 2020, e-wallet operators must start differentiating their offerings while innovating and integrating elements that build on their areas of strength ... with challenging global market conditions predicted over the next few years, I believe the need for a sustainable commercial model will be the focus of most players,” he said.
‘There should be sanity in the market’
The cessation of DiGi’s vcash has taught a lesson to the e-wallet industry, that there should be sanity in the market, said TNG Digital’s Ong.
“Going out in the market and [trying to] win the war with cashbacks, [and] offerings that are not sustainable ... I don’t think that is the right thing to do. At the end of the day, that is just going to kill the e-wallet operator, and wrongly educate the market. My biggest worry today is that Malaysians are using e-wallets because of cashbacks, not for the convenience that comes with it,” he said.
“If a new e-wallet comes into town today, everyone is going to expect some freebies from it. So, unless it has very deep pockets, it is better for it not to come into this game at all — it is just hard,” he added.
Malaysians are also still cash-dependent, despite the many e-wallet services available out there after more than 40 e-wallet licenses issued by Bank Negara Malaysia, said GrabPay Malaysia, Singapore and Philippines managing director Ooi Huey Tyng.
“With so many e-wallets in the market, everyone is fighting for the same piece of pie. While this works to the benefit of users, as an industry, it may be quite fragmented — which is why we are a strong proponent of any efforts that can reduce the barrier of embracing the digital economy for both consumers and merchants alike,” she said.
Putrajaya is doing its bit to boost adoption, via the RM30 e-Tunai Rakyat initiative. Under the programme, the government is spending RM450 million to increase e-wallet use by gifting 15 million eligible Malaysians a one-time RM30 digital incentive to be used via selected e-wallets, which are Touch ’n Go eWallet, GrabPay, and Boost.