E-wallets to carve up more market

PETALING JAYA: The year 2020 and beyond will see the continued rise in popularity of e-wallets which stole the financial technology limelight in 2019.

Last year has been an aggressive one in terms of user acquisition.

This year will see nothing short of that as service providers will be ramping up their game.

The good news is, when these elephants fight, no grass will suffer. Instead, all consumers will prosper.

This is the time to reap all the freebies and cashback the e-wallet providers are offering to get users on board.

There is also a thrust by the government to push for a cashless nation through the e-Tunai Rakyat initiative, which will see a disbursement of RM450mil starting a fortnight from now.

This digital stimulus implemented by Khazanah Nasional Bhd will benefit some 15 million people, who will each receive RM30 in the e-wallets of their choice.

The biggest e-wallet is Touch ‘n Go eWallet, operated by TNG Digital Sdn Bhd. Other big players in the industry are Boost and GrabPay.

All these efforts are in line with Bank Negara’s vision to make e-payments the preferred medium of economic transactions in Malaysia.

For the 10-month period from January to October last year, statistics by Bank Negara showed that the transaction value for e-money surged to RM13.9bil with a transaction volume of 1.72 billion, surpassing the RM11bil figure that was recorded for the whole of 2018 out of 1.92 billion transactions.

It is interesting to note that e-money is the most widely used electronic payment method in Malaysia in terms of transaction frequency.

Easy does it: E-wallet users will be able to track their spending with everything recorded digitally.

Credit cards played second fiddle at a transaction volume of only 416 million for the January-October period and 447.1 million in 2018.

(The value of these credit card transactions was higher though, at RM117.3bil within the January to October period.)

In terms of number of users, there are a total of 89.86 million e-money users as at October, out of which 47.11 million are network-based.

Assuming an average of three e-wallets per user, this translates to around 15.7 million Malaysians, which is around 48% of the country’s population of 32.6 million.

This then poses the next question: Are there too many e-wallet providers in Malaysia? With a total of 47 e-money licences issued by the central bank, the e-wallet scene is still quite a crowded battleground.

There are close to 50 e-wallet providers in the country, both closed loop and open loop.

The aggressive play last year has seen some smaller providers fizzling out because the business model of providing incentives and cashbacks during this incubation period was not sustainable.

China, which has a population of 1.4 billion, is served by two e-wallets – WeChat Pay and Alipay.

It was in 2015 when the usage of WeChat Pay in China skyrocketed when Tencent, the parent company of WeChat, gave out US$80mil (RM327.4mil) worth of e-hongbao (e-red packets) for the Chinese New Year festivities.

As for Malaysia, a truly cashless nation will reduce the need for cash withdrawals to very low levels. This saves the country quite a substantial amount of money to print and circulate physical cash.

Without the need for holding physical cash is also a security advantage and users will also be able to track their spending with everything recorded digitally.

In an ideal situation where Malaysia fully migrates to e-payments which also eliminates the use of paper-based instruments like cheques and bank drafts, the country may potentially save 1% of its Gross Domestic Product (GDP), which is around RM13bil.

TNG Digital Sdn Bhd chief executive officer Ignatius Ong said his aim for the year was to get more SME merchants on board the Touch ‘n Go eWallet, such as food truck operators, hawker stalls and traders at night markets and wet markets.

“Once we achieve greater presence in these places, I think that’s where the utilisation, the familiarity, getting to use and transact using the e-wallet becomes a lot easier, ” he said.