Fintech: The first steps towards a cashless society

The last couple of years have been exciting for those involved in the FinTech industry, with new advancements completely transforming the way technology has been integrated into global financial systems. Adoption of revolutionary technology often leads to revolution in the way society works, and it’s no different with the adoption of advancements in FinTech.

The advent of e-payment and e-wallet systems in the past couple of years has shown unprecedented and exponential growth, especially among tech-comfortable millennials who make up a large percentage of today’s workforce the world over. And with any new technology, where there is a large influx in user adoption, there is large potential for change in the way society operates.

MONEY ON THE MIND

Worldwide, leading the way in the e-wallets and digital payment industry are two of the biggest global players, WeChat Pay and AliPay, which sees more than 600 million active users thanks to high adoption rates in China’s fast growing mobile payment scene. An estimated 47% of China’s population uses digital wallets as their preferred payment technique, making it the number one choice in the country, beating out the more traditional methods of cash and credit cards. In China, exclusive usage of e-wallets has become so widespread, that even street food vendors and night market sellers accept WeChat Pay and Alipay, breaking through the misconception that e-wallets can only be used at e-commerce websites and physical brick-and-mortar stores.

As is often the case, China operates on a different playing field than the rest of world, making them the exception in global trends, but it won’t be long before the rest of Asia, and eventually the world, catches up. According to a 2018 global payments study carried out by Worldpay, a leading global payment services provider, credit cards still reign supreme in North America for both e-commerce and POS transactions, while global trends put cash and debit cards as the preferred payment methods for physical sales, and e-wallets as first choice for e-commerce transactions.

LOCAL WINDS SHOW…

In Malaysia, the big players are Boost and GrabPay, who have been leading the e-wallet sector since their respective launches in 2017 and 2018, with a few more notable apps such as the Touch n’ Go e-wallet and Fave also gaining a fair number of users over the past year. Most of these apps work on the reload-and-use model that prepaid phone line users will be familiar with, allowing control of how much you intend to spend. In the case of GrabPay, their expansion into launching a fully fledged digital wallet was obvious as their range of services grew out of just ride-hailing to include the likes of food delivery service, package delivery and in-store GrabPay-based payment system as a cheaper alternative to traditional card terminals.

“GrabPay is an integral part of our business and mission to enhance the everyday lives of Malaysians by offering a seamless and convenient payment option for their on-demand rides, food or parcel deliveries, instore and online purchases, or even hotel stays and movie tickets – all from one singular app, while earning points and rebates,” says Ooi Huey Tyng, Managing Director of GrabPay for Singapore, Malaysia and the Philippines.

Since the launch of the GrabPay e-wallet service in a year ago June 2018, the application has quickly become the widest used e-wallet in South East Asia, being one of the few services with a presence in six countries in the region. Ooi attributes their rapid growth down to being hyperlocal and partnership-driven. “With our operations running across the region, it requires us to be adaptable when it comes to working with regulators, partners and stakeholders to ensure that we are providing services that are tailored to the needs of each market. In Malaysia for example, we collaborate with Maybank to expand our offline acceptance to a more varied group of QR-enabled merchants as well as increase usage opportunities of the GrabPay wallet.”

“On top of that, we believe in the partnership model. In July 2018, we launched GrabPlatform which is a key differentiator that allows our partners, local and regional, to leverage on our ecosystem to scale their businesses and make our services more ubiquitous. Under that, we introduced two new payment technologies – an online check-out feature and point-of-sale device integration for small businesses and start-ups, under the ‘Pay with GrabPay’ service. Our online checkout feature was launched with e-commerce platforms, Qoo10 and 11Street, while the point-of-sale integration enables merchants to use GrabPay as a payment method for their businesses. Grab as an everyday super app aims to provide one seamless experience for users with as many touch points as possible,” she adds.

DIGITAL MEETS PLASTIC

For those yet unwilling to fully give up the familiarity of a physical payment object, perhaps BigPay is more your speed. “BigPay is a mobile app and payment card which is an everyday alternative to your bank. Our goal is to democratise and decentralise financial services by providing a low cost, transparent and fully digital product for everyone,” explains Christopher Davison, CEO and co-founder of BigPay. “We are the first and fastest growing independent FinTech company, regulated by Bank Negara Malaysia. In less than one year BigPay has become one of the largest financial services companies in Malaysia, so we are a mass-market company. I think focusing on simplicity and value for money has definitely helped drive our popularity.”

BigPay is a subsidiary of the AirAsia Group and was launched in 2018 by AirAsia CEO Tony Fernandes as a game-changing new FinTech product. And indeed, BigPay is the first of its kind in Malaysia to marry both the rapidly growing e-wallet technology with the familiar, globallyrecognised credit card. What sets it apart from the other e-wallet services on this list is the power of having a Mastercard connected to your wallet, which allows users to perform transactions not just locally, but also overseas in any currency. Most digital wallet services on this list are only accepted in their country of origin, and in the case of GrabPay can be used in the South East Asia region provided that your wallet is reloaded with the right currency before use.

BigPay allows cross-border transactions thanks to the Mastercard affiliation and allows withdrawal from ATMs anywhere in the world, charging users the competitive daily exchange rate at time of transaction. As a nonbank entity, BigPay also eliminates any additional bank fee that may be imposed on forex transactions, ultimately giving users long term savings. Their non-bank position is what BigPay lauds as their best feature, as it allows for more freedom than traditional bank-affiliated credit card services and reduced card and transaction fees.

The move to going ‘bankless’, not just with BigPay but with all other e-wallets available in Malaysia, is a move that is being called a democratisation of the finance and wealth sector, allowing consumers to choose what is best for them without having to choose between one bank or another bank. Davison sees it as a positive disruption of traditional finance systems. “The growth of FinTech is a global trend and a positive one because competition is good for customers, and companies like BigPay are challenging the status quo of how you manage your money. Many banks have legacy core systems, old technology stacks, a lack of strategic innovation and are not agile enough. Using technology, and data driven risk decisions, FinTechs such as BigPay can provide better services and better value than before,” he explains.

IS CASH STILL KING?

So with the convenience of e-wallets making it an increasingly appealling service, it begs the question of whether cash still reigns? In the case of Malaysia, the answer is yes, especially since there still exists an unbanked population that transact almost entirely in cash. That being said, the government’s goal to reaching a cashless society might not be completely out of reach. With more people opting to make purchases online and with millennials (between the age of 23-38 in 2019) making up the bulk of the local workforce, spending power is increasingly being used in the digital and virtual scenes.

Plus, e-wallets provide a whole new level to digital payments outside of what we’re used to with cards and mobile banking services, and often includes additional functions and services that gives users more bang for their buck. Accumulation of reward points with every ringgit spent in-app that allows users to buy more but spend less is a common feature in most e-wallet services available in Malaysia, which bankbased services have yet to adopt.

For example, Maybank’s QRPay digital payment service works the same way as other e-wallet payment providers, banking (pun intended) on convenience and efficiency of digital payments to increase customer use, but without including additional rewards, which makes third party e-wallet services just a little more appealing.

Digital wallets also pose a strong rival to the use of debit and credit cards based on sheer speed of transactions, as it often takes only a couple of seconds to scan a QR code and submit payment (which will only get quicker once 5G internet is deployed in Malaysia).

“Simply put, it’s about convenience, security, and rewards. On average, users in Southeast Asia spend approximately six hours on their smartphones in a day; they are comfortable doing things on their mobile devices – including purchases and payments. As users become more digitally savvy and with the region already starting to adopt the ‘onthe-go’ attitudes of an increasingly mobile audience in their day-to-day lives, the growth of technology and innovation will only help the region embrace the perks of a truly cashless societies even faster,” Ooi explains.

For GrabPay’s Ooi, the way to go in achieving cashless status is for FinTech companies and banks to work together. “We recognise the crucial role banks have played and will continue to play in spurring economic growth in the region, therefore we partner them to help improve things for users. The biggest incumbent in Southeast Asia is not banks, but cash. 90% of all transactions in SEA are still in cash and by combining the strengths of our technology with the capabilities of banks, we believe we can make a difference. By partnering with banks and insurance companies, we will be able to grow the market together instead of replacing one another and we view our relationship as complementary. We have attracted industry-leading global and regional banking partners that have helped build infrastructure to scale our digital payment services and offer wider financial suite of services that are tailored to the region.”

Even so, as FinTech advances and banks slowly move further with them, services like in-app digital payment integration in banking apps and the ability to pair cards with a third-party payment provider, it’s probable that even cards might be left at home in favour of carrying just the one increasingly multitasking smartphone for all daily needs.

A REAL REVOLUTION?

So, can Malaysia be a totally cashless society? The biggest challenge to this will be in reaching the unbanked and non-urban sectors of the country and bringing them the resources and environment to adopt, and trust in, these new technologies, which will require quite the mobilisation not just from service providers but also in terms of infrastructure.

For Ooi, the revolution will come once more Malaysians trust in digital payment systems enough to move away from cash spending. “The increasing mobile data usage and mobile phone penetration in Malaysia provides a steady foundation for e-payment methods to thrive and we’ve seen some successes in our journey towards a cashless economy as 88% of Malaysians are aware of mobile wallets. However, on top of a highly fragmented market, concerns over security remain a prominent hindrance for mobile wallet adoption for everyday expenses as 93% prefer to use cash when dining out, 90% pay in cash for groceries, 89% use cash for public transportation services, 81% for petrol and taxis.”

Will paying with digital wallets be the norm in the next five to ten years? Davison thinks that it’ll come much sooner. “The direction of travel is away from cash. The growth of e-commerce in South East Asia is astounding and this is definitely helping as people look to FinTechs to provide a seamless mechanism to transact online. Furthermore the cost of handling cash for companies is high. So the efficiency savings of a cashless society will bring benefits to everyone. I think the move away from cash towards mobile transactions will happen at a faster rate than predicted over the next 5 years.”

It’s certainly probable, especially with the rate of adoption seen in Malaysia alone over the past few years (Boost’s user base grew from 100,000 in 2017 to upwards of 1.5 million in just one year) and the attractive features that digital payment providers give, not only to users but to merchants alike. At least in urban areas of Malaysia, it’s incredibly likely that e-wallets will turn into a staple for the everyday user. With the Touch n’ Go e-wallet now being linked to toll payments and the new RFID toll system, it’s increasingly likely that a typical Malaysian will be using more than one e-wallet at a time for different kinds of transactions, all in the name of getting the best rewards and bang for your buck. It seems a democratisation of what we know to be strict and rigid financial systems is on its way. It’s just a matter to time.