Saturday, February 22, 2020

“Do you accept Cash?”: The Prevalence and Future of E-wallets in Malaysia 

By : Daneesh Shahar


It was only two years ago that CIMB Bank announced that their subsidiary, Touch ‘n Go’–the Malaysian equivalent to Hong Kong’s Octopus–had entered a joint venture with Ant Financial to introduce secure payment methods and digital finance services in Malaysia. 


It was unclear at the time what would materialize from this partnership, but for many in the financial industry, the interest expressed by the Chinese giant represented exactly the catalyst needed to elevate the fintech space in Malaysia. 


Today, plastered across the cashier counters of most restaurants are a sea of QR codes. With backgrounds in eye-popping colors and bold captions, they urge people to “scan here to enjoy rewards/rebates/cash back!”. These QR codes are all issued by a few of the 40-plus e-wallet vendors in Malaysia, which include CIMB’s Touch ‘n Go. 


At the cashier counter of a Mamak (casual Indian restaurant): Don’t have Alipay? Then go ahead and scan for Boost pay. Use Maybank QRPAY instead? The sticker’s right here. 


According to a 2018 fintech report produced by PWC Malaysia, only 22% of survey respondents used e-wallets despite the country’s moderately high internet and mobile phone penetration rate. The report illustrated that the e-wallet market was ripe for the taking, and highlighted the importance of being the first mover. It was going to be the next digital gold rush. 


Surviving the First Wave of Wallets 


As a result of the lucrative but overly crowded e-wallet market, Malaysian consumers are spoiled for choice; but therein lies the problem – there are just too many of them. It’s difficult to differentiate yourself when your services are virtually identical to your competitors’, so e-wallet providers must grasp at any traction available in order to survive. 


One customer acquisition method being employed is to inundate users with a never-ending stream of promotions–both online and offline. Starbucks discounts and “enjoy 50% off Tuesday’s lunch” offers flood my inbox on a daily basis. Even in person, escaping these promotions is near impossible: e-wallet vendors set up stalls in local night markets and food courts, offering RM3 off an RM10 meal in exchange for an on-the-spot app download.


Subsidizing costs for consumers bleeds a company of enormous amounts of cash, but is an effective way to acquire users in droves. This business model is financially sustainable as long as you’re backed by VCs or banks, but for the small-time vendors who don’t enjoy regular funding injections, onboarding the right corporate partners is often a fight to the death. 


The second strategy for long-term survival is market consolidation. Telecommunications conglomerate Axiata Group is currently involved in the highly publicized acquisition of its competitor, Digi. When combined with Axiata’s other Malaysian telco subsidiary, Celcom, the conglomerate would gain a controlling stake in the market with an estimated 20 million non-unique users. The implicit silver lining of the merger is that Axiata’s e-wallet, Boost, will be able to reach almost every mobile subscriber in Malaysia. 


The key to stickiness in this market is accumulating the greatest number of locations and applications for your service. Currently, GrabPay is the best positioned to lead the industry, given that their super-app allows users to pay for ride-hailing, car rental, and food delivery. 


Predictions for the Future 


When the dust settles, only a handful of e-wallets will survive the first wave, whether through product differentiation or sheer financial muscle courtesy of a powerful parent company. From there, e-wallets will need to evolve to provide more functionality–banking solutions, credit cards, insurance, etc.–although there are already signs that this evolution is happening (for example, Razer Fintech’s Visa card and Grab’s microinsurance). 


The future of e-wallets in Malaysia is unpredictable. While the competitors battle it out, only one thing is for certain: the biggest winner out of all this is ASEAN payment service provider, GHL. 



Payment service provider and merchant acquirer, GHL power many of Malaysia’s e-wallets. 


About the Author


Daneesh Shahar is a Journalist in Residence at Jumpstart Magazine. He is a senior at New York University Stern School of Business, studying Quantitative Economics and Computing & Data Science. He has a deep fascination for both the potential of the crowdsourcing model in shaping wide-scale employment, and the role technology plays in driving eSports to becoming the dominant spectator sport.



The Jumpstart Journalist-in-Residence program invites passionate writers from around the Asia-Pacific region to write for Jumpstart, learn about the startup ecosystem, and have the chance to attend premier tech events. To apply to the program, visit today!

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