Is cash dethroned by Covid-19? Mastercard study finds Malaysia leading SEA mobile wallet usage

• Khairil Abdullah of Boost, Chan Kok Long of iPay88 feel shift to e-wallets permanent
• Malaysia saw 40% increase by consumers, cash seen unsafe (from virus transmission)

The coronavirus era has catalysed a great many changes we are witnessing unfold in the world. Some are major and temporary. For instance, the global economic slowdown with the IMF now predicting a 4.9% fall in global GDP for 2020. But the economy will recover in subsequent years.

Some changes are small but will likely accelerate with the new momentum. One of them is attitudes towards e-wallets – with Malaysian consumers leading the way in Southeast Asia (SEA). A new Mastercard study shows about 40% of Malaysians surveyed are using mobile/e-wallets more, followed by debit cards (26%) and contactless credit cards (22%).

The key question though, is whether this shift is temporary or heralds new consumer behaviour?

Mohd Khairil Abdullah (pic), CEO of leading Malaysian mobile wallet, Boost, thinks the shift is permanent. “My belief is that this is not temporary. Behaviours have changed. People who in the past questioned how safe (security) were e-wallets are now branding cash as unsafe (from virus transmission),” Khairil notes.

Chan Kok Long, cofounder and executive director of leading SEA payment gateway, iPay88, agrees.

“It’s unlikely to be temporary behaviour because Covid-19 is here to stay and, more importantly,  many millennials already accept e-wallets as their replacement for cash,” he notes, adding, “And don’t forget, e-wallet players are also giving a lot of incentives to encourage adoption, where cash offers nothing and is very unhygienic to use.”

The latest evidence of this shift to e-wallets and digital payments in general comes from the Mastercard Impact Studies which surveyed 10,000 consumers across 10 markets in the APAC region, including Malaysia (Mastercard did not provide a breakdown of respondents when requested beyond the fact that they ranged from 300 to 2,000 consumers surveyed per country). Not surprisingly it finds the Covid-19 pandemic has driven momentum towards the digital economy in Southeast Asia.

Perhaps surprising though is the strong adoption of digital payments in Malaysia where it is the leading mobile wallet adopter in SEA, ahead of Philippines (36%), Thailand (27%) and Singapore (26%) which surprisingly lags behind.

Malaysia’s usage of other forms of digital payments was also higher in comparison to other markets in Southeast Asia. In April, consumers were doing 18% more cashless payments (including mobile, QR payments), as compared to 16% in Philippines, 15% in Singapore, and 15% in Thailand.

On the contactless cards front (both debit and credit), Malaysia tied with Singapore with approximately 24% of consumers in both markets saying they are using contactless payments more.

Mastercard notes that the Covid-19 pandemic has driven momentum towards the digital economy in SEA. The report notes that even as countries in the region begin to ease restrictions and prepare for the New Normal, some of these trends and habits formed are expected to remain on the long term.

“Covid-19 has impacted everyone and every country in some way or another. Many consumers and businesses have been quick to adapt to the digital world and cashless payments in order to stay safe and maintain a sense of normalcy in these extraordinary and uncertain times,” says Safdar Khan, Division President, Southeast Asia Emerging Markets, Mastercard.

The (slow) dethroning of cash

Chan (pic, right) of iPay88 tells Digital News Asia that the surge of e-wallet usage is tied to millennials and teenagers making purchases online as well as to the rising recognition of the benefits of using e-wallets.

“Our data shows that 60% of transactions through them came from non-credit cards, with 20% from e-wallets. Prior to the MCO, e-wallet usage consisted of about 10% of total transactions.”

However, putting things into perspective, Chan highlights that even though there is a major surge in e-wallet adoption, digital transaction – even during the MCO – accounts for about 10% of all transactions, with 90% still being non-digital.

Still, social distancing and fewer direct interaction between people, whether in retail or F&B, will encourage digital payments where he believes e-wallets will be preferred in small ticket spending in places like stalls and hawkers.

Meanwhile, reinforcing his view about the preference for e-wallets being permanent, Khairil of Boost, points to offline retailers behaviour. “Obviously, during the MCO, many offline retailers were not able to trade and so we saw a decline in volumes from offline. However, non-offline categories experienced a surge: e-commerce, food delivery, online groceries, digital content, bill payments all saw strong growth.”

Interestingly, when the country went from MCO to conditional MCO, offline retailers that started trading again, all wanted to protect themselves, he said, and “started using more and more forms of cashless payments.”

The Mastercard study reveals that cash usage in Malaysia declined by 64% since the beginning of the pandemic, with the shift being region-wide – other markets such as Singapore, the Philippines and Thailand also saw reduced cash usage at 67%, 64% and 59% respectively.

For Malaysia, the intriguing question is whether cash is about to be dethroned by digital payments.

Chan feels that it will take a while to dethrone cash as king. “I personally see this happening in five years, when cash usage will fall from (the current) 75% to maybe 40%.”

But CC Puan (pic), CEO of Green Packet Bhd is confident that the transition will happen much quicker. “We are seeing rising adoption for both our kipleBiz payment gateway and kiplePay ewallet. This will continue as part of our lives in the new normal,” he says, predicting that cash will be dethroned in three years time.”

Other Malaysian payment trends

Malaysia’s increasingly cashless preference follows heightened interest in online activities. The Mastercard study found that Malaysians spent more time online with top activities comprising of surfing the net for news and entertainment (75%), followed by online video streaming (57%), social networking (55%) and home delivery of food or groceries (50%).

Additionally, about 64% of Malaysians said they will conduct online shopping in the same frequency as currently or before the pandemic even after restrictions are lifted. Similarly, 54% of consumers expect to continue home deliveries while 45% expect to continue working from home.

This spending behaviour is likely to persist. Mastercard found that about 70% of Malaysian consumers remain cautious about Covid-19 and 62% are concerned about the future negative impact the pandemic will have on their household finances.

In light of this, 75% of Malaysians are looking to hold off on big ticket purchases, which is higher than neighbouring Thailand (74%) and Singapore (65%), even the Asia Pacific average (59%).

Overall, Malaysians are more optimistic about the measures taken by the government and banking authorities to help them get through this crisis. 97% of respondents in the nation felt positive or neutral about the government and banks’ actions thus far.

Mastercard attributes this positive aptitude to the Malaysian government’s implementation of a MCO in phases. The government has also allocated three economic stimulus packages totalling US$63 billion (RM280 billlion) to improve the economic risks arising from the pandemic.

This confidence, the study found, has led to 30% of respondents indicated they believe they will increase their level of investment over the next few months.

That said, the confidence doesn’t come without caution. Two-thirds of Malaysians surveyed expect income declines over the next few months and will have to reduce their savings as a result. 35% expect spending to decrease.