e-Payment adoption in Malaysia going full steam ahead

• Real-time transactions unlocked US$394mil of additional economic output
• e-Payment adoption key focus area in Financial Sector Blueprint 2022-2026

Some banks in Malaysia have recently begun talking about creating the first cashless kampung in the country. Yet, quietly and without fuss, Bank Negara Malaysia (BNM), Malaysia's central bank, has been the enabler for e-payment adoption for years.

Way back in 2018, BNM introduced ‘Bayor Dok Gune Pitih’, an e-payment initiative on Redang Island. The program recorded an impressive 73% migration to e-payment among the small merchants and businesses across the island. However, Malaysia’s progress in widening e-payment adoption goes beyond this idyllic island.

As we all know it, technology and innovation have made a quantum leap in the last two decades. BNM has been rolling out various policies to keep Malaysia ahead in the adoption of e-payment products and services. This includes the formulation of the e-payment roadmap in 2011, which was succeeded by the publication of the Financial Sector Blueprint (FSBP) 2022-2026. The latest FSBP brought about a more ambitious goal. As the previous goal of achieving 221 e-payment transactions per capita in 2021 has been successfully achieved, the new goal now is to increase the number of e-payment transactions by at least 15% annually which translates to more than 400 e-payment transactions per capita by 2026.

The efforts by the central bank culminated in a grand campaign launched in October 2022. BNM and the financial industry partnered to initiate a five-year-long e-payment campaign called e-Duit (Selamat, Senang, Segera). The campaign aims to create awareness among consumers and small businesses of the various e-payment initiatives. This includes greater awareness on the safety features of payment products and how it benefits users.

The campaign is timely as e-payment usage has spiked and stayed high over the course of the pandemic. The Global Findex 2021 report by the World Bank estimated that 79% of adults in Malaysia used e-payments during the pandemic. In the 2021 Real-Time Report of Payments by ACI Worldwide, a US-based real-time payments provider, Malaysia was rated the third fastest growing market for real-time payments with a CAGR of 83.9%. Based on the report, Malaysia recorded 1.1 billion real-time transactions, resulting in an estimated cost savings of US$484 million (RM2.27 billion) for businesses and consumers. This unlocked US$394 million (RM1.85 billion) of additional economic output.

Clearly, the benefits of e-payment is far reaching. At the merchant level, especially among the micro-SMEs, the vast benefits offered by e-payment have been much welcomed. Merchants have experienced higher sales from an expanded client base. Better cash management, inventory and proper record keeping as a result of e-payment also open up more opportunities to secure financing from financial institutions.

Strong data points from 3Q 2022 show results of greater adoption

The outreach efforts have translated to an impressive trend. e-Payment transactions hit RM22.2 trillion in 3Q 2022, an increase of RM2.1 trillion over 3Q2021. Among the e-payment services that contributed to this include:

[RM1 = US$0.223]

• Online banking transactions (Internet and Mobile Banking) have increased by 8.2% to 2.8 billion transactions in 3Q 2022 (3Q 2021: 2.6 billion transactions);
• Contactless payment transactions contributed to 67.9% of card transactions at physical merchants in 3Q 2022, from a 62.5% share in 3Q 2021; and
• More merchants have been onboarded to accept payments via QR code – 1.4 million merchants registered a DuitNow QR code in 3Q 2022 (2021: 1.1 million).

Strong partnering ethos

A standout aspect of any BNM initiative in the e-payment space is its strong belief in partnering with relevant stakeholders. This is evident across all of its many initiatives.

MyDIGITAL Corporation has collaborated with BNM and state governments to promote the benefits of digitalisation to both merchants and customers, giving focus to adoption of e-payment and contactless transactions; in addition to guiding them through the onboarding process such as the Program Transformasi Digital Pasar Besar Siti Khadijah in Kota Bharu.

An e-payment initiative in collaboration with Federal Agricultural Marketing Authority (FAMA) resulted in 550 merchants or 76% of merchants in Pasar Tani Kekal (PTK) FAMA across Malaysia accepting e-payment. The central bank believes that the high usage of e-payment acts as a catalyst for micro businesses (such as a nasi lemak street vendor) to move to e-payment, resulting in a virtuous and cashless supply chain ecosystem.

BNM has also partnered with key stakeholders such as the Ministry of Trade and Consumer Affairs via the Retail Sector Digitalisation Initiative (ReDi), financial institutions, local authorities, business chambers and consumer associations to encourage the adoption of e-payment.

At the ground level, initiatives are aimed at addressing issues faced by local communities such as facilitating maintenance collection at PPR Padang Tembak, Penang, a collaborative initiative with the state of Penang. Through this effort, more than 400 residents in Padang Tembak PPR in Penang were able to make timely payment to the local authority. Transparency in e-payment also mitigates potential fraud or mismanagement of funds in the public sector.

In its pursuit of greater e-payment adoption, BNM also places equal importance on awareness and education initiatives to build public resilience against scams and fraud attempts. These initiatives include ongoing nationwide financial literacy and financial scam awareness campaigns. The public can obtain the latest updates of these efforts and information on the latest financial threats and crime through the Amaran Scam Facebook page.

BNM along with other regulators and the financial industry will continue to ramp up efforts to combat fraud and scams through the National Scam Response Centre (NSRC). The public should immediately call the NSRC at 997 or their banks if they have fallen prey to financial scams.

The train for greater e-payment adoption has definitely left the station and is moving full steam ahead. We are all playing a part in the country’s push to advance our e-payment agenda, and the great thing is – all of us can now expect a more secure, simple and swift payment experience!