Championing digital payments in Malaysia

• Singapore has consistently led in digital transformation both regionally and globally
• China is leading the pack in the cashless game with the rise of digital wallets

DRIVEN by increased smartphone penetration and a rise in digital payments adoption, Asia is widely accepted to be leading in mobile payments globally.

A study by Kantar TNS found that over half of connected consumers in the Asia Pacific region use mobile to pay for goods and services via apps, compared to consumers in North America and Europe.

Closer to home, Malaysia’s smartphone penetration grew from 68.7% in 2016 to 75.9% in 2017, according to SKMM’s latest study.

Consumers today are embracing e-payments in almost every aspect of their daily lives due to the convenience and speed they bring. This is made possible with the increasing array of solutions such as digital wallets, mobile payment apps and stored value cards.

At the same time, there’s been increased awareness of going cashless recently, as more governments in Asia are driving the payments transformation.

With e-commerce expected to be worth around US$88 billion by 2025, the majority of fintechs in the region have made payments their focus.

According to UOB, 43% of fintechs in the region focused on payments and they are in the driver’s seat of making a cashless society turn into a reality.

However, Asia remains a fragmented market in the digital payments space with varying levels of readiness; as well as differing payments infrastructure and emerging technologies. Businesses that can navigate the opportunities and challenges of the digital economy both regionally and locally will be best poised to harness the growth potential of the payments space.

SEA countries driving regional digitisation

Singapore has consistently led in digital transformation both regionally and globally. It’s no surprise that they are making headways in mobile payments given the Government’s push to drive the Smart Nation agenda.

Recently, the country announced that starting next year, customers dining at coffee shops, hawker centres and industrial canteens (all of which make up a significant portion of dining locations in the country), can choose from all 20 payment schemes through unified touchpoints.

It’s the first time the country is unifying behind an integrated system that provides options for consumers. Across the country, there has also been a wave of e-banking and peer-to-peer electronic fund transfers rolled out by financial institutions in Singapore which have been readily adopted by consumers.

Earlier this year, several payment companies (Wirecard was one of these companies) came together to develop a universal unified payment QR code SGQR to allow consumers to scan and transfer funds from as many as 27 e-payments apps.

This was a win for both consumers and merchants. Consumers don’t have to worry about not having options and merchants need not display multiple QR codes and payment options at their stalls.

Malaysia has also been making in-roads to become a cashless society. We are already witnessing the burgeoning of digital payments platforms in Malaysia, as fintech players tie up to provide more payment options for consumers.

Most recently, we saw Razer partner with Berjaya to launch the digital wallet, Razer Pay, which enables Malaysians to transfer funds to each other and top-up at more than 2,200 7-Eleven stores across the country or via their bank account.

The entry of mobile payment services providers – AliPay and WeChat Pay, also boasts an array of offline and online partnerships, accelerating the country’s migration to e-payments.

China shows the way in the future of payments

China, for instance, is leading the pack in the cashless game with the rise of digital wallets such as Alipay.

With over 500 million users, Alipay is the most successful mobile payment solutions worldwide driving the value of non-cash transactions in the country. Used for payments in online shops and at POSs in China, the Alipay app includes functionalities which enable users to manage their coupons and receive shop recommendations.

From a consumer's point of view, these platforms and services offer real added value that goes far beyond the convenient payment at the point of sale (PoS).

In addition, China has been the biggest proponent of the QR code which has led to the growth of mobile payments as people increasingly used social media platforms such as WeChat to make transactions.

Through one of Alipay’s latest payment services (a collaboration with Wirecard), Chinese tourists can now pay with their smartphones while traveling overseas – without incurring currency exchange fees.

More and more companies are adopting payment innovation to turn cash into digital money in this online payment revolution. As they embark on this journey to a cashless society, the scale and pace for digital transformation vary across the region.

Partnership and collaboration will be vital in closing the gap between cash and cashless; and companies need to constantly reinvent their payments to cater to their customers.  

Digital is great but more collaboration is essential

Despite these advances, there’s room for continued improvement and wider acceptance usage by businesses and consumers across all channels. Data shows that only 28.4% of Malaysians have made purchases through a mobile phone, which contrasts with the high mobile phone penetration rate. While this is largely attributed to fears and concerns over data privacy and convenience fees associated with credit card and e-payments usage, there’s a massive opportunity for companies which can fill the gap here. 

As more payment systems come to market, there needs to be greater collaboration in the payments space to create a more inclusive environment for both merchants and consumers. Ultimately, it’s about integrating all the different payment methods to provide a seamless and safe way for consumers to pay for their goods and services.

Future of payment stands and falls with the customer experience

Providing a frictionless customer experience used to be the critical differentiator some years ago. Today, not offering the best customer experience is a competitive disadvantage. Shoppers expect faster check-out times and a fuss-free and secure payment process.

In the world of retail, modern payment solutions are key to improving the customer experience.

Connected commerce concepts are among the most promising technologies. Supermarkets incorporating the Internet of Things technology (IoT) in their services are currently the latest sensation.

In Germany, T-Systems is one of the first to implement such a solution to simplify the customer retail experience.

Similar to Amazon Go, the concept allows consumers to shop in a virtual environment and receive real objects delivered to their door – eliminating long waiting times during the check-out process.

However, even with the rise of IoT and mobile payments adoption, security still tops the list of concerns among consumers. A recent study by F5 Networks found that secure experiences are of foremost importance for Asia Pacific consumers, with 53% of them prioritising security over functionality and convenience of an app.

For consumers, it could mean the susceptibility to payment fraud due to day-to-day operations or a lost device. Merchants, on the other hand, need to ensure that transactions are processed securely.

Biometric payments will be vital to counter these security concerns. The use of biometric authentications such as fingerprint, face or voice recognition are more secure than current practices and these biometric identification methods can help protect customers from unlawful purchases if their smartphone is stolen or when faced with malicious attacks by cybercriminals.

While the introduction of these systems has taken off significantly due to mobile phone proliferation, there’s still much more that can be done and businesses need to accelerate their adoption of such options for their consumers.

The future might already be within our grasp

What we do know is that successful payment systems of the future must be uncomplicated and offer both customers and retailers real added value.

Appropriate solutions are already available today that are far more convenient and secure than existing systems.

In an increasingly competitive online business, retailers must therefore focus on integrating these new concepts that improve the customer experience. This will help retain customers.

Much of this lies in future-oriented technologies such as IoT-supported shopping and payment solutions which can help completely close the gap between online and offline trade and combine the advantages of the stationary shopping experience with those of online shopping.

Appropriate solutions are already available on the market and are just waiting to be used - the future of payment has already begun.

Chan Chun Fee is the country manager of Wirecard Malaysia.