KUALA LUMPUR, Sept 10 — When met at a coffee shop in a popular mall in the city’s shopping district, 27-year-old Zharif who is a self-professed fashion enthusiast said he goes there regularly to enjoy his latte while doing what he loves most: shopping.
“But I don’t go around the shops though,” he joked. “I come here, order my coffee and look at my phone religiously. That’s where I do most of my shopping.”
Zharif said choices and convenience are what make him favour online over physical shopping.
The same reasons apply to why he thinks the smartphone has become indispensable; at least half of all his financial transactions are done on his iPhone 7.
Yet Zharif admitted he still has reservations about using a smartphone to pay for his coffee or anything bought over the counter; those transactions are strictly cash-only.
“I don’t see the need for it… but also for security reasons. There have been plenty of hacking cases and credit card details stolen when they were swiped, so it could happen to my phone,” he explained.
While more people worldwide have warmed up to the idea of mobile payment, security concerns and the lack of awareness about the new technology have kept many Malaysians away from signing up even as many shop and pay their bills online.
In a survey done by Nielsen, the consultancy firm that compiles online and mobile payment data, up to 72 per cent of respondents shared Zharif’s views about security, although many also said they would make that jump if stronger safeguards were in place.
All that could change as one of China’s leading mobile payment services provider, Alipay, announced a partnership with local banks that would enable subscribers to pay for a range of products here by just scanning the QR code on one’s smartphone, safely.
In China, one of the most cashless countries in the world where mobile payments are used for almost everything, companies like Alipay have processed transactions worth US$5.5 trillion (RM23.3 trillion), 50 times the size of America’s US$112 billion market, Forbes reported.
Building trust
Meanwhile the same report quoted a study by Tencent, Renmin University of China, and research company Ipsos that up to 14 per cent of Chinese people do not carry cash at all, while up to 40 per cent carry less than RM100.
In short, the Chinese have grown to rely more on their smartphones than they do cash.
But it didn’t start out that way. Lin Guangyu, who is in charge of payments for urban services at Ant Financial, the company that owns Alipay, told news network NPR that the company took years to build that trust.
"When we created Alipay in 2003, we did it to resolve the issue of trust between people. And by resolving the issue of trust, we've also resolved the issue of payment," he was quoted as saying.
Today, Alipay has over 450 million users in China alone, a reflection of the growing confidence consumers have in the platform’s security features.
However, security is only a tiny factor driving its growth as most signed up for the perks and services.
Platforms like Alipay and WeChat Pay have evolved to become more than just networks that connect and process your debit cards for payment; they are now a business “ecosystem.”
Imagine this: a user is connected to a universe of services ranging from the most menial of tasks like the car wash and food delivery, up to more complex transactions like banking and commerce, at the convenience of a few clicks.
Not only that, the enormous amount of data collected from the transactions allow the providers to develop a credit-scoring system where users with higher scores can enjoy privileges like discounts or even expedited airport security checks.
In May, Ant Financial announced a partnership with two of Malaysia’s two biggest banks, CIMB Bank and Maybank, with Public Bank joining two months after. The company said at the moment the partnership was intended to roll out Alipay services for the millions of Chinese tourists that visit Malaysia yearly.
Analysts believe Alipay’s presence in the country has the potential to spur the same innovation and reverse that trust deficit Malaysians have towards mobile payment and kickstart the shift towards a cashless society.
“We agree that the arrival of Alipay will kickstart the fintech disruption in the payment sphere, and it will extend to the merchant acquisition space,” Ryan Kong Mun Kit, Head of Consumer Lifestyle Finance, OCBC Bank (Malaysia) Berhad, told Malay Mail Online.
“The road to a cashless society has started with PCRF, and the introduction of Paynet will spearhead the domestic debit environment towards a cashless society.This is not a far-fetched idea, and it is a reality that is going to be realised in the next 2-3 years.”
Cashless society
The Payment Card Reform Framework, which makes card payments cheaper, and Paynet, a shared infrastructure to make online wholesale and retail payment easier, were two key policies announced by Bank Negara Malaysia earlier this year as part of its effort to reduce cash circulation by encouraging online payment.
But data compiled by market analysts so far suggests that it may take some time before the mobile payment revolution can take off.
For example, research firm RFi Group in a study published in June this year said data indicated an increase in usage of existing digital wallets last year among those aged 25 to 34, the primary market for mobile payment, but only by 5 per cent. Other age groups also recorded increases but at a marginal one per cent.
The low use of debit cards could be another indicator. Even as most cards now have chips that make payment as easy as waving them, debit card transactions accounted for only about 4 per cent of the US$123 billion-retail market in Malaysia in 2016, according to research firm Frost & Sullivan.
So this means the quality of services and products provided by mobile payment providers will be crucial if they want Malaysian consumers to make that leap away from cash.
And the race has already started. Banks like Maybank and CIMB have already developed their respective mobile payment platforms, or e-Wallets, called MaybankPay and CIMB Pay, which allows account holders to connect their debit cards to their smartphones and make payments at any merchants with Paywave terminals.
More banks are expected to follow.
Meanwhile in June, Alipay announced a partnership with Touch n Go Sdn Bhd to give its 10 million card users access to a mobile online payment system that analysts predict would likely mirror the Chinese company’s own platform.
Currently the 10 million Malaysians holding TnG cards use them primarily for transit like paying toll or train or bus fares.
There is also speculation that Alipay would eventually be allowed to operate in Malaysia independently, a move that could even drive more demand for inclusion from local businesses aiming to tap the company’s vast customer base, that could possibly include Malaysian customers as well.
“We think Malaysian retailers are ready to accept these third party payment channels and they are in fact, waiting eagerly to be on-boarded,” Mun Kit said.
“It will likely start with customers from China and eventually be able to accept payments from local residents. Key example is Starbucks, which already has Alipay acceptance in their outlets.”
The mobile payments market in Malaysia was valued at over RM4 billion in 2016. The market is expected to grow at a compounded annual rate that is close to that of Asia Pacific levels of 28.7 per cent during 2016–2021, according to research firm Frost & Sullivan.
