Finance – Digital payments give users more bang for their ringgit (The Edge Markets)

The adoption of digital payments in Southeast Asia has reached an inflection point and is projected to cross the US$1 trillion milestone by 2025, according to a 2019 report, titled e-Conomy Southeast Asia, by Google, Temasek andBain & Co.

The surging levels in the adoption and usage of digital payments are in line with other internet economy sectors such as ride-hailing and e-commerce. Digital payments will account for almost half of all money spent in this region by 2025, says the report. In addition, e-wallets are expected to grow even faster, from US$22 billion in 2019 to US$114 billion in 2025.

The Covid-19 crisis is likely to accelerate these digital trends as consumers’ daily habits, consumption patterns and ways of thinking have begun to change during this crisis.

“The adoption of e-wallets saw a sharp uptake during the Movement Control Order (MCO) period and we continue to see an uptrend as people become increasingly comfortable with digital payments. Post-Covid-19 user behaviour will continue to be positive for us whereby a greater push for cashless payments, which reduces physical contact, is expected,” says Effendy Shahul Hamid, CEO of group ventures and partnerships at CIMB Group Holdings Bhd.

CIMB Group wholly owns Touch ‘n Go Sdn Bhd (TNGSB). TNGSB and Ant Financial — the world’s highest valued fintech company and an affiliate of China’-based Alibaba Group — own e-wallet provider TNG Digital Sdn Bhd, which operates the Touch ‘n Go eWallet.

GrabPay, one of the country’s leading e-wallet providers by dominant ride-hailing company Grab, the region’s first unicorn, concurs that the MCO has accelerated the use of cashless payment methods.

“I believe that this mode of payment is here to stay. This outlook is also supported by studies that indicate a huge behavioural shift and an acceleration in digital payments, with over 75% of consumers in Asia-Pacific continuing to use digital payments after the pandemic,” says Priyanka Madan, head of GrabPay Malaysia.

According to the Mastercard Impact Study 2020, Malaysia leads the region in mobile and digital wallet adoption. The country has a mobile wallet usage of 40%, ahead of other countries such as the Philippines (36%), Thailand (27%) and Singapore (26%).

In Malaysia, the number of e-wallets has been on the rise in recent years. Today, there are more than 40, including popular ones such as the Touch ‘n Go eWallet, Boost (by Axiata), GrabPay and Maybank e-wallet.

The move towards cashless methods has incentivised businesses to accept digital payments. The Touch ‘n Go eWallet saw a spike in e-commerce volumes and online transactions during the MCO. period.

“The ability to transact digitally has proved to be a crucial point during this period. As users became more receptive, the e-wallet has become an important component for small and medium enterprises (SMEs) and entrepreneurs in digitalising their payment avenues and connecting better with their consumers,” says Effendy.

“This crisis has accelerated the realisation and adoption rate among merchants and the rate continues to be high today. From a trend perspective, if our numbers are anything to go by, industry acceptance of e-wallets is certainly heading in the right direction.”

Meanwhile, Grab announced an expansion of GrabPay’s merchant-partners to include household brands from all essential categories such as groceries, pharmacies, food, electronics and hardware across the nation in early July. “The growth in cashless [payment] adoption shows that it is advantageous to both users and businesses. The latter can be offline or online merchants. We see digitalisation being at the forefront for businesses to survive and scale their reach in the new normal,” says Priyanka.

Addressing pain points and growing markets

SMEs are often the last to jump on the technology bandwagon. This is especially true for mom-and-pop stores run by a generation of founders who may never have used a smartphone before or do not understand how cashless payments work. To encourage these smaller businesses to adapt to new technology, e-wallet providers are looking to address their pain points by introducing initiatives that can further increase their market share.

CIMB Group’s Effendy points to the value proposition that the Touch ‘n Go eWallet offers merchants. “For example, we have helped multiple merchants manage the difficulties associated with cash-handling. More efforts will continue in that vein. We will add more value by helping them know more about their customers on the back of superior analytics.

“We are seeing a huge pick-up in micro-merchants and smaller traders coming into our ecosystem as their customers move away from cash. Static QR solutions are quick to deploy and secure. At the same time, we make good use of our scalable technology platform to perform e-KYC (electronic Know Your Customer) and speed up business processes.

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The Edge Markets

16 August 2020

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