Malaysia expected to become cashless society in 20 years
It was noted in the digital era, on the sidelines of a media briefing on Malaysia’s payments ecosystem recently, that it is very expensive for a country to print cash or for retailers to handle cash. Nonetheless, senior experts feel the would take at least 20 years to become a cashless society.
This is due, in large part, to the spending habits of Malaysians who prefer to use cash for payments. Additionally, cashless society may not work in the rural areas as they are still heavily reliant on cash and have a lower degree of financial literacy compared with urban citizens.
It is encouraging to note that the number of electronic payment transactions in Malaysia had shown a sharp increase since two years ago, thanks to the booming e-commerce market in the country.
According to the statistics of the Bank Negara Malaysia, 833.9 million transactions were made via internet banking from January to November 2018, compared with 741.9 million for the whole of 2017 and 588.2 million in 2016.
Statistics show the use of mobile banking also increased in the first 11 months of 2018, recording 1.92 billion transactions, compared with 1.05 billion in 2017 and 526.6 million in 2016.
The number of cash withdrawals from the automated teller machine dropped to 718.3 million from January to November 2018 versus 763.9 million for the full year 2017 and 761.2 million in 2016.
However, there is a danger in over-reliance on digital payments.
On the question of whether it was necessary to fully transform Malaysia into a cashless society, expert cautioned over-reliance on digital payment would put the country at risk, particularly in the light of cyber security threats and geopolitical concerns.
For instance, the mostly cashless society Sweden is currently facing such a potential risk. If their digital infrastructure goes down, the country would have no other way of working.
Regulators must therefore, play a vital role in ensuring the smooth functioning and security of the payment systems in the country.
In the past, OpenGov Asia has reported on the rise of digital payment in Malaysia. In early December 2018, OpenGov Asia reported that Malaysia’s e-commerce landscape expected to grow.
The report stated that according to a release on the MDEC website, The National eCommerce Council (NeCC), comprised of various Ministries and Agencies and was established to drive the implementation of the roadmap towards doubling Malaysia’s eCommerce growth rate and reach a GDP contribution of RM 211 billion by 2020.
Then, later in December 2018, reports indicated that the Malaysian government would expand the e-payment system and will allow tracing.
It was noted that the Malaysian Government seeks to intensify and expand e-payment platforms with an emphasis on Government transactions “for good governance and reducing corruption”.
According to the Mid-term Review of the 11th Malaysia Plan 2016-2020, a cashless payment transaction system would ensure transparency, as well as enable tracing and tracking.
The report noted that in view of the growing expectations about greater transparency in financial transactions, it is crucial that Government departments modernise payment mechanisms to become more client-centric, secure, efficient and transparent.
In addition, the Government will also undertake efforts to leverage the potential use of other technologies, including blockchain, although no details were underlined.
Among steps taken by the Government in the first half of the review to facilitate e-payment include the introduction of “Sarawak Pay”, a mobile app by the Sarawak State government to provide a one-stop mobile app payment channel for the public to make payment for bills or purchases via their mobile phones.