A contact-free future: The rising cashless ecosystem in Malaysia

MasterCard | Payments Photo by Bryan Derballa

Business Today interviews Devesh Kuwadekar, Vice President and Head of Market Development, Malaysia, Mastercard on the changing shifts of digital habits in Malaysia and  the segments that will see rising usage of contactless payments.

By Poovenraj Kanagaraj,

In a recent study by Mastercard as well as reports by several other digital platform players across the nation, the arrival of the Covid-19 outbreak has accelerated the rapid adoption of e-commerce, digital payments and preference for online activities.

However, digital habits, prior to the outbreak had already been on the rise among Malaysians. Reports have shown that the e-commerce segment had been registering rapid growth in Southeast Asia, representing two percent of all sales in Malaysia.

“Even before the pandemic, digital payments were already on the rise in the country and even across Southeast Asia. This was primarily due to internet democratisation, increase in mobile adoption, and accelerating efforts by governments to drive financial inclusion as well as cashless agendas,” Devesh Kuwadekar, vice-president and head of market development, Mastercard Malaysia, tells Business Today.

Kuwadekar further points out that the adoption of digital payments in 2019 across Southeast Asia is expected to cross USD1 trillion by 2025. The pandemic matter of fact has increased awareness for the need and adoption of digital payments, especially contactless – a space that was already on an upward trajectory.

According to Mastercard, in terms of contactless penetration, Malaysia is one of the fastest-growing countries in Asia Pacific. In 2018, the number of contactless POS terminals increased by 90.3 percent.

Bank Negara statistics reveal that transaction value for e-money between January and October 2019 surged to RM13.9 billion, with a transaction volume of 1.72 billion, surpassing RM11 billion for the entire 2018.

“The country has over 83% of internet penetration, 97% smartphone ownership, 76% of smartphone penetration and 85% of Malaysians are already banked. For a country of 32 million people, there are currently 48 mobile wallets players vying for their patronage. The market is well served by online banking, debit cards and credit cards,” Kuwadekar highlighted.

Covid-19 accelerated the adoption rate

During the outbreak period, Mastercard points out that the nation’s high usage of cashless payment was evident and more in comparison to other countries in the region.

“In April, this year, we saw more people use their contactless credit cards and even more so with their contactless debit cards more,” said Kuwadekar.

The month saw over 18 percent increase in Malaysian consumers doing more cashless payments, including mobile and other ways like QR.

Increases in in Philippines were approximately 16.9 percent followed by Singapore at 15.75 percent and Thailand at 15 percent.

Devesh Kuwadekar, Vice President and Head of Market Development, Malaysia, Mastercard

He further shares that factors that had led to the shift in attitudes as well as the adoption. “In recent years, we’ve noticed a shift in attitudes towards payments among consumers in Malaysia. Consumers here are increasingly looking for faster, safer and  more convenient methods to pay for goods and services,” he shared.

By 2019, 67 percent of Malaysian consumers had used some form of cashless payments. Kuwadekar further points out that debit cards and online banking were the most preferred non-cash methods for people, and with the nation putting in place an industry-wide effort to target 800,000 POS terminals by the this year, 30 percent will be contactless-enabled.

Segments bound to register increase in contactless spending

Mastercard expects three areas in which consumers will increase both, debit and credit card spending.

“With Covid-19, consumer spending priorities have shifted. In Malaysia, 75% consumers are now delaying major purchases. Consumers across Southeast Asia are now allocating more of their monthly income on essential items such as groceries and healthcare products,” Kuwadekar tells Business Today, expecting the pattern to continue for some time in both the online and offline spaces.

Besides using their cards for the purchase of essentials, Mastercard also expects to see the usage of cards increase with e-commerce. As  more people are turning towards online purchases in order to minimise contact, Kuwadekar says more cards will be used in this space to make purchases safely yet conveniently.

And as a result of the Covid-19 spread, Southeast Asia consumers have developed comfort and adapted to virtual routines and this Mastercard believes has resulted in them opting for experience related online services such as movie streaming, events and sports.

“This is one area we anticipate greater card usage from consumers looking to access entertainment related experiences in a safe environment,” said Kuwadekar.

However, with the rise of e-wallets and alternative payment options, how is Mastercard staying relevant among its consumers?

One of its efforts in doing so involves rolling out accelerator programmes for Fintechs. For instance, Mastercard launched the Mastercard Accelerate programme in which fintechs are offered a single-entry point to Mastercard’s wide portfolio of specialised programmes that give support and assistance throughout the Fintech’s growth and transformation journey, starting from market entry all the way to global expansion.

Late last year, the financial service provider introduced Fintech Express across Asia Pacific. The programme allows Fintechs to access a suite of digital-first products to differentiate their offerings. Flexible commercial agreements for Fintechs’ early growth stages are offered to reduce barriers to entry.

“As fintechs look to scale globally, Mastercard provides global licensing support with in-market teams to accelerate their growth and execution,” Kuwadekar says.

With most e-wallets in the country now operating within a closed loop system, acceptance of this payment medium is limited to the select list of merchants that are signed up with the e-wallet provider.

“This is where Mastercard comes in to integrate our open loop system to provide consumers a more seamless and best-in-class payment experience,” he tells Business Today.

“For example, Grab and Mastercard launched GrabPay, which is one of the first e-wallets from Southeast Asia that offers global acceptance. This expands Grab’s offline and online merchant ecosystem, allowing users, regardless of whether they have a bank account, to transact securely and easily online or offline, at nearly 53 million merchants worldwide that accept Mastercard,” Kuwadekar says.

Mastercard has also invested and innovated in the real-time payment space in order to deliver a growing suite of real-time and digital payment solutions across Asia Pacific.

For instance, fast payment systems in Singapore and Thailand, popularly known as PayNow and PromptPay, respectively, are being powered by Vocalink, a Mastercard company.

The company aims to establish a presence in leading the way in the real-time payment space as Mastercard’s believe it is well-positioned to be the one-stop partner for banks, businesses, merchants, digital players and governments in the space.

“With the acquisition of Nets – a leading European PayTech company, Mastercard has further reinforced our leadership position as a multi-rail payments company, delivering real-time payment capabilities seamlessly and safely across multiple payment flows, be it B2B, P2M or P2P, card and non-card payments flows,” Kuwadekar says.



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