Southeast Asia is on the cusp of a cashless revolution and Malaysia is playing a central role. In 2023 alone, the nation signed two landmark agreements with Singapore and Indonesia to bring cross-border QR code payments to international travellers. The agreements signal the dawn of a faster, cheaper and more transparent payments infrastructure from which Malaysian businesses can benefit.
As Malaysia’s economy picks up post-pandemic, businesses spanning tourism, retail and e-commerce all stand to gain from Southeast Asia’s rapid digitalisation and burgeoning growth.
Fast and transparent
In 2023, Malaysian consumers can make instant purchases, bank transfers and buy goods and services from their mobile phones. With banking apps and mobile wallets soaring in popularity, it has never been faster or more efficient to make a purchase. These payment bridges and the adoption of digital financial services have made payment systems efficient, inexpensive and comprehensive for Malaysian consumers and merchants.
As international travel grows, these wallets provide greater convenience for travellers and can be cheaper, depending on the merchant and vendors’ interoperability. Ideally, they help consumers and merchants avoid intermediary banks, currency conversion fees and hidden charges. Additionally, they are often more transparent than traditional currency conversions.
A smoother payment process is critical towards encouraging overseas tourism and shopping, helping benefit both sectors of all countries involved. Cross-border payment solutions also allow regional and international businesses to access new customers in Malaysia more easily through cheaper and more efficient transactions in the country. These will also be a factor in the Malaysian economy’s recovery and growth.
Unfortunately, despite the region’s boom in financial technology and digital economy, the cross-border payment landscape has remained fragmented. This fragmentation naturally has affected the expansion of e-commerce, tourism and other industries seeking to transact cheaply and more efficiently in Southeast Asia.
However, progress is underway. Last year, Malaysia was one of five ASEAN countries, which included Indonesia, Thailand, Philippines and Singapore, to agree to connect retail payment systems. Plans are also in place to bring this to the wholesale level and the central bank digital currencies.
This agreement, alongside Malaysia’s bilateral QR code payment agreements with Singapore and Indonesia, is a sign of significant progress in the region’s cross-border payment space.
This should result in ease of use, more free movement in the region and an interoperable way for merchants to integrate one alternative payment method for multiple regions. The agreements should also give these communities a simple and localised way to access international commerce through cross-border instant payment methods, and without having to convert to US dollars.
Reputable partners
Some consumers and businesses are hesitant to use digital solutions when paying for overseas goods. Moving money abroad comes with risks, but no more so than carrying a bag full of cash.
However, there are ways to protect personal and financial data from hackers, fraudsters and identity thieves. These include transacting with reputable payment service providers. Consumers should also use secure channels and devices when transacting, ideally backed by robust cyber security, authentication and encryption.
Both consumers and merchants should regularly monitor their transactions and alerts and ensure the payment provider used is Payment Card Industry Data Security Standard (PCIDSS)-compliant, as well as having stringent anti-money laundering and counter-terrorism financing (CTF) regulations of the countries or regions involved in the transaction.
It is possible to check whether a cross-border payment provider is safe and trustworthy by their licenses, certifications and accreditations for operating in the space. You can also check their track record, reputation and reviews from other customers or partners.
Last but not least, it is important to make sure the payments partner or provider understands the region, regulations and compliance responsibilities. As mentioned, Southeast Asia’s regulatory framework is highly fragmented: each country has its own set of regulations around compliance, data protection and privacy when it comes to banking and overseas transactions. Having a partner who understands this complex system will prove an asset for Malaysian businesses looking towards global expansion and revenue growth.
It can also be challenging for a merchant to partner with and connect to each alternative payment method individually. As such, it is essential to find a partner who is connected to multiple popular methods to mitigate stress and extra admin.
Malaysia’s post-pandemic recovery is well-underway now, but stronger financial inclusion in Southeast Asia will have a huge impact on accelerating its growth. A unified, transparent and interoperable cross-border payments ecosystem will be key to driving innovation in Malaysia’s digital economy and future economic success.
By Sue-Ann Seet, Head of Asia, dLocal
