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Government Incentives Boosting Malaysian eWallet Adoption

September 24, 2020

Filippo Giachi

VP – Asia Pacific, Middle East & Africa

A combination of government financial incentives and COVID-19 lockdown restrictions are encouraging more Malaysians to forgo cash in favour of contactless payments, including the use of smartphone embedded electronic wallets (eWallets) to fund online and physical in-store purchases. Some eWallet providers have seen payment volumes almost double this year. GrabPay, for example, highlighted a 1.7x increase in cashless transactions since the Malaysian government’s movement control order (MCO) was first implemented on 18th March 2020 according to reports by the Straits Times quoting the deputy head of GrabPay Malaysia.

Government stimulus playing a significant role

The Malaysian government has been encouraging greater use of electronic payments (ePayments) in the country for the last ten years, while the COVID-19 crisis appears to be accelerating a broader shift towards a cashless society. 

One source of inducement comes from the Short-Term National Economic Recovery Plan, designed both to spur domestic spending for local merchants and increase the percentage of electronic and mobile payments for offline and physical goods and services in the country. That includes the US$176m ePenjana programme that offers subscribers a free US$11.76 eWallet credit funded by the government (coupled with another US$11.76 of additional discounts, cashback and reward points from eWallet providers themselves) which is set to run between July and September of 2020. 

The ePenjana incentive is available to all Malaysians aged 18 years old and above with an annual income of less than US$23,500 (estimated at around 15m citizens). It follows a similar and successful US$7 eTunai Rakyat credit scheme covering online purchases introduced in January 2020. Applicants are also required to download and register with the government’s MySejahtera App to help improve QR code-based contact tracing to contain the COVID-19 pandemic.

Population primed for mobile payments

Malaysia was primed for increased mobile payment adoption even before its government’s coronavirus-induced fiscal stimulus policy was brought into play, however, partially driven by high levels of Internet and smartphone penetration in the country. Almost three-quarters of its 32m citizens live in urban areas according to the United Nations, with around 29m regularly using the Internet calculates Statista. Nearly all (97%) of those Internet users between the key ages of 16 and 64 have a smartphone according to statistics compiled by GlobalWebIndex in the third quarter of 2019, with ownership of laptop and desktop computers amongst the same age group almost as high (72%).

Those penetration rates have risen in tandem with significant improvements to Malaysia’s fixed and wireless broadband infrastructure over the last few years. Ookla speed tests indicate that the average speed of fixed internet speed grew 23% year on year to 78Mbit/s in January 2020, with average mobile internet connection capacity up by 19% to almost 24Mbit/s in the same period.

With all that bandwidth available, Globalweb5index estimates that Malaysians aged between 16 and 64 spend an average of almost eight hours a day using the Internet, way ahead of the time spent watching television, listening to music or using a games console. Internet users of all ages also spend an average of four hours a day browsing the web on mobile devices, mostly their smartphones, estimates the company.

E-commerce spend doubled in 2019

Malaysians are also doing a steadily increasing proportion of their shopping on the Internet with World Bank global financial inclusion data suggesting that 39% of citizens aged over 15 make online purchases or pay their bills online. Statista’s market outlook for e-commerce, travel mobility and digital media compiled in January 2020 estimates that 19.9m Malaysian consumers purchased just over US$3.2bn of online goods in 2019, an increase of 33% on 2018 and representing roughly US$185 per head. The latest figures compiled by the market research company (calculated 2nd September 2020) estimate that spend will reach almost US$4.4bn this year and rise further to US$8.6bn by 2024. By that time, it expects average revenue per user (ARPU) to hit US$340.

Rival estimates from PPRO’s payments and e-commerce reports for 2019 and 2020 estimate that the total value of Malaysia’s business to consumer (B2C) market doubled in size to US$4bn in the last 12 months. Even so, online sales still represent a fraction of the country’s total B2C retail spend, leaving significant room for further growth over the next five years.

Much of that e-commerce activity is being conducted from smartphones. GlobalWebIndex estimated that 64% of Malaysians in the 16 to 64 age group made an online purchase via some form of a mobile device in the third quarter of 2019 (compared to 44% who used laptop or desktop computers for the same purpose). And PPRO estimates that mobile devices processed 46% of all transactions by value in 2019. Statista also calculates the number of Malaysians making digitally enabled payment transactions in 2019 – defined as either online or point of sales payments made using a smartphone app – at 20m. It forecasts the total value of those transactions at US$10.5bn, up 21% over 2018 and representing US$520 per user.

Use of e-commerce apps is well advanced, with GlobalWebIndex reporting that 61% of Malaysians aged 16 to 64 used mobile shopping apps in the third quarter of 2019. South-East Asian online shopping platform Shopee (owned by SEA Group and backed by Chinese technology conglomerate Tencent) was the eighth most visited website in Malaysia in the fourth quarter of 2019 according to Similarweb. Lazada, a subsidiary of another Chinese technology giant Alibaba Group, saw its e-commerce app ranked 6th in terms of active users, with Shopee right behind in 7th and Grab’s mobile payment app in 10th (the latter also ranked 4th and 6th in terms of mobile app downloads during the same period).

While Malaysia sees a much larger proportion of its adult population having bank accounts compared to other countries in South East Asia (85%, with 21% also owning credit cards according to World Bank global financial inclusion data), its penetration of mobile money accounts is also high at 11% of over 15s.

Almost half of Malaysians in the 16 to 64 age category (49%) used banking apps in the third quarter of 2019, according to GlobalWebIndex. The same proportion also used or scanned QR codes which often underpin contactless payments, with 55% using their smartphones to transfer money to friends or family. PPRO also offers some insight into the methods Malaysian consumers use to fund those e-commerce purchases, with 47% using bank transfers compared to 25% credit cards, 12% cash and 6% eWallets. 

Mobile payment players

That eWallet penetration has been driven by the emergence of several local and international mobile money providers regulated by the Bank Negara Malaysia in the last five years. Grab started out as a ride-hailing company before launching its GrabPay payment service in 2016, subsequently expanding its remit to e-commerce purchases, takeaway deliveries, hospitality and ticketing. The Softbank-backed company also operates in Singapore, Cambodia, Indonesia, Myanmar, the Philippines, Thailand and Vietnam. It has raised a total of US$856m funding from Japanese investors, including Mitsubishi UFJ Financial Group (MUFG) and IT services firm TIS in February this year according to some media sources. Its ride-hailing and GrabFood businesses have been hit hard by the pandemic; however, with Bloomberg reporting, it will cut up to 5% of its workforce in June.

Retail promotion service provider Fave acquired Groupon’s operations in Malaysia, Indonesia and Singapore in 2016 before introducing its FavePay platform in 2017. FavePay is a mobile payment aggregator that links to customers’ existing eWallet, credit card and online bank accounts to fund purchases with specific retailers, with cashback schemes available to inspire repeat business and loyalty programmes. 

Retail News Asia reported that FavePay had amassed 2m customers using the service in May 2018 eight months after its launch, with merchant partners spread across key Malaysian cities such as Johor Bahru, Kuala Lumpur, Ipoh, Kuching, Kota Kinabalu and Penang. Owner Fave also acquired two restaurant table ordering and meal takeaway start-ups – CutQ and FoodTime – to help expand its FavePay mobile payment customer base in 2019.

Boost is still majority-owned by Malaysian telco Axiata Group, despite roughly 22% of its stake in the eWallet provider’s parent company Boost Holdings having been sold to Singapore-based insurer Great Eastern for US$70m in June 2020. The company says it has around 7m “Boosties” with its homegrown mobile payment app accepted at over 140k touchpoints in Malaysia. It has a partnership deal with China’s UnionPay that allows the latter to target Boost’s Malaysian user base with QR code-based payments at retailers including Old Town White Coffee, Orange Convenience Store and Colours & Fragrances. In turn, Boost eWallet users will be able to make payments to the estimated 16 global merchants that use UnionPay’s QR codes. 

The origins of Touch ‘n go lie in road toll fees, having launched in 1997 as a way to electronically fund trips on Malaysia’s Metramac Highway and PLUS Expressway routes. The platform has since evolved to include railway tickets, vending machines and parking meters as well as pre-paid contactless payment cards.

Sarawak Pay is a Sarawak state government-owned mobile payment platform launched in 2017. It was subsequently rebranded as S-Pay in 2019 when a partnership with China’s UnionPay enabled its customers to use the card in any country where the latter is accepted. The app enables users to scan and pay for physical goods via QR codes, transfer funds, buy mobile top-ups, and pay for subscriptions and utility bills via online banking and bank cards. Speaking at the Third International Digital Economy Conference Sarawak, Chief Minister Datuk Patinggi Abang Johari Tun Openg reported registered users at just under 92k as of 1st July 2019, predominantly in Sarawak itself, with plans to reach 150k by 2020.

New challengers emerging

A recent survey compiled by App Annie Intelligence and data aggregator iPrice Group found that Grab, Touch n’ Go, Boost and Fave were the top four mobile payments platforms used by Malaysians over the course of 2018 and 2019.

More recent entrants to the market which could muscle in during 2020 and beyond include Vcash and BigPay. Elsewhere Malaysian mobile network operator (MNO) U Mobile launched its GoPayz eWallet in partnership with UnionPay International (UPI) in November 2019. The service combines QR code digital payments with physical and virtual Visa, Mastercard and UnionPay cards as well as ATM withdrawals. The consumer version also allows payments for insurance, financial services, e-commerce purchases, mobile phone top ups, utility payments, transport tickets and entertainment subscriptions, with a business platform (GoBiz) facilitating digital payment acceptance for merchants.

Ant International’s AliPay maintains a small but constant pool of subscribers following its partnership with Malaysian bank CIMB to provide cashless payments for Chinese tourists visiting Malaysia in 2017, having appointed Razer Merchant Services as its local acquirer. Razer also offers its own eWallet app – Razer Pay – designed specifically for younger citizens and millennials making online and physical purchases of games, entertainment, food, mobile top ups and more at participating merchants.

The predominance of local players in the country stems partly from the absence of bigger international mobile payment and eWallet providers. Malaysian banks and card issuers are yet to support Apple Pay in Malaysia for example while Google Pay is restricted to pay online or in app purchases but not contactless payments. Samsung Pay is available but is tied to the Korean smartphone makers own NFC-enabled handsets. Media reports suggest that having launched its international money transfer and remittance services in Malaysia in 2019, UK-based TransferWise is collaborating on partnerships with local eWallet providers and negotiating with regulators to launch a multi-currency card this year.

DCB enhances ease of use to promote eWallet adoption

While the volume and userbase for cashless and mobile payments is growing, they still appear to represent a fraction of purchases in Malaysia. As recently as January 2020, business newspaper The Malaysian Reserve reported Malaysia’s Finance Minister Lim Guan Eng as estimating just 5% of daily transactions in the country were cashless, a proportion he is keen to see increase by making ePayment facilities more widely available and safer and simpler for Malaysians to use.

That ease of use could be enhanced by combining eWallets to direct carrier billing (DCB) payment mechanisms that fund purchases from the buyer’s mobile phone account rather than bank accounts or credit/debit cards. The smartphone is already the device of choice for many Malaysians’ eCommerce activity, and simple one-click cashless payments backed by integral identity and authentication processes are likely to prove more convenient for others.

Both DCB and eWallets also offer e-commerce merchants access to telcos large user bases, with mobile connections in Malaysia estimated at 41m, almost a third of which (30%) are post-paid rather than pre-paid. And by partnering third party payment service providers by DOCOMO Digital, online brands can streamline the acquisition of new subscribers through simple application programming interfaces (APIs) backed by efficient fraud detection and dispute resolution capabilities.



[i] Coronavirus pandemic has steepened adoption curve of e-wallets in Malaysia, Straits Times, 27th April 2020.
[ii] SoftBank-backed Grab raises US$856m from Japanese investors in financial services push, Channel News Asia, 25th February 2020
[iii] Grab to Cut 5% of Employees in Another Setback for SoftBank, Bloomberg News, 16th June 2020
[iv] FavePay reaches 2 million customers, Retail News Asia, 7th May 2018
[v] Govt targets 150,000 Sarawak Pay users by year-end, New Sarawak Tribune, 9th July 2019.
[vi] TransferWise Launches in Malaysia, Open to Partnership with E-Wallets, FinTech Malaysia, 21st November 2019
[vii] Only 5% total daily payments are cashless to date, says MoF, The Malaysian Reserve, 21st January 2020

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