FARHANA BINTI NORAZMAN_MMB201007_INDIVIDUAL_ASSIGNMENT_UHMS6013

TECHNOLOGY DEVELOPMENT ISSUES:
FACTORS THAT OBSTRUCT MALAYSIAN FROM MOVING

TOWARDS A CASHLESS SOCIETY.

SCHOOL OF GRADUATE STUDIES
UNIVERSITI TEKNOLOGI MALAYSIA

FARHANA BINTI NORAZMAN MMB201007

TABLE OF CONTENTS

LIST OF FIGURES ...................................................................................................................3
LIST OF TABLES.....................................................................................................................3
INTRODUCTION .....................................................................................................................4
CAPABILITY AND AFFORDABILITY OF INTERNET CONNECTION............................6
TOO MANY E-MONEY PLATFORM ....................................................................................9
BAD INTERNET/MOBILE BANKING EXPERIENCE .......................................................10
MALAYSIA STATUS COMPARED TO OTHER COUNTRIES .........................................11
CONCLUSION ........................................................................................................................ 13
REFERENCES ........................................................................................................................14

LIST OF FIGURES

Figure 1: Classification of retail payment in Malaysia..............................................................4
Figure 2: Mobile-broadband Average Download Speed by ASEAN and selected countries
(Mbps), December 2019 ............................................................................................................7
Figure 3: Malaysia pays higher IP transit prices than many of its neighbours ..........................8
Figure 4: E-Wallet landscape in Malaysia ...............................................................................10
Figure 5: The percentage Usage of Internet by Individual, Malaysia......................................11
Figure 6: Percentage of purchasing using Mobile Payment ....................................................12

LIST OF TABLES

Table 1: Classification of retail payment in Malaysia ...............................................................5
Table 2: Basic payment indicator for transaction value per capita (unit) in Malaysia. .............6
Table 3: Network performance results for wireless broadband service – Nationwide ..............8

INTRODUCTION

The worlds are going cashless. A cashless payment uses the advantages of electronics
transfer payment to substitute physical money (Ong, 2016). There are many advantages of
going cashless. People don’t need to bring money all the time, the expenditure is traceable, the
hassle of payment with small coins and the need to carry it in your pockets are eliminated.
Furthermore, crime rates, money laundering can be reduced. Not to mention the time and
resources you need to spend to exchange your currency during travelling (Armstrong, 2020).
However, we should not forget some of the limitations of going cashless. Hackers can take over
your bank account, or if there are technical problems, you will have no alternative source of
money.

Bank Negara Malaysia has classified retail payment in Malaysia as Figure 1. However,
this paper will only be focussing on the usage of Credit Cards, Debit Cards, E-Money, Internet
Banking, Mobile Banking and Mobile Payment in Malaysia. The definition of each retail
payment is shown in Table 2. Meanwhile, (Haikal Hafiz Bin Kadar, 2018) identified the use of
Debit/Credit Card, Internet banking and Mobile Wallet as the famous cashless transaction in
Malaysia.

RETAIL RETAIL PAYMENT SYSTEM eSPICK
PAYMENT RETAIL PAYMENT SAN
INSTRUCTION HOUSe
RETAIL PAYMENT CHANNELS InterBank GIRO
Direct Debit
Financial Process Exchange

Cheques
Credit Cards
Charge Cards
Debit Cards
E-Money

Internet Banking

Mobile Banking

Mobile Payment

Figure 1: Classification of retail payment in Malaysia
Source: Bank Negara Malaysia

It can be seen that the usage of cashless methods has been increased every year. Table
2 shows the transaction value per capita (unit) in Malaysia (BNM, n.d.). Despite the increasing
usage of cashless methods by Malaysian, there are still some obstacles that need to be endured
to make a cashless society in Malaysia. Factors that obstruct Malaysia to become a cashless
society are the capability and affordability of internet connection in Malaysia, the negative
perception on the internet and mobile banking, and also too many e-wallet platforms to choose.

Table 1: Classification of retail payment in Malaysia

Retail Payment Definition

Credit card Enables its holder to buy goods and services with a credit line given by credit card issuer
and the amount will be settled at a later date. Cardholders are billed monthly and
cardholders would have to bear finance charges (interest) on the outstanding amount if
payment is not made by the due date. Examples of credit card brands are Visa,
MasterCard and JCB.

Debit card A payment card where the transaction amount is deducted directly from the cardholder's
bank account. No late payment penalties, finance charges.
Example are VISA and MasterCard brands as well as cards with both international debit
and domestic PIN-based ATM applications.

E-money A payment instrument that contains a monetary value that has been paid in advance by
the user. It can be used to purchase goods and services from merchants and the amount
will be automatically deducted from their e-money balance.

Internet Internet banking provides a fast and convenient way of performing common banking
banking transactions, such as transferring funds from the customers' savings account to their
current account, or even to a third party's account. Payments also can be made to
Mobile relevant parties, such as utility bills, assessment tax, and others.
banking
Mobile banking is similar to Internet banking in that it provides a fast and convenient
way of performing common banking transactions. All you need is a mobile phone that is
equipped with the features required by your bank that provides this service. You can do
your banking transactions from anywhere that has your mobile telecommunication
network coverage.

Mobile Mobile payment allows you to make payments to selected merchants by using your
payment mobile phones. Bill payments and purchase of goods and services are among the
cashless transactions that can be made. To enjoy the benefits of mobile payments, you
have to register and open an account with mobile payment service providers. Non-bank
mobile payment services are provided using an e-money account.

Source: Bank Negara Malaysia

Table 2: Basic payment indicator for transaction value per capita (unit) in Malaysia.

Transaction Volume Per Capita (unit): 2015 2016 2017 2018 2019
15.6
Credit card 11.5 12.1 12.7 13.8 11.4
64.0
Debit card 2.9 3.4 5.1 7.6 23.0
10.1
E-money 44.4 52.6 58.1 59.3 0.2

Internet banking 10.7 13.2 15.9 19.0

Mobile banking 0.9 1.5 2.7 5.9

Mobile payment - - 0.01 0.04
Source: Bank Negara Malaysia

CAPABILITY AND AFFORDABILITY OF INTERNET CONNECTION

Based on statistic by Department of Statistic Malaysia (2019), the percentage of
individuals who use the internet in Malaysia has been increased by 3.0% to 84.2% in 2019 as
compared to 81.2% in the previous year (DOSM, 2020). Internet usage in urban and rural areas
has increased by 2.6 % and 3.3 % respectively as compared to the previous year. The (GSMA,
2020) also reported that almost half of the world’s population now are using mobile internet
since the 4G coverage is catching up with 3G coverage. Furthermore, it is said that the mobile
phone and mobile data are becoming more affordable globally.

However, the capability and affordability of internet connection in Malaysia,
especially in rural areas are still far from perfect. It is proven by the story of Veveonah Mosibin,
an 18 years old university student in Sabah that needed to climb a tree to get a Wi-Fi connection
to answer her online examination (BBCNews, 2020). Internet connection should be reliable in
all across our country, especially during this pandemic. The demand for internet connection is
tremendously high due to the lockdown. The government should be able to provide a reliable
and affordable internet connection across Malaysia regardless of rural or urban areas. With the
poor internet connection, it might be impossible for Malaysia becoming a cashless society since
the majority of the cashless transactions are utilizing the use of the internet. For example, in a
situation where we want to use the Touch ‘n Go e-wallet to purchase goods from the market, it
could not be done since we are not connected to the internet due to poor coverage at the location.
We are forced to opt for the normal physical transaction. Figure 2 below shows the Mobile-
broadband Average Download Speed by ASEAN in December 2019. Malaysia is ranked
number 7 among ASEAN countries, and 83 worldwide far from its neighbour, Singapore.

Figure 2: Mobile-broadband Average Download Speed by ASEAN and selected countries (Mbps), December
2019

Since the Malaysian Communications and Multimedia Commission (MCMC) is
implementing the use of Fixed Number Portability (FNP), the competition within
telecommunication service provider in Malaysia is increase. The option for choosing the most
affordable internet broadband should be broadened because the customer does not need to get
a new telephone number (MCMC, PUBLIC CONSULTATION PAPER - Implementation of
Fixed Number Portability (FNP) in Malaysia, 2020). Table 3 display the availability of
Telecommunication service provider in Malaysia and their network performance for wireless
broadband service nationwide (MCMC, NETWORK PERFORMANCE REPORT 2019 -
MEASURING MALAYSIA BROADBAND AND VOICE PERFORMANCE, 2019). It can
be seen that Maxis is the best wireless broadband service provider based on the measurement
conducted in 2019.

Table 3: Network performance results for wireless broadband service – Nationwide

Source: Malaysian Communications and Multimedia Commission

Figure 3: Malaysia pays higher IP transit prices than many of its neighbours

Despite that, Malaysian is paying more than other countries for broadband service as
shown in Figure 3. This is proof that broadband’s price in Malaysia is less affordable at the
retail level (Adilla, 2018).

TOO MANY E-MONEY PLATFORM

Malaysia is indeed anticipated to be a cashless society. As evidence, in 2019, the
government is giving RM30 worth e-wallet (TheStar, Towards a cashless Malaysia, 2019) and
in 2020, another RM50 worth e-wallet credit is given through the ePenjana campaign (TheStar,
ePenjana: How to redeem your RM50 e-wallet credit from July 31, 2020). However, it may
become a problem where there are a lot of e-money platforms to choose from. It might be easier
if one platform can be used to suit all purposes. For example, using Touch ‘n Go eWallet to
make payment and also paying bills.

Touch ‘n Go eWallet is an electronic wallet (eWallet) that holds electronics money (e-
money). Using a mobile application, it can use QR code to do online payments at retails, F&B,
as well as fund transfer and also tolls payment using “PayDirect” feature and RFID. Touch ‘n
Go is the only Electronic Toll Collection (ETC) operator for all highways in Peninsular
Malaysia. It is also being accepted as the Common Ticketing System (CTS) for major public
transports in the Klang Valley (TNGD, 2018).

E-wallet has grown fast in Malaysia, Figure 4 below show the rise of e-money platform
in Malaysia since 2017. Beside Touch ‘n Go eWallet, other popular mobile wallets are GrabPay,
Boost, Maybank E-Wallet and many more. Some might disagree and say that the more e-wallet
platforms are better for a cashless society. However, it can be confusing when different place,
providing different platforms. Furthermore, we need to reload our money into each of the e-
wallet platforms to use the system which can be troublesome for some people. The advantages
of using Touch ‘n Go eWallet is, their money-back guarantee policy promises full compensation
if your account is being charged with unauthorised purchases or reloaded. By any chance, a
little modification to the algorithm of Touch ‘n Go eWallet system can be done to enable the
user to use the eWallet even on other e-money platforms inside and outside Malaysia.

Figure 4: E-Wallet landscape in Malaysia

BAD INTERNET/MOBILE BANKING EXPERIENCE

Before the rise of Internet/Mobile banking, people are spending their time line up at
the post office to pay bills and when the internet banking was first introduced, people were
hesitated to use the system and still willing to pay the bills manually. This is because of
misunderstanding regarding giving private information online. The first-time user feels that the
cashless way of the transaction is deceiving because they might have to pay more compared to
the conventional transaction.

The (GSMA, 2020) also reported that there is a lack of literacy and skills in using
mobile technology globally. The elderly and the disabled also feel that with the rapid and
digitalisation technology advancement is a big challenge for them. Some did not have the
confidence and trust to use the platforms because of fears of frauds and scams. (NST, 2020)

In 2018, the social media users claimed that CIMB’s online banking portal is
transferring out funds from their online banking involuntarily to a PayPal account. (TheStar,
CIMB denies its online banking system was hacked, assures all is secure, 2018). Although
CIMB has denied and ensured that security measure has been taken and all transaction is
continuing to be protected, there are still people hesitated with the service. Figure 5 below from
the department of statistic of Malaysia shows that in 2019, only 35.2% of Malaysian using the
internet to purchasing or ordering goods (DOSM, 2020).

Figure 5: The percentage Usage of the Internet by Individual, Malaysia
Source: Department of Statistics, Malaysia

Perhaps more awareness and knowledge should be given by the banks and the
government to ensure that it is okay to do a transaction online. Some basic steps that can be
taken before making an online transaction are to make sure that the URL of the website is legit
before key in your username and password, and also keep your username and password as
private. It is also advisable to change your password regularly.

MALAYSIA STATUS COMPARED TO OTHER COUNTRIES

Malaysia needs to learn from other countries regarding how to become a cashless
society. Figure 6 shows that, although there is an increase in growth from 2018 to 2019 in the
usage of mobile payment in Malaysia, Malaysia ranked is below its neighbouring countries.
The level of acceptance of e-wallet technology is still relatively poor in Malaysia ( (Norulhuda
Abdullah, 2020).

For example, China that has the highest familiarity with e-wallet is proven in the
percentage of using mobile payment. The innovative social commerce model and also trusted
digital payment infrastructure has driven China to become a cashless society quickly. Singapore
also a good example of a successful cashless society compared to its neighbouring countries.
They are one of the pioneers in introducing an electronics prepaid card with the NETS CashCard
in 1996. Moreover, the rise in mobile and internet technologies has resulted in electronic
payment solutions more prevalent.

While in India, it is interesting, that the small act like the demonetisation of Rs. 500 and
Rs. 1000 notes have partly responsible to be the reason why the citizen adopt mobile wallet
rapidly in 2016 (Pachare, 2016).

Figure 6: Percentage of purchasing using Mobile Payment

CONCLUSION

As a conclusion, it is not impossible for Malaysia becoming a cashless society.
Slowly, but surely. Amid this pandemic, even the World Health Organization (WHO)
recommending the use of contactless transaction to avoid the spreading of Covid-19 viruses
(Huang, 2020). This situation forced everyone to opt for a cashless transaction. Furthermore,
during the Movement Control Order (MCO), people are spending more money through online
shopping.

Finally, to make it possible to make Malaysian a cashless society, a reliable and
affordable internet connection should be provided by the government, more awareness and
education should be given to change the bad perception of using internet banking and also
utilising the use of a single e-money platform such as Touch ‘n Go eWallet that can suit all
purposes could be the solution.

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