From cashless to cardless: Malaysia is on the right track

|Posted by | Banking & Finance, Credit Cards


When the debit card was first introduced in 1987, the concept of a cashless society was pushed towards every economy around the world. Now, a new concept of a ‘card-less’ society has been adopted by many developed and developing countries including Malaysia. But how far away are we from fully adopting it? How soon will mobile and internet payment portals become the next leading payment solution?

According to Frost & Sullivan’s APAC Industry Principal for Digital Transformation, Quah Mei Lee says the mobile payments market in Malaysia was worth US$ 824 million (RM 3.3 billion) in 2015 and will reach close to US$ 1 billion (RM 4.1 billion) by the end of 2016.

“The market is expected to grow at a CAGR that is close to that of Asia Pacific levels at 28.7% during 2016–2021,” Mei Lee stated.

Mobile and internet payments have open doors for e-commerce solutions and for consumers in terms of easier and faster transactions, leading to the thrive of digital business in the country. Mei Lee points out that key enablers of mobile payments in the Asia Pacific region include connectivity through smartphones, payments infrastructure, usage behaviour, and regulatory/government support.

In Malaysia particularly, the Payment Card Reform Framework is triggering a significant change in the payments landscape with the lowering of interchange rates and KPIs for terminal deployment.

With the framework, Mei Lee is relieved that there will be a gradual shift from cash and credit cards to debit cards, an overall increase in the use of contactless technology and widespread acceptance of cards. This shift will ultimately benefit the mobile payments market as use of cards is seen as a pre-requisite to increasing adoption of mobile payments.


According to a survey conducted by Nielsen titled “Mobile Money” 2016, it shows that Asia Pacific has the highest rank in terms of mobile phone usage to check one’s bank account balance or recent transactions (52%), paid bills (53%), transferred money between banks (45%), and even to deposit a cheque into a bank account using mobile camera (13%) when asked across all respondents who own smartphones in the region for first quarter of 2016.

Continued efforts for improvement to attract more users

While local credit card penetration remains low at approximately 29% as of June 2016 and smartphone penetration at only 62.2% in 2015, experts admit that more needs to be done to realise the concept of a ‘cardless’ society.

More banks are taking the initiative to provide better payment gateways to their customers. Asia Pay CEO, Joseph Chan says development of applications has helped to push e-commerce to the next level with the added convenience and security. In the past, mobile commerce was only limited to mobile internet surfing only on your device’s mobile browser.

“By making all type of online payment features available to all users (rather than just credit card users), this will allow debit card and average users to tap into many e-commerce opportunities in the market, such as Grab ad 11street,” Joseph added.

For example, Visa Checkout introduced by Visa to enable easier online payments for online shopping is definitely one of the highlights to improve user experience, as it includes prepaid, debit and credit card options.


Security is still key

Despite Bank’s efforts to keep up, Joseph suggests these players need advice and assistance from payment gateway experts to provide improved and customized tools in terms of payment solutions.

Though we are in the midst of adopting online payment portals, Nielsen report shows that security remains the key concern for users to fully adopt online payment.

To counteract this, Mei Lee believes that while some are within the control of mobile payments service providers – such as thinking through the customer’s end-to-end journey to avoid shopping inconveniences and adding value and simplifying the transaction process -this also requires a concerted industry push towards a true cashless ecosystem.

“For example, BNM could play the lead, active role in encouraging mobile payments adoption through standardization of the payments flow and determining the minimum security guidelines. It could then work with the industry to promote awareness of the increased security offered by mobile payments over cash or card through technology enablers such as biometrics, tokenization and end to end encryption,” Mei Lee points out.

There are three major concerns over security: data security, data privacy, and fraud. To reassure users, Joseph from Asia Pay shares some security measures in place to tackle this:

  1. Data Security

When customers use their card for online transaction, they will need to first receive their password or one-time password (OTP) from bank or card issuers. This is the first layer of protection for consumers.

  1. Data privacy

Payment Card Industry Data Security Standard (PCI DSS) is a proprietary information security standard for organizations adopted in Malaysia, that handle branded credit cards from the major card schemes including Visa, MasterCard, American Express, Discover, and JCB.

This helps to ensure your data is kept in safe hands, away from exposure and compromise.

  1. Fraud

With different type of modules in place such as tokenization, mobile responsive payment page, anti-fraud module and many more in the making, payment solution providers are responsible to keep up with the on-going digital revolutions to battle fraud in many forms.

Examples of Modules for Digital Payment (security):  

1.Anti-fraud module- A module that use filters to identify transactions coming from a card with suspicious IP address, which can be a fake card. Equipped with a scoring system, merchants can identify any signs of fraud such as which country the card is issued in, language settings, the location of the transaction and more data to analyse the payment details.

2.Tokenization – the process of substituting a sensitive data element with a non-sensitive equivalent, referred to as a token that has no extrinsic or exploitable meaning or value. The mapping from original data to a token uses methods which render tokens infeasible to reverse in the absence of the tokenization system, for example using tokens created from random numbers. In the payment card industry, tokenization is one means of protecting sensitive cardholder data in order to comply with industry standards and government regulations.

3.Near-field communication (NFC) – a set of communication protocols that enable two electronic devices, one of which is usually a portable device such as a smartphone, to establish communication by bringing them within 4 cm (2 in) of each other.

With the payments landscape slowly changing, Malaysia may not be as fore front as other developed countries but with the right effort and education, we will definitely live to see the dream of ‘cardless’ society coming true and this will enable us as consumers to experience faster and better shopping experience on a secured platform!



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Ooi Chia Shen

About Ooi Chia Shen

Shen was a content writer in He has moved on to greater things but his words live on here.