Embracing Cashless Transformation

Going cashless is fast becoming a way of life globally and events such as the pandemic highlighted the convenience of digital payment and accelerated its evolution. WBN’s #iEmPOWER webinar on E-wallet: Embracing a Cashless Transformation in June 2022 discussed its benefits and development.

Digital technology facilitated the innovation of electronic payment systems such as e-wallet which is expedient because it eliminates the need to carry physical cash. Digital wallet is a major economic development and significantly increases consumer spending habits. In some countries particularly in Southeast Asia, governments encourage consumers to adopt e-wallet via various initiatives such as network infrastructure, policy packages and security guarantees in digital transaction. The growth of e-commerce has played a part in the rise of e-wallet platforms among young people. Adapting to e-wallet and opting to go cashless is no longer just a trend but a way of life. In fact, many believe physical money will be phased out in the next 20 years.

Meet the Speakers
– Ungku Norliza, CEO, Boost Life, Malaysia
– Aarushi Jain, Associate Director, PwC India, India
– Hazlin Abdul Rani, Head of Cryptography Development, CyberSecurity Malaysia
– Chrisma Albandjar, Vice Treasury II, Indonesia FinTech Association, Indonesia

Moderator: Mazlita Mat Hassan, Founder, RECQA, Malaysia

How Has E-wallet Evolved?
Ungku Norliza: We started back in 2017 and 2018. By 2019, we acquired customers and touch point merchants to create a complete ecosystem of a cashless society. Within the macro environment, you can also see a lot of statistics shows how the aggressiveness of the [digital payment] adoption. Numbers show that it is an increase of more than 60 per cent from 2020 to 2021 and in 2021, cashless transaction went up to about two billion transactions. Another study shows on a macro level, a customer that uses e-wallet actually use more than 95 per cent in a monthly transaction. The frequency of that transaction actually increases from 10.5 in the past to about 17 times now. The pandemic definitely accelerated [its adoption].

Chrisma Albandjar: In Indonesia, there is a rapid increase in fintech adoption. In May 2022, there was more than double increase in digital transaction – from 145 million to 393 million. It has become one of the most important components in supporting Indonesia’s economic recovery, besides disbursement of government programmes to ease the burden due to the pandemic. For Indonesia, the benefit of digital payments including e wallet has brought a solution to the country’s economic problems. Therefore, [digital payment] will definitely continue to grow and we are looking forward to more.

Aarushi Jain: In March 2020, when the pandemic started, we were at about USD40 million transactions a month. Within a month, this doubled and by April 2021, it grew five times to about USD450 million. Today, we are upwards of USD500 million per month and will be touching about USD6 billion by end of the year. That is the scale we’re talking about in terms of the overall digital transactions. There are two points I want to highlight on how e-wallet ecosystem is evolving:

• One, overall revenue drivers and how players are looking at making money apart from transaction fee and how they can offer value added services such as integrated solutions to a merchant. In India, for example, this would be bookkeeping services and invoicing solutions to smaller merchants.
• Two, how do they utilise this humongous amount of data? They are building metrics out of it and entering alternate channels like BNP [Paribas] like lending.

The other area of change that I want to highlight is on the use cases. Traditionally, e-wallet ecosystem was limited to transfers, transit payments, which we are seeing now. But I am also seeing a trend towards B2B or business payments.

It’s a Matter of Trust
Hazlin Abdul Rani: Ensure that you enable your device password. Do not use the same password for your apps, use a different one. On the developer’s side, add another feature called ‘two factor authentication’. Hackers are becoming more intelligent and resourceful. So, avoid public wifi while you’re doing highly confidential things online like digital payment.

Aarushi: India uses two factor authentication for every payment. One would be your pin or biometric authentication that you do and the other is one-time bypass (OTB) that you receive on your phone.

Chrisma: In Indonesia, national cyber and corruption agency indicate that 24 per cent of cyberattacks that happened in 2021 were within the financial sector, 70 per cent were targeted towards banking, 16 per cent on insurance and 14 per cent towards other financial sectors. There has been a significant increase of cyber personal data protection, money laundering and third-party service organisation including illegal online P2P lending during the pandemic. Right now, we are waiting for the finalisation and issuance of our own personal data protection, as well as cybersecurity laws. The bill, the law of our personal data protection is key for us.

Financial Inclusion
The underbanked refers to individuals or families who have a bank account but often rely on alternative financial services due to inaccessible and affordable banking services or their preference to alternative financial services.

Chrisma: E-wallet is being used in Indonesia widely now. Even though cash is king, it’s not widely used. For those who do not have access to banks, they can use e-wallet in their daily transactions. E-wallet enable customers to make payment and transfer money. Also, credit scoring is key for us and those given by e-wallet can help them access bank funds or loans. E-wallet doesn’t replace banks but it is an extension [of their service]. Banks are our partners. We are not a threat to the banks.

Ungku Norliza: We started as e-wallet [service] and have now more than 10 million customers and more than 500,000 touch points across merchants. What do we do with them? How do we serve the underserved, practice financial inclusion, get them to play within the same arena and more? Boost Life has more than 400 machines and have dispersed more than MYR1 billion of micro SME loans to help small businesses expand. We see almost 50 per cent of this segment didn’t receive financial assistance. So, we use alternative credit scoring based on transactions made.

Final Words
Elderly people in the rural areas and those in the urban areas are very different, and so are their grasp of technology. Aarushi explains how in India, the Uber app launched a very light version for senior citizens without a lot of added features. ‘It basically allows the elderly to key on where do they need to go and [pick up point]. These kinds of small tweaks and adaptations to an app make a person feel comfortable, which players are doing right. In the rural area, governments are working with influencer to make them understand benefits of apps and e-wallet in regional languages, using more pictures and numbers,’ he says.

Digital payments offer significant benefits to all from businesses to the underbanked. Their benefits include cost saving due to efficiency of the system, financial inclusion due to accessibility and greater transparency since the technology enhances traceability. All of which provide bigger economic opportunities, give financial control especially to women and thus, raise standard of living for many. Reports have shown how digital payments have contributed to the increase of women’s economic participation.

‘[Besides], using cash is more expensive. It is riskier. E-wallet is as good as cash and it is faster,’ concludes Chrisma. It is not only convenient but also more inclusive. Basically, digital payment is here to stay.