Report: Mobile payments not a major threat to Malaysian banking system -- yet
A new report from Malaysia's RAM Rating service says the growing popularity of mobile payment platforms is not seen as a significant threat to the country's banks for the time being.
RAM Ratings co-head of financial institution ratings Wong Yin Ching said such a mode of payment in the country is unlikely to become as broadly based as it is in China in the near future. She added this is due to the wider availability of other more established electronic payment methods, such as credit and debit cards.
Sophia Lee, one of the co-heads of financial institution ratings at RAM, added that even if increased payment volume via mobile wallets reduces credit card transactions, the fee income earned from card transactions only accounts for a minor proportion of Malaysian banks’ total revenue.
A few mobile wallet providers have moved into sectors like lending, but the RAM report found that loan amounts are comparatively low and borrowers are usually small merchants and entrepreneurs and are not typically the types of clients pursued by banks.
However, RAM does recognise that mobile payment is growing rapidly around the globe, with China the world's leader and varying levels of adoption were seen in other countries. RAM also points out that mobile payment is still budding in Malaysia but that market competition is intense as the country's central bank, the Bank Negara, has granted licences to 48 non-bank e-money issuers.
The central bank’s stated policy is to promote mobile payment as part of a drive to build a cashless society, as detailed in the Financial Sector Blueprint 2011-2020. Commenting on the blueprint, Wong said, “It comprises a three-wave cashless transformation. The first wave had involved the displacement of cheques with electronic fund transfers (EFTs) and had met with considerable success.
“However, it remains to be seen for the second wave, which entails the displacement of cash with debit cards as debit card usage, while growing, has remained comparatively low." Mobile wallet payments reached RM1.3 billion in 2018, a small fraction of overall spending.
To change that, the central bank has introduced the Interoperable Credit Transfer Framework (ICTF), under which all eligible mobile payment players would have to operate on a shared payment network known as the Real-time Retail Payments Platform (RPP) once they have reached a certain size.
Lee predicts the RPP to be an enormous driver of mobile wallet use, since users will have a single wallet that pays various mobile payment players operating via the RPP. That said, Wong did note that many mobile payment players are still loss-making as some do not charge merchants any payment processing fee at the outset. “Operating costs are also eye-watering for many players, who have to contend with outflows such as IT-related expenses and marketing expenditure to promote adoption."
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