Is COVID-19 accelerating the cashless push in Malaysia?

Written by || May 07 2020

Malaysia was gradually moving in a cashless direction long before the coronavirus pandemic hit the country, forcing it into lockdown from mid-March until early May. The virus just may have accelerated Malaysia's cashless push though, as people out of necessity opted for contactless payments instead of those involving contact. Now, digital wallets are offering new incentives to consumers and merchants, while policymakers are tightening regulations around the use of cash. Malaysia's cashless vision appears to have gotten an unexpected boost from the pandemic.

Data from several of Malaysia's top digital wallets show that adoption has picked up since the Malaysia government implemented the movement control order (MCO) in mid-March. GrabPay Malaysia's cashless transactions have grown by about 1.7 times since then, the company said. Maybank, the top Malaysian bank, has signed twice up as many users as usual for its MAE e-wallet since the MCO began, according to The Straits Times. On the merchant side, Maybank has waived transaction fees for the time being to boost adoption of contactless payment and added food hawkers to Maybank2u banking platform.

While there are no peer-reviewed studies yet that show a clear correlation between use of cash and increased risk of infection with SARS-CoV-2 (the virus strain that causes the COVID-19 disease), we do know that it spreads by physical contact or being within proximity of infected people. Then it stands to reason that contactless payments could perhaps be safer than using cash.

That shouldn't be the overriding rationale for going cashless though. There are far more important reasons to stay the cashless course than the hygiene benefits. There are significant costs to produce, transport and store cash, as well as safety risks - from armed robberies, not COVID-19. There is also the convenience factor for consumers and merchants.

Yet, none of those factors quite drives cashless momentum like concern about the spread of a deadly pathogen. With that in mind, the COVID-19 pandemic could perhaps serve as a source of sustained momentum for Malaysia to step up development of its digital payments ecosystem.

There is a long way to go. In January, Malaysia's Ministry of Finance (MoF) said that just 5% of daily transactions were cashless. Digital payments infrastructure remains relatively rudimentary, while financial literacy is not high, the MoF said, adding that one in three Malaysians consider themselves to have low financial knowledge.

For cashless payments to become more widespread in Malaysia, “first, e-payment facilities must be widely available, safe and simple to convenient as cash," Finance Minister Lim Guan Eng was quoted as saying by The Malaysian Reserve.