According to a 2022 Visa study, so many Malaysians have adopted cashless payments that we could see a cashless Malaysia by 2025. However, is Malaysia truly ready to be a cashless society? Personally, I am not so sure.
The COVID-19 pandemic and subsequent lockdowns propelled cashless transactions into the limelight. For example, Bank Negara Malaysia tracked the use of cashless transactions in Malaysia and saw elevated use in 2020; which only continued to rise ever since.
Is Malaysia ready for a cashless society?
Definitely not. I would dare say that we are far from it.
According to the 2023 Global Payments Report, the popularity of cash is without a doubt declining; but its drop in usage is slowly leveling out. The 2022 Digital Payments Insights Study also serves to highlight the continued dominance of cash in the Malaysian market, with 78 percent of Malaysians saying they prefer cash to other payment options and 48 percent saying they use it on a daily basis. Cash is certainly losing ground to digital transactions, but not nearly at a rate fast enough that we could achieve cashlessness by 2025.
Add to this the fact that service disruptions are a very real problem that Malaysians face when using eWallets. For example, Touch n’ Go eWallet faced some service disruption earlier this year, leaving many unable to top-up their RFID tags or make purchases with the app.
While I would be happy to embrace the sci-fi future and use purely digital payments, I would also like to avoid being unable to pay for my lunch due to reasons outside my control.
Additionally, while many places are ready and willing to accept digital payments (including some pop-up street vendors even), some places that you might assume to accept cashless payments actually do not. Case in point, you can still only get a My50 travel pass using cash.
Lessons we can learn from other countries
You might think that I would be in the minority, but I am not. Finland, which is poised to transition to a cashless society, is in no hurry to phase out cash entirely. A study conducted by IRO Research revealed that many Finns view cash as a source of security with some even believing that it made their daily challenges easier.
Our neighbour Singapore, which has the highest cashless adoption rate in Southeast Asia at 97 percent, has faced several major digital banking outages in 2023. Many were left stranded at petrol stations, car parks and even having to abandon their shopping carts in stores as customers did not have cash to pay for services and products.
Our other Asian neighbours are also grappling with the same dilemma. A survey by U.S.-based banking and payment processing company FIS revealed that Thailand, Japan and Vietnam are lagging behind in the adoption of cashless payments. The survey highlighted the high rates of unbanked consumers in Thailand as one reason why cashless payments have not made inroads. Surprisingly, cash is still king in Japan with a high percentage of aging population. Among the reasons include high credit card fees which discourage merchants from accepting cashless payments.
Danger of widening social and economic inequality
Simply jumping straight into a cashless society in a few years is going to cause problems, primarily among those who still see cash as a valuable form of payment.
What will happen to those who have trouble learning to use digital apps? What will happen to the 55% of Malaysians who are underbanked or the 8% who remain completely unbanked. These are some of the issues that should be addressed first before we even think about transitioning into a cashless society.
Going cashless can widen social and economic inequality as the prerequisite for making digital payments is owning a smartphone. The urban population may not see this as an issue, but it applies substantial pressure on B40 families who would need multiple devices for their children.
In many Asian countries, going 100 percent cashless may simply be not on the cards. Limitations in infrastructure, digital literacy and access to technology still pose a barrier to wider adoption of cashless payments in many Asian countries. There have been many voices promoting the advantages of going cashless but the disadvantages are often overlooked.
With the growing threat of online scams, personal data security and the potential for data breaches are top concerns. Access to smartphones, card readers, or other digital payment devices can be severely limited outside of urban cities. As the Singapore example earlier highlighted, ensuring a stable and reliable internet connection and power supply are not a given even in a developed nation.
