Using E-Wallet for Business Process Development: Challenges and Prospects in

Malaysia

Md. Mahmudul Alam *

School of Economics, Finance & Banking
Universiti Utara Malaysia
06010 UUM Sintok, Kedah, Malaysia
Email: [email protected]

Ala Eldin Awawdeh

Department of Management
Emirates College of Technology
Abu Dhabi, United Arab Emirates
Email: [email protected]

Azim Izzuddin Bin Muhamad

Department of Banking and Finance
Faculty of Business and Management
Universiti Teknologi MARA
Kedah, Malaysia
Email: [email protected]

* Corresponding author

Citation Reference:

Alam, M.M., Awawdeh, A., & Muhamad, A. I. (2021). Using E-Wallet for Business Process
Development: Challenges and Prospects in Malaysia. Business Process Management Journal,
27(4), 1142-1162. (online) https://doi.org/10.1108/BPMJ-11-2020-0528

This is a pre-publication copy.

The published article is copyrighted by the publisher of the journal.

20
 Using E-Wallet for Business Process Development: Challenges and Prospects in
Malaysia
Abstract

Purpose: This study aims to explore the challenges and prospects of using e-wallets in
Malaysia, and what it means for businesses and customers. Suggested here are strategies to
leverage the strengths and opportunities as well as overcome the weaknesses and threats.
Suggested here are strategies to leverage the strengths and opportunities as well as overcome
the weaknesses and threats.
Design/methodology/approach: This study analyses the e-wallet phenomenon using a SWOT
(Strengths, Weaknesses, Opportunities, and Threats) analysis to assess Malaysian business
development. It is supported with findings from the literature and secondary data. The relevant
secondary data were collected from Bank Negara Malaysia and the World Bank.
Findings: This study shows that e-wallets in Malaysia have still not achieved their purpose but
there is huge potential to do so. The SWOT analysis identified several strengths (e.g. financial
incorporation, easy to access, protection and safety, simple for other accounts to connect to,
product and consumer service management, quick to implement/administer), weaknesses (e.g.
lack of infrastructure and the ‘tapping’ of devices already cornered by the mobile phone market,
opportunities (e.g. eliminating fraud, better customer service, promotion/loyalty that can be
built into customer experience) and threats (e.g. attacks from viruses, frequent inquiries
whether multiple wallets can be used by clients, the concerns of reckless spending behaviour
of the E-wallet users).
Research implications: This study is crucial for assessing the current situation and the
prospects of e-wallets in Malaysia. This study also offers significant insights for policymakers
and e-wallet service providers to develop appropriate strategies to enhance e-wallet services in
Malaysia.
Originality/value: This paper is the first of its kind to integrate a SWOT analysis and the rapid
development of the e-wallet market in Malaysia. Hence, the findings could broaden our
knowledge on the fintech industry and enable firms to participate in the e-wallet market.

Keyword: Fintech; E-Wallet; Digital payment; Electronic payment; Malaysia

1. Introduction

The modern digital revolution conveyed by ubiquitous internet connectivity and the immense
usage of mobile phones has created huge possibilities for payment systems to grow. One
example is the emergence of sophisticated advanced payment apps, such as E wallets
implemented on cell phones of consumers, provided by the growth of flexible payment
providers that try to suggest more incentives to retailers and consumers, than banks have done
before. (Kazan et al., 2018). The e-wallet is a transaction structure where an internet program
or service permits clients to handle data in a central place linked to acquisitions, affiliation,
loyalty and finance information. It is slightly similar to the physical wallet (Uddin & Akhi,
2014). The e-wallet behaves like a regular one except that the money is digital and the phone
has the e-wallet as an app. All that is required is to put funds into the e-wallet, and most
applications in any case allow users to do so using credit cards, debit cards, or online bank
transfers. Even if there is cash in the e-wallet, it can be used to pay retailers through a range of
methods, including scanning a QR code, "press and pay" through the NFC feature of the
handset, or with the corresponding physical card with certain e-wallets. Many e-wallets make
it possible to send money instantly to friends who specifically use the e-wallet inside the app.

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Cashless transactions have now become extremely popular and the worldwide demand for e-
wallets is constantly increasing (Singh et al., 2020). Research shows that consumers seek a
faster, cost- and time-effective technology for their daily personal financial transactions. For
this reason, the e-wallet is considered an effective way to fulfil this need (Nizam et al., 2019).
Eventually, people all over the world are now making the transition to a conventional payment
gateway to e-wallet technology so that their transactions are faster. The security of this online
wallet is protected by a distinct password and this wallet can be used to buy anything from
small groceries to computers, flight tickets, luxury items online, etc. (Karim et al., 2020).

Jayaseelan (2017) states that payments are not the only thing those e-wallets can handle. They
offer further extended services that are believed to create more value to its users. Some common
features it provides are transfer of funds between individuals, credit card integration and
patented magnetic strip technology. It also provides all the functions of today's wallet on one
convenient smart card which removes the need for multiple cards. With each credit card
purchase, identification is required, and if the card is altered, the card is fitted with a disabling
tool. In addition, it offers a cheaper cost transaction process by removing the requirement for a
middleman. Its efficient transaction processing gives markets the competitive edge for using
this platform. It also opens up a new dimension to the payment systems for large markets and
creates more or better business opportunities. Having all these advantages, consumers are
shifting from traditional cash-based transactions to cashless payments hence producing value
for all. Some of these have been fruitful, while others still fail to resolve the diverse challenges
and prospects personified in the platform business process development models (Cennamo and
Santalo, 2015).

The increased intricacy of frameworks and the requirement for normalization of the
contributions of numerous services, for example, alternative payment platforms suggest that
firms need to build up their skills and business abilities to deal with significantly more mind
boggling projects that incorporate both intangible (services) and tangible (items) perspectives
(Grönroos, 1997). Behind this intricacy, there is a fast advancement of technology, especially
information technology (IT). This is driving the adjustment in business process improvement
and includes the spread and efficiency of information, an emphasis on quality, and
responsiveness, and adaptation to strategic planning, globalization, partnering, outsourcing,
social and ecological accountability, and an adaptable client interface. Hammer and Champy
(1993) characterized business process as “a collection of activities that takes one or more kinds
of input and creates an output that is of value to the customer”. With that in mind, Yaokumah,
Kumah and Okai (2017) argue that it is not easy to completely shift from a cash-based to
cashless mode of payment, since the former is a century-old transaction mechanism that is still
strongly supported. Nonetheless the prospects for the e-wallet remain strong due to the
increased popularity of e-commerce in recent years. Due to technological advances and
people’s increasingly hectic lives, consumers want the convenience of a fast, effective and
effective payment system (Nizam et al., 2019). Research shows that e-payables opt for the
transition from paper-based to e-payment systems, reducing the effort to deal with payable
accounts (Grigg et al, 2014). This ultimately works as a cost-saving mechanism for the
consumers and companies alike. From the business owner’s perspective, another opportunity
the e-payment system creates is future business prospects with existing clients. In this system,
client data are stored in a secured and organised way which can easily be retrieved and used
for further online purchase. This retrieval can be used for future product and service promotion
as well (Chauhan, 2015).

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However, despite having a number of convenient features, there are disadvantages in the e-
wallet payment system. Growth is one of the major issues faced by many-sided platforms such
as e-wallets, generating a critical mass of users and thereby unleashing the possibility for
network influences (Hagiu and Rothman, 2016). Since e-wallets are used as channels in the
wider ecosystem of financial technology (fintech), they are no exception (Kauffman and Ma,
2015; Milian et al., 2019). Niranjanamurthy et al. (2013) also states that the risk of fraud is
huge in the e-wallet system, coupled with stealing, illegal control over someone’s account.
Moreover, the vendors not providing the required service may discourage consumers from
using the e-wallet. So, it is clear that the e-wallet payment system has both good and bad points
as a powerful alternative digital payment system. On the other hand, E-wallets reviews in
Malaysia are scarce, Leong et al, (2021), Loh et al, (2021) and Susanto et al, (2020) all
examined behavioural and usage aspect of the E-wallet customers regarding this new
phenomenon however, there are hardly any studies that focus on this topic from the perspective
business process development. Therefore, this study investigates the challenges and prospects
of using e-wallet in business in Malaysia. Malaysia is an ideal country to research because
fintech adoption in e-payment transactions are still low when compared to other countries. The
Malaysian government started its initiative in developing fintech in 2011. This idea was part
of the 10-year Blueprint Financial Masterplan to transform the country’s financial system into
a high value environment, and help Malaysia become a highly developed country by 2020.
Bank Negara Malaysia (BNM), the central bank of Malaysia, plans to create a cashless nation
by 2020, the key to this being mobile-based payments. However, over the last couple of years,
so far only approximately 40 e-wallet licenses have been approved.

This study will benefit e-wallet users and providers, marketers and policymakers to understand
the important features, prospects and challenges involved, so that they can improve the service
quality of the e-wallet system. The findings will help guide policymakers and e-wallet service
providers to develop appropriate strategies on how e-wallets can flourish in Malaysia.

2. Literature Review

E-wallet is a fintech tool; whereas fintech is defined as a technology utilised in multiple

businesses such as books, transportation, telecommunications and finance-related products
(Wikipedia, 2020). Scholars have generally adapted the definition of fintech defined by
Financial Stability Board in which fintech is described as technology that enhances financial
products and services. This process affects the financial market and traditional financial
institutions regarding their processes, applications, products and services (Navaretti et al.,
2018; Schindler, 2017). Meanwhile, the ever-increasing global demand for paperless payment
systems has turned the mindsets of consumers to consider using e-wallets, and can the advances
being made may change the dynamics e-wallet acceptance significantly (Shekhar et al., 2020).

Fintech is a combination of the terms ‘financial’ and ‘technology’. Scholars have shown that
Information technology (IT) has wielded significant influence on business structures,
performance and business models (Venkatraman, 1994; Venkatraman, 2000). There are 5
levels that have proved to be revolutionary in the business model. Further analysis of the
Business Process Re-engineering or Redesign (BPR) has found of these 5 levels, the first two
levels deal with evolving technology and the next three levels saw this technology become a
significant part of the insurance industry. The evolution of fintech started with fintech 1.0
(1866-1967) which was mainly about developing infrastructure in financial globalisation. Then
fintech 2.0 (1967-2008) began with the first ATM installed by Barclays Bank in 1967 in the
United Kingdom. Following this was fintech 3.0 (2008-current) which focused on fintech start-

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ups (Arner et al., 2015) and currently the world is experiencing fintech innovation 3.5
(Salampasis & Mention, 2018).

2.1 FinTech 1.0 (1866-1967): Analogue to Digital

Fintech 1.0 was the first stage and it covered the period 1866-1967 with the focus being on
global trading. This phase marked the establishment of global interconnections between banks
and financial institutions. Infrastructure such as bridges and railroads were built to make
commerce and trading activities faster and more efficient; it paved the way for what would
happen in the future (Arner et al., 2015; Boamah & Murshid, 2019). During this period the first
trans-Atlantic cable and the first electronic fund transfer system was developed in the United
States in 1866 and 1918, respectively. Furthermore, the famous Diner’s club credit card
emerged in 1950 and it enabled an initially small group of people to start using digital payments
through credit cards.

2.2 FinTech 2.0 (1967-2008): Refinement of Traditional Financial Services

The second stage known as fintech 2.0 covered the years 1967-2008 and during this time the
finance industry refined financial services and features associated with them. The first ATM
was launched in 1967 and the digital finance world began. The world’s first digital stock
exchange for trading activities got started with NASDAQ in 1971. Fintech 2.0 enabled
significant changes from traditional banking systems which turned into digital systems through
the impact of advancing technologies. Many financial services activities now became digital
systems such as stock market exchanges, bankers’ automated clearing house services, payment
systems such as SWIFT, etc. During this period, many other fintech services emerged such as
online banking, mobile payments and PayPal. The internet got underway in the mid-1990s and
e-commerce business models flourished especially in developed countries. At the same time,
regulations on protecting fintech users were established due to the rapid growth of technology
and fintech innovations. During this stage, financial technology received widespread
acceptance throughout many societies, not just certain industries, banks and other financial
institutions. Traditional banking systems were increasingly replaced by fintech innovations in
the form of computerised and digitalised systems (Arner et al., 2015; Boamah & Murshid,
2019).

2.3 FinTech 3.0 (2008 – present): Democratising the Digital World

Stage 3 which is known as fintech 3.0 is generally accepted as beginning in 2008, when the
fintech evolution led to new financial services and products. The global financial crisis of 2008-
9 not only hugely disrupted and nearly destroy the global financial industry but also forced the
developed countries to develop better finance/business models and more secure innovations.
The finance industry now had to become more transparent due to consumers now being much
more cautious about the information and services they received from banks and finance
companies (Palmié et al., 2020). Bitcoin was released in 2009 and Alibaba introduced loans to
SMEs on its e-commerce platform. Digital payments grew rapidly on in multiple platforms
such as Google Wallet, P2P money transfer services and Apple Pay. At the same time,
traditional banks had to deal with the competition generated by new fintech developments.

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2.4 Fintech 3.5: Fintech Innovations

The fintech revolution has led to a series of major and far-reaching changes, and now a plethora
of financial services and products have led to new kinds of interactions in the finance industry
and the consumer market (Salampasis & Mention, 2018). Fintech 3.5 is defined as a fast growth
phenomenon and it targets young people equipped with mobile devices/phones. Consumers’
usage of fintech and the behaviours involved mean that trust and convenience go hand-in-hand
due to the rapid developments in fintech innovations. Many businesses are looking for more
opportunities in fintech start-ups to improve their profits and create a new business model. The
private sector is hugely involved in this process, to diversify and grow business. Scholars
contend that finance-related innovations and sustainable development are understood by
customers because they offer better financial services and products, and legislation or
regulations reflect this reality (see Salampasis & Mention, 2018; Schindler, 2017; Kerényi &
Molnár, 2017).

At the same time, fintech innovations can be categorised into three types, namely, surface
innovation, genuine innovation and foundational innovation. The first level or surface
innovations do not fundamentally change the nature of financial services and products, which
mean the users and providers of services basically remain the same. For the second level of
genuine innovation, new products and services do lead to more significant changes such as the
concept of life insurance. The third level or what is known as foundational innovation marks
the most significant changes, for example completely new infrastructure and other financial
systems that have radically reshaped the finance system (Schindler, 2017).

2.5 The Emergence of E-Wallet

Fintech innovations and fintech starts-up are now very ubiquitous in the world’s developed
market economies (Chiu, 2017), rising from a total value of US$1.2 billion in 2008 to US$22.3
billion in 2015, according to data from Multinational Professional Services Network (KPMG),
2016. The United States became the largest fintech market in the banking/finance system
(Haddad & Hornuf, 2019), but China is closing the gap with the success of Alipay and Yu’E
Bao (Chen, 2016). Venture Scanner (2017) reported that the US invested US$80.4 billion in
fintech start-up innovations in 64 countries which in total involved 1,537 companies at the final
quarter of 2017. In developing countries such as Africa (Kang, 2018), South Korea (Choi et
al., 2020), Kenya (Lashitew et al., 2019), Pakistan (Shaikh et al., 2017), Indonesia (Tan et al.,
2019) and Malaysia (Tun-pin et al., 2019) significant fintech innovations and business
development are now occurring those countries’ financial services industry.

At the same time, the growth in people’s mobile phone bank accounts has reached half the
world’s population and this means in effect 49% of users are connected worldwide (GSMA,
2018). Similarly, continued growth of fintech reached 525 million adult users who adopted
mobile money services in 2017. It is evident that fintech innovations have occurred in both
developed and developing nations. Fintech facilities provide high value financial services in
the global market and offer greater business opportunities. Although fintech has generated
many services and products that are competing, governments are increasingly regulating or
legislating the industry due to the devastating outcomes of the global financial crisis. Fintech-
driven transformations have meant that the traditional business models are now integrated into,
or replaced by, modern banking industry and mobile banking policies and services. Scholars
studied that the impact of digital payment has fundamentally changed the finance industry in
terms of cost efficiency and superior quality (Kerényi & Molnár, 2017; Gomber et al., 2018).

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Fintech mobile phone payments not only make online payments possible but also shopping and
others payment needs that are low cost, and quick and easy to access (Hung & Luo, 2016;
Gomber et al., 2017).

As stated earlier, when developed countries began their fintech revolutions, developing
countries would inevitably be affected. Rapid growth of fintech start-ups and a very high rate
of adoption in digital payments system was evident in Indonesia, according to the Bank
Indonesia’s findings (Tan et al., 2019). Similarly, the fintech innovations in Hungary greatly
changed the finance sector and its services, especially in payments schemes when bank-card
payments and contactless payment transactions were introduced (Boamah & Murshid, 2019).
Digital payments grew from 18.6% of bank card transactions to 19.1% between 2014 and 2015
with a total of 300 million transactions every year according to the Central Bank of Hungary
(Boamah & Murshid, 2019). The banks enjoy a greater advantage in building trust between
themselves and customers due to better security systems compared to others financial
institutions (Zhiming et al., 2013). Fintech may have put pressure on the traditional banking
system but banks can reduce the cost of borrowing and this widens the customer base (Navaretti
et al., 2018). Meanwhile, the impact of fintech payments in Taiwan is noticeable in essentially
two categories, these being point of sales payment and third-party payments which are offered
online, offline and online-to-offline facilities. The Taiwanese legislation known as “The Act
Governing Electronic Payment Institutions” was implemented to supervise third-party payment
institutions with reference to fintech innovations (Hung & Luo, 2016). Clearly, banks have
their own policies regarding business activities that need to take fintech developments into
account, and this could have implications for emerging market economies such as Malaysia.

Fintech innovations on mobile devices such as ATMs and smartphones are now the major
payment methods in southern Asia, and these have been made possible by the fintech
revolution. Furthermore, the adoption of digital payments usage in the past year for developed
countries allocated 44% compare to 12% in developing countries, according to global index
2017 (Hess, 2017). Today, China has become the leader of fintech given that the most
successful digital payments devised in that country are Alipay and Wechat Pay. They offer
services to more than 100 million people despite Paypal still being dominant in global business
(Chen, 2016). Obviously, China has huge potential growth in making digital payments able to
reach a global market. Moreover, it is important to note that security problems that can lead to
account losses or account hijacking among debit cards and bankcards, are much lower in
China’s systems. Aliay’s fraud rate is under 0.01% while that of Wechat Pay is under 0.02%.
These are much lower when compared to the US market.

In Malaysia, Chew et al, (2020) explored the entrance of Chinese-based Alipay's cellphone
payment innovation into Malaysian business sectors. This passageway occurred around mid-
2015 and was first of its sort possessed by owned by a foreign company. The acknowledgment
of such innovation was made conceivable by Bank Negara Malaysia and few other local banks
who considered this to be a chance to connect the business sectors of the two nations. From
that point forward, businesses across the nation acknowledged Alipay shows by showing
notices on wall and door stickers and table cards. This sort of E-wallet was also broadly utilized
by the Chinese travelers visiting in Malaysia which considered local people to effortlessly
acknowledge it thus appealing to their foreign customer’s needs. On the other hand, the public
authority of Malaysia also urges local people to utilize the e-wallet platforms. As referenced
by the Minister of Finance, the Malaysian government gives RM30 subsidy to all Malaysian
individuals reached 18 or above to take an interest in the e-wallets framework. The motivator
was made to urge Malaysian people to take an interest in the e-wallet framework. During a 10-

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month time span from January to October 2019, insights by Central Bank of Malaysia (BNM)
showed that the exchange value for e-cash reached around RM13.9 bln with an exchange
volume of 1.72 billion, outperforming the RM11 billion figure that was recorded for the entire
of 2018 out of 1.92 billion exchanges (Andrew et al., 2019). Therefore, the demand for the e-
wallet framework is expanding to help the Malaysian government program in advancing this
sort of digital money.

The ever increasing global demand for paperless payment systems has changed how consumers
think about the e-wallet (Shekhar et al., 2020; Singh et al., 2020). The origin of the e-wallet
concept was in the mobile phone payment system which is now widely accepted as an
alternative payment method for both consumers and traders. Originally, the barter system was
one in which people exchanged goods for goods but with the passage of time this system was
replaced by paper currencies like the US dollar or British pound (Das Nair & Landani, 2020).
In the 20th century the world of business started employing plastic money like debit and credit
cards which reduced cash-based transactions. The boom in smart phone technology coupled
with the internet revolution means that new forms of payment such as those on mobile phones
make the e-wallet payment platform possible (Teoh et al., 2020). Currently, there are various
types of e-payments that provide real-time and world-wide cashless transaction facilities to
consumers and businesses.

One important aspect of electronic currency is that it has no or vary low production cost.
Banknotes and coins are not produced from precious metals but technically they have their own
cost in terms of manufacturing, although this cost does not equate the quantity of products that
can be purchased with them with its actual value (Assenmacher & Krogstrup, 2018). However,
e-payments have improved the efficiency of financial systems in terms of transaction cost
reduction, liquidity improvement and effective allocation of financial capital. There are,
however, arguments that the adoption of e-payments might have some policy issues from a
central bank’s perspective due to its concerns on how such a payment system should function
(Gupta & Gupta, 2013.). It is further argued that e-payments might destabilise the money
multiplier and decrease the demand for physical money. Using e-money as a means of payment
is likely to build near-substitutes for physical cash that would increase the development of
narrow money or even replace the demand for conventional bank deposits and other liquid
deposits. There is vast literature that worry standard pattern of business process improvement.
For instance, Becker et al. (2011) gives a point by point outline of techniques and instruments
for the cycle plan that compares to different works devoted to process development. On the
other hand, when you take a gander at the literature on E-wallets in Malaysia, Leong et al,
(2021) inspected the aim of utilizing cellphone payment services among Malaysians in
Sarawak district, also Loh et al, (2021) investigated the reasons behind the slow uptake of
mobile payment from a switching intention (SI) perspective while Susanto et al, (2020)
examined the determinants of clients' social aim and genuine use conduct of e-money services
in a transition financial settings in Malaysia. Therefore, most of these studies focus on
behavioural and usage aspect of the E-wallet customers regarding this new phenomenon
however, there are hardly any studies that focus on this topic from the perspective business
process development. Despite the fact that the traditional way to deal with business process
development has its benefits, it sometimes falls short for most of all business conditions,
specifically, it may not be appropriate for the situations with a serious level of dynamism
therefore, this study looks into challenges and prospects of using the E-Wallet as business
process development in Malaysia thus filling the gap in the literature.

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2.6 Process of Using E-Wallet in Business Development

Traditional banks implement payment processing services either online or offline. Payment
services provided by local banks have the highest usage by customers for reasons of
convenience and flexibility. Customers need to register and hold an account for such things as
credit cards or debit cards which are linked to their bank accounts. When transactions are made
by the customers such as a purchase or any other transaction, the merchant will request payment
clarification and information so that the transaction is approved. Such transactions can only be
done through the verification of a local bank in order to transfer the funds to a specified location
such as retail shop, payment merchant and another financial institution. Meanwhile, customers
may make a consistent payment to any financial institution without directly transferring funds
from the users’ pocket, through a simple ‘click’ of a button.

According to Kang (2018), digital payments can be made directly or indirectly to the financial
institutions, made possible by fintech digital payment platforms and payment facilities.
Although users still prefer to use traditional methods of payment in the local banks due to good
security and private information protection services, there is more advantage in using fintech
digital payment systems. Traditional payment services only can be done according to what the
financial institutions state, so their platforms and policies are to some extent limited. For
example, users generally own several cards or accounts for making multiple transactions.
Digital payments allow users to make multiple transactions that are not specific to any financial
institution or dependent on a single platform. Digital payment can be registered with any
financial institution by using technologies that can make numerous transactions independently.
Users can easily make a transaction by selecting any digital payment service provided by a
fintech technology.

The e-wallet is a high-tech, cashless network service that allows users to shop online. As long
as there is a registered account and login name, anyone can use the e-wallet service anytime
and anywhere with a password. All shopping will be delivered to the indicated place and
destination. It can be seen that e-wallet consumers now have access to a fast, convenient, high-
tech, convenient tool, for example global online shopping (Salah Uddin & Yesmin Akhi, 2014).
After completing the specific registration procedure, anyone can deposit money into the e-
wallet account and can activate its functions. The electronic wallet is linked to a person’s bank
account.

3. Research Methodology

This study employs a systemic literature review to assess the literature on e-wallets in Malaysia,
but not much has been published on this important phenomenon. For this reason, the study
examines the e-wallet from the perspective of Malaysian business using a SWOT (Strengths,
Weaknesses, Opportunities, and Threats) analysis. It is based on what the available literature
and secondary data have reported. The relevant secondary data were collected from Bank
Negara Malaysia and the World Bank. SWOT analysis is a valuable method for helping
managers define operational and environmental variables, so that strategic plans can be put in
place to determine the appraisal of an enterprise, a strategy, or a business operation. SWOT
analysis is an easy but effective method to exploit the resource capabilities and vulnerabilities
of an enterprise, its business prospects and external risks that could occur in the future.

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4. Analysis

4.1 Current E-Wallet Usage in Malaysia

Fintech institutions have financial services that are combined with recent or the latest
technology. A breakdown of fintech players’ operations shows that payments and e-wallet
segments play an important role in Malaysia’s fintech, amounting to 20% and 19%,
respectively. Other players are Regtech (6%), Insurtech (8%) while the other lending, wealth-
tech, blockchain and remittance systems amount to 7% (Figure 1). It can be stated here that the
e-wallet has emerged as an important tool in fintech.

Islamic Fintech
3%

Proptech Payments
3% 20%
Remittance
7%

Blockchain
7%
e-Wallet
Wealthtech 19%
7%

Lending Regtech
7% 6%

Crowdfunding Insurtech
6% AI/Big Data Marketplace 8%
4% 3%

Figure 1: Breakdown Fintech Players in Malaysia

Sources: Fintech Malaysia, 2019

Due to the rapid growth of e-wallet systems in Malaysia, there are in total 48 non-bank e-money
issuers listed under Bank Negara Malaysia (Bank Negara Malaysia, 2011) and they occupy
19% of the fintech industry according to a report in Fintech News Malaysia (2020). The e-
wallet start-up market has become a crucial aspect of the Malaysian economy. The Central
Bank of Malaysia formulated a Financial Sector Masterplan (FSMP) in 2001 to guide and help
in the financial development of the country. The transformation of the finance sector since then
has played as important role in supporting local economic growth. To exploit this potential, the
government put in place some policy measures to boost public awareness of the cashless
transaction system and its advantages. For example, the Bank Negara Malaysia reduced the
fees involved in instant e-payment by as much as RM5,000, and also increase the cheque-
related processing fees (Bank Negara Malaysia, 2011). Moreover, the government allocated a
RM30 payment to e-wallet users out of the national budget for 2020 to boost e-wallet use (Teoh
et al., 2020). It should be noted that the Financial Sector Blueprint aim is to transform Malaysia
into a high income and developed country by 2020 which is set out to increase the digital
payment transactions from RM22 to RM200 per capita. This represents a big motivation to
develop e-wallet use throughout the country. The e-wallet provides consumers with a fast,

20
convenient, high-tech, convenient method that can utilised anytime, anywhere, especially given
the upsurge in global online shopping.

The fintech revolution’s rapid growth has triggered a raft of government legislation and
regulations to protect customers’ data and financial information disclosure issues. Malaysia
Securities Commission (SC) started supporting the development of fintech in Malaysia in 2014,
so that it became the first Asian country to establish a regulatory framework on financial
services and products (Tajudin & Musa, 2018). Local governments in Malaysia not only focus
on the booming financial development in their areas, but also on how to protect the interests of
consumers to ensure the healthy and transparent functioning of the finance industry. All e-
wallet vendors must be licensed to do so according to the BNM and SC guidelines. According
to Bank Negara Malaysia1, there are 48 non-bank e-money issuers listed under Bank Negara
Malaysia. The major Malaysian e-wallet merchants are summarised in Table 1 below.

Table 1: E-wallet Types and Mechanisms in Malaysia

E-wallet Backed up By Usages Merchants

Boost Axizta Group 140,000 touch points covered in stores Watson, Tealive,
in Malaysia, accepting UnionPay Cards, Giant, KK Super
Pay DBKL’s car park and Astro, Mart
Syabas and Telekom bills
GrabPay Grab Used to purchase food, shopping, KFC, Legoland,
paying for taxi rides, allow mobile Boost, Jaya Grocer,
phone credits to be topped up, pay Family Mart
Celcom, Digi, Maxis, U Mobile and
TuneTalk, allow Maybank customers
cross-platform use.
Touch’n Go Alipay, Touch’n Covers 150,000 merchants nationwide, Mydin, Tesco,
e-Wallet Go pay tolls, purchase items on Apple Giant, Diamond,
Store and iTunes, pay for street parking, Laza, Watson,
taxi rides and food delivery services, Converse
bus tickets, KLIA Express and KLIA
Transit tickets
Razer Pay Razer Inc 1,000 online merchants participate with Starbucks, F.O.S,
Ambank, Banks Islam, CIMB, Hong KK Super Mart,
Leong Bank, Maybank, Public Bank, Burger King, 7-
purchasing games eleven, Fashion
Valet, JD Sports
Wechat Pay Tencent Group Enable local currencies to be paid KK super Mart
outside of China, participate with
Ambank, Hong Leong Bank, iPay88,
MOL, Revenue Monster, KK Super
Mart, purchase bus tickets, withdraw
money
MAE Maybank Available to 200,000 merchants, Jaya Grocer, Aeon,
purchase movie tickets TGV Cinema,
Krispy Kreme,

Source: BNM, 2018

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 Watson, Mydin,
McDonald’s,
Franciso Coffee
BigPay 70% AirAsia In tandem with physical MasterCard, Accepted 40 million
online purchase, withdrawing funds merchants
from ATMs worldwide except
North Korea and
Israel

Sources: Muslimin, 2020

Although digital payment channels are still in the early development stage, this scenario is
changing gradually. According to the banks’ perspective, payment services are the biggest
concern of customers. Therefore, fintech is crucial and the most challenging aspect is to make
it more efficient and exciting. Most e-wallet companies in Malaysia are still offering various
freebies and cashbacks to customers because in Malaysia 92.5% of the payments are still cash
based. However, e-payments are increasing at 9% annually thanks to different reward-based
initiatives (Nizam et al., 2019). The market’s top e-wallets like Touch'n Go, Grab and Boost
have now had millions of downloads. Figure 2 depicts the top e-wallet rankings in Malaysia,
where the first choice of Malaysians is GrabPay which is followed by Touch n’Go and Boost.
The time period covers mid-2018 until the third quarter of 2019.

Figure 2: E-Wallets’ Ranking in Malaysia

Sources: Chew, 2019

Looking at the profiles of Malaysian e-wallet users, it shows that in the 25-34 age group, e-
wallets are more widely utilized with a solid proportion of e-wallet users even in the 35-44 age
group at 25 percent (Figure 3). It is also clear that the use of e-wallets is more widespread
among those who are in PMEB (Professionals, Managers, Executives and Businessmen)
positions, because they might be more aware of technological trends and are able to take
advantage of using e-wallets. It is also noticeable that the e-wallet users have marginally higher
income than non-e-wallet users.

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 Figure 3: E-wallet Users Profile in Malasyia
Source: OPPOTUS, 2019

4.2 SWOT Analysis for Using E-Wallet in Business Scenarios

SWOT analysis is a technique for assessing four aspects – Strengths, Weaknesses,

Opportunities, and Threats. Table 2 summarises these four themes for using e-wallet in
Malaysian business scenarios.

Table 2: SWOT Analysis Matrix

Strengths Weaknesses
• Financial consolidation of accounts. • Lack of infrastructure.
• Easy to access. • Already cornered by the mobile
• Protection and safety. phone market
• Simple for other accounts to connect • Users need an electronic wallet to
to. have a charged device to operate
• Product and consumer service it.
management. • Depends on the services made
• Quick to implement/administer. available by e-wallet providers
Opportunities Threats
• Stop fraud. • Attacks by software viruses.
• At the point of sale, it will offer better • Questions arise whether multiple
customer service. e-wallets can be used by clients.
• Promotion/loyalty can be built into the • the concerns of reckless spending
experience. behaviour of the E-wallet users
• Make shopping easier

Strengths: There are certain strengths in the consolidation of accounts, and it is easy to access
the apps and payment platforms. One ‘click touch’ on our phones can result in a transaction
between a seller and customer. The most important thing is the protection and safety of the data

20
and a customer’s privacy. All online platforms now have a strong security and protection
system to secure consumers’ data. This technology makes it simple to access other account and
for that reason customer service and product management must operate at their best at all times.
Over the past few years, mobile wallets have become more popular and can be used at most
stores that accept cards as a payment option. While there are still some sites that use older
processing systems that restrict access to some goods or facilities, the number of stores offering
access to purchases in this way continues to grow every year.

Weaknesses: Weaknesses of the e-wallet include lack of infrastructure whereby not all places
or neighbourhoods can use it, so they would rather use cash then use this mobile app. This will
not be convenient for those people who already and every day employ the e-wallet for
transactions. Although an electronic wallet allows more flexibility for certain users, it does not
totally remove the need to bring anything with them. If they do not have an individual to engage
with on their mobile account, then they cannot complete a transaction. For that reason,
customers are required to take a typical wallet or purse with them everywhere because these
wallets do not store their ID or other important items. Another weakness is that individuals are
already part of the mobile phone market, and for e-wallets to work they must upgrade their
phones all the time. If they fail to do this, then customers will face problems with the app on
their phone. Moreover, it still requires an internet connection and a type of mobile phone that
can support the e-wallet app (De Luna et al., 2019). Another drawback is that users always
require a charging device on them so that the electronic wallet can operate. Users do not need
to worry about how much battery life is left on their phone when they carry a traditional wallet.

Opportunities: Regarding opportunities, this technology makes it possible to improve customer

service when the sales are carried out efficiently. Providers or vendors of e-wallets can gain
the trust of customers when customer service is good. More than that, they can enhance the
loyalty of the customer and vendor to the app. Rather than cash or cheque, electronic wallets
offer incentives to encourage consumers to think that for certain purchases, they are better for
such things as fuel, food, or travel, or discounts. Some companies may also work with their e-
wallet platforms to offer specific discounts. So without changing their spending habits, users
have the potential to save money. They can help manage people’s spending patterns according
to the desired electronic wallet. Some can produce reports that display particular spending
categories for them. To guarantee that they do not spend more than they should, they can even
delegate a budget to a particular product or service. However, if they have an expensive item
to buy, they should be able to disable this transaction, so that they have enough cash to make
that purchase and only at that price.

Threats: Technology is at the mercy of cyber security issues such as cyber-attacks. e-wallet can
put an end to fraud or other people’s attempts to steal a user’s data and then sell it to a third
party. Moreover, e-wallet has two kinds of threats attached to it. First, someone’s smartphone
or mobile device's security depends on the settings that person chooses. If users do not have a
password protecting the device, someone might steal their device and access the money from
the bank account or credit card. There are definite security benefits that make an e-wallet a
useful technology, although to maximise them, it requires responsible management of it. There
is also the great risk of being attacked by software viruses which can disable apps. Second, this
type of technology can cause reckless spending behaviour by users, and simply encourages
some individuals to struggle with their spending patterns; when money is electronically-based
instead of a physical object then a person lacks a sense of its real worth. If they are still
struggling with a traditional wallet to sustain a budget, then an electronic wallet could make

20
the problem worse. Lastly, it is an issue whether several wallets can be used by one client, and
this is a threat that has not yet been answered.

4.3 Prospect of Adopting E-Wallet in Malaysia

It can be stated that the e-wallet has significant prospects in Malaysia. In a cashless
environment people can pay bills with their e-wallet rather than paper currency, which can
lower the cost of paper currency management. There is no need to print money and hence, this
can reduce the circulation of paper currency in many places through banks and ATMs.
Therefore, all expenses of paper currency management can be avoided by switching from a
cash-driven economy to a cashless economy. Moreover, transaction hours can be shortened
because in a cashless environment transaction can be done with only a few clicks. Also, a
company can develop new products that meet the preferences of customers based on their data-
driven consumption patterns and preferences. This reduces the time required for investigating
consumers’ preferences significantly.

According to the BNM, the usage of e-money has witnessed a huge increase from 921.8 million
with a total value of RM3.4 billion for 2012, to 2,093.7 million with a total value of RM18.2
billion for 2019. At the same time, according to the Bank Negara Malaysia, the finance industry
has contributed an average growth of 7.3% annually of real GDP. This is expected to increase
to 10-12% in 2020. Although Malaysians still generally rely on cash-based facilities and
transactions, e-money has grown substantially over the last 10 years and will continue well into
the future.

Table 3: Payment Instruments in Malaysia

Mil/RM bil 2012 2013 2014 2015 2016 2017 2018 2019
Volume 325.3 332.4 345.7 359.6 383.8 406.5 447.1 510.1
Credit card Value 94.1 99.7 105.5 112.7 118.5 125.6 135.2 143.8
Volume 4.1 4.0 4.4 4.2 4.1 4.7 5.2 6.2
Charge card
Value 6.5 7.2 8.6 8.9 9.7 11.0 12.5 13.1
Volume 36.0 49.4 68.7 89.7 107.6 162.2 245.7 371.0
Debit card Value 8.6 11.5 14.8 19.8 22.6 29.8 40.3 52.4
Volume 921.8 1,046.7 1,175.0 1,384.7 1,663.2 1,861.7 1,920.4 2,093.7
E-money Value 3.4 3.9 5.3 6.0 7.7 9.1 11.0 18.2

Sources: Bank Negara Malaysia, 2020

Moreover, Malaysia has experienced relatively steady GDP growth from 2012 to 2018 (Figure
4). Economic progress has enabled people to enhance their purchasing power and thus their
consumption of goods and services. In a cashless economy, the willingness to purchase plays
an important role and its increase can push up the ownership of e-wallets. Economic progress
might encourage the government to increase investment in infrastructure related to electronic
transactions. As digitalisation creates a financial revolution, the promotion of e-wallets will
provide enormous opportunities for Malaysia to expand its economy.

20
 6.50%

6.00%

5.50%

5.00%

4.50%

4.00%
2012 2013 2014 2015 2016 2017 2018

Figure 4: Annual GDP growth Rate in Malaysia

Source: World Bank, 2018

According to the World Bank, a survey it conducted on fintech adoption every 3 years, found
that Malaysia’s mobile phone account holders rose every year from 2014 to 2017 (Figure 5).
Most holders are the young adults, aged 15 to 24, who are followed by those in the workforce
group, who are also male and on high incomes group. All types of mobile phone account
holders have grown by more than 300% in the last 3 years. Consequently, there is much
opportunity for fintech and the e-wallet industry to develop in Malaysia.

Rural, age 15+

Income, richest 60%, age 15+
Income, poorest 40%, age 15+
Secondary education or less, 15+
Primary education or less, age 15+
Older adults, age 25+
Young adults , age 15-24
Female, age 15+
Out of labor force, age 15+
In labor force, age 15+
Male, age 15+
Age 15+

0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

2017 2014

Figure 5: Malaysia’s Mobile Account Holders in 2014 and 2017

Source: World Bank, 2018

Another big prospect for the Malaysian e-wallet lies in the country’s increasing population.
Malaysia’s current population is 32.6 million but the growth rate is very high (Table 4). An
increase in the population creates more demands. At the same time, Malaysia is transforming
into a digital state and the numbers of smartphone and internet users have risen every year since
2012. This is expected to propel the use and acceptance of e-wallets in the future.

Table 4: Population Growth, Smartphone Users and Handphone-Internet Users in Malaysia

2012 2013 2014 2015 2016 2017 2018

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 Population (million) 29.07 29.47 29.87 30.27 30.68 31.11 31.53
Smartphone users
(% of total phone 26 37.4 53.4 52.3 68.7 75.9 78
users)
Internet users in
smartphone (% of 68.8 78.5 90.1 92.4 94.8 94.6
smartphone users)

Source: World Bank, 2018

5. Discussion

The consumer market in Malaysia is changing and in a context where the economy is becoming
an increasingly e-commerce-type system. It was noted by the United Nations that the majority
of consumers in Malaysia - 29.6% under the age of 15, 65.4% between 15-64 years old, and 5%
above 65 years of age – are still using cash for their transactions (Nizam, Hwang & Valaei,
2019). Issues of why Malaysians have not adopted the e-wallet opens up the opportunity to
develop it so that it is more user-friendly and acceptable.

Despite the prospects for developing the e-wallet in Malaysia having much potential, it is
observed that the use of e-wallet is still insignificant due to its technology-based functionalities.
A mix of educated or less educated people in Malaysia fail to understand the functionalities of
the e-wallet and other electronic payment systems. For this reason, they tend to avoid using
this platform. Users cannot fully understand and accept the complex process of electronic
payments. Due to their lack of adequate knowledge on how to use electronic payment gateways,
they are vulnerable to fraud and theft. In Malaysia the dynamics of using credit cards has
changed with the increased use of smartphones and the internet. This has fostered the
development of the e-wallet. However, the existing Information Technology (IT) infrastructure
is not adequate to satisfy the bulk demand that is anticipated to occur in the future. Studies
show that the lack of a trusted infrastructure may explain the low rate of cashless payments,
which currently accounts for just 5% of total daily payments in Malaysia, despite the
technology-driven initiatives of the last two decades (Povera, 2020). Ensuring the network’s
security is critical to the success of a cashless payment system and electronic wallets are the
vital components which do run the risk of hacking and other cyber-crimes. This risk factor is a
serious one and discourages many people from adopting it. When all financial transactions
depend on technology then the risk is magnified.

Although fintech has created new business opportunities and transmission of financial
information from country to country, the products and services provided by fintech can be
challenging to businesses and how they develop. Hence, Bank Negara Malaysia (BNM) and
Securities Commission (SC) together ensured that Regtech made efforts to protect consumers
and financial institutions. Regtech consists of a group of companies that help businesses to
comply with regulations properly and less expensively by using cloud-based technology. BNM
and SC have played an important role in Regtech to guide the application programming
technology (API) requirements and guidelines (Figure 6). Meanwhile, BNM launched the
electronic Know-Your-Customer in June 2020 to reduce the need for human intervention.

20
 •BNM issues policy document for open Application Programming Techology (API)
Open API

•SC and BNM working to bring Initial Currency Offering (ICO)s under securities law
ICO/Digit
al Assset

Virtual •BN Govenor announces that Malsysia will be issuing virtual banking licenses
Banking

•BNM introduces electronic Know-Your-Customer (e-KYC) guidelines for money transfers,

E-KYC following similar guidelines for remittances in June 2020

Figure 6: Fintech and Regulatory in Malaysia

Source: Fintech News Malaysia, 2020

There are two issues that reveal the most important weaknesses for a robust e-wallet market in
Malaysia. First, as a developing nation, the majority of the population are not on good incomes
or have a high level of education. There is consequently a lack of awareness among them about
the benefits and threats of using e-wallets; this is why the growth of the e-wallet market is slow.
Raising awareness will require nationwide financial and technological literacy programs
focusing on the use and benefits of e-wallets. Secondly, Malaysia is a large country consisting
of 2 large islands divided into several states. This has caused the uneven distribution of
infrastructure and communication facilities that are not yet available in all parts of the country.
This has become a huge challenge for the government and its ability to ensure the equitable
development of infrastructure and communication facilities in all places. When adequate
infrastructure and communication facilities are in place, it will be easier for economic
transactions to be carried out using the e-wallet.

Although the e-wallet creates many challenges in legislation, regulations and traditional
business models, it has important multifunctional uses that will benefit economic and
financial services in Malaysia. If Malaysia can implement extensive e-wallet services, then
the e-wallet can play vital role in monitoring public sector or administration irregularities such
as scams, fraud and theft. This will contribute to strengthened and enforced government
policies throughout the country and the beneficiaries will be those who use e-wallets. Besides,
cashless transactions could greatly reduce crimes like bank robberies and muggings. Frauds
that do occur with an e-wallet will still be recorded and the event can be tracked down and
punished, which is generally not possible in a paper currency transaction case. Moreover, from
the public revenue earning perspective, the e-wallet has great potential to generate income tax
revenue. Due to the digital transaction system, all financial transactions will be recorded
properly and widespread tax avoidance will be averted to some extent. The transparency of
economic affairs will prevent the ‘black economy’ from operating or starting up.

6. Conclusion

The e-wallet is a system that enables and informs individuals about the advantages of digital
transactions in their daily lives. All financial transactions, if carried out electronically, will lead
to a more transparent and accountable culture, from a person's salary to mobile phone

20
recharging. It may not be possible to switch from existing payment methods to fully cashless
payment methods in the near future, but rapid advances in digital payment mechanisms will
certainly improve societal access to cashless payments. Meanwhile the implementation of one
method of cashless payment will impact on another form of cashless payment and eventually
it will bring about a significant change. Therefore, this study examines the prospects and
challenges of using the e-wallet in Malaysia. This study shows that Malaysia has very good
prospects for using the e-wallet payment system but there are some issues. These include
having adequate infrastructure, complexity of using e-wallet, cyber security, privacy risk and
fintech regulations – all issues which need to be resolved in order to exploit this emerging
technology. The SWOT analysis identified several strengths, weaknesses, opportunities and
threats related to e-wallets in business development in Malaysia. It is recognised that the
acceptance rate of this structure is still low.

Currently, entrepreneurs should pay attention to what enhances e-wallet services, especially
with reference to what customers want or need in their e-wallet. Financial services should boost
the speed and convenience of purchases in order to maximise market appeal. In this way they
will have the ability to compete in the market. Though this study will play an important role
for policymakers and e-wallet service providers to develop appropriate strategies to enhance e-
wallet services in Malaysia, it has some limitations. This study only focused on a SWOT
analysis which does not indicate how to achieve competitive advantage or efficiency.
Therefore, to draw more substantive conclusions, future research can focus on the variations
between gender and ethnicity when it comes to the acceptance of e-wallets, and how cyber
security or privacy protection issues are perceived. Similarly, studies also need to check what
the issuers or vendors of e-wallets consider to be important.

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Author’s Biography:

Dr. Md. Mahmudul Alam is an Associate Professor at Universiti Utara Malaysia and an
Associate Fellow at University Technology MARA (Malaysia). He is a certified Financial
Planner and certified Expert in Climate Adaptation Finance. He was awarded the AFFP
Research Fellowship from FS-UNEP Centre (Germany) and recognized by the BDRC (USA)
as one of the “Top Bangladesh Development Researchers of the Millennium”. He obtained his
PhD and Master’s degrees from the National University of Malaysia. To date he has published
more than 150 journal articles and presented more than 100 articles at conferences. His research
areas include sustainable finance, sustainable development, ecological economics, financial
economics, fintech, and Islamic finance and economics.

Dr. Ala Eldin Awawdeh is currently working as Assistant Professor in the Department of
Management at Emirates College of Technology, UAE. He has earned his PhD from the
Faculty of Economic Sciences and Management, University of Pisa, Italy. He obtained his
Master’s degree from the Faculty of Economic Sciences and Management, University of Pisa,
Italy, and Bachelor degree from the Faculty of Economic Sciences and Management,
University of Mutah, Jordan. He has experiences of teaching at University of Alain (UAE),
Khawarizmi International College (UAE) and Toledo College (Jordan). His research interest is
business management and development.

Mr Azim Izzuddin Bin Muhamad is a senior lecturer of Finance at Universiti Teknologi

MARA Malaysia. He obtained his Master’s degrees in Finance from Universiti Teknologi
MARA Malaysia. His research areas include entrepreneurial finance, portfolio management,
sustainable business, sustainable development, and agro business.

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