Banking Insight:
The convergence of the four primary forces- mobility, social media, IT cloud models and data/information – is catalysing the digitisation of banking channels, and thus, the implementation of the true “Cashless Society”.
“Cashless Society” concept is where the usage of physical payment methods such as cash and cheques diminish and give way to more cashless mediums such as debit and credit cards, online cards, online credit transfers, mobile payments, banking portals, digital wallets, cryptocurrencies and more.
The Local State Of “Cashless”
Malaysia is currently in the transitioning stage from cash to cashless. An upward trajectory of cashless transactions is influenced by factors such as ease of access to financial services, uptake of cashless payment solutions by merchants, technology and infrastructure readiness, and macroeconomic and cultural aspects.
Moreover, in 2013, Bank Negara Malaysia announced the reduction of fees to a mere 10 sen for all Interbank GIRO or IBG transactions that are performed online via Internet and mobile banking.
For banks and many businesses in the financial sector, a cashless society will substantially lower their costs by removing the need to handle cash on a daily basis.
All of these factors will prove irresistible for all modern banks to invest not just into making analogue processes into digital, but also to innovatively create new processes, products and services to meet the demands of the cashless society.
Technology Spurring The Cashless Journey
Despite the positive signs, Malaysia continues to face certain challenges in growing more cashless payment activities. Some of these challenges include a low rate of credit and debit possession, and a relatively large percentage of informal business sectors that do not naturally fit into the default cashless transaction ecosystem.
In addition, the absence of a proper regulatory and policy framework pose some risks in integrating new cashless mediums and models into the entire monetary landscape.
From a technology standpoint, developing a comprehensive digital strategy requires banks to envision the enablers to support the banking and payment modernisation roadmap based on a sustainable and agile strategy.
Technology is indeed creating opportunities for banks to develop new revenue streams based on a cashless society, but it is imperative that building cashless payment channels does not become just another IT project.
GST Amplifies The Cashless Society Development
In tune with local developments, the impending Goods and Services Tax (GST) to be implemented by 1 April 2015 reinforces the market’s and nation’s move towards a truly cashless society as the imposition of GST requires businesses to capture all their sales accurately.
Moving Forward
The movement towards a more cashless society is proceeding incrementally. All available evidence and trends indicate that it is imperative for banks to play an active role in shaping the future of the “cashless society”, or risk being left behind.
