The first question most people would ask, are wireless payments safe? Thanks to numerous rumours and fake news flying around on both social media and chat groups, the adoption has taken a slight pause. It had come to a point where Bank Negara themselves had to issue out a statement that contactless cards are safe to use.
What is the current state of payments now in Malaysia? In the cities, credit cards and debit cards are a little bit more widespread but once you step out, most people still use cash.
For the past year, banks have been trying to get you to change your credit card to the new Pin and Chip version whereby by March 2017, all merchants and stores would have to change how they charge customers using the credit card terminal. What do I mean by that?
Due to the previous way of operating, the credit card terminal has never been in close access to the customer, meaning that it is solely in the domain of the cashier or store operator. They will take the credit card from the customer, key in some magical numbers and then produce a receipt for the customer to sign and voila, the transaction is done.
With the new way of working, customers now don’t sign any more receipts but rather input in their pin. This requires a better placement of the credit card terminal. For those of you well travelled, if you go to places like Australia or in the UK, you would notice that those terminals actually faces the customer for them to insert in their cards themselves.
As a nation, we are in the midst of transitioning to that change in behaviour for both the customer and the cashier. While that is happening, new technologies introduced by the card networks such as VISA and MasterCard as well as technology players such as Apple and Samsung.
VISA and MasterCard introduced similar technologies called VISA Paywave and MasterCard PayPass. Essentially it is a contactless technology which requires you to just present your card near the terminal for it to accept payment. No pin and signing required. It goes through the same security layers and have a certain limit in which you can use this. As VISA is a bit more popular in Malaysia, here are the merchants which currently accepts VISA Paywave at their checkout counters.
If you notice closely, your debit card (ATM card if you have changed it at the bank) might have the VISA Paywave symbol, hence you can use it at these locations as well. I mostly use my debit card to pay for food at the McDonalds drive-through, groceries at Village Grocer or AEON BIG or reload my Starbucks card.
You have probably heard about Apple Pay and Samsung Pay globally as well as the locally launched Maybank Pay and CIMB Pay (which is only available on Android phones with NFC). The war between these players all come down to the handsets they own as well as the facilities the merchants have to accept these sort of payments.
Apple Pay is not in Malaysia yet, the numbers are too small and there aren’t enough iOS users in the market to justify a full scale roll out in the country at this time. The technology is only for Apple’s iPhones and the use of the NFC chip is locked for Apple Pay only. Why did I mention that? The key difference is in the form of Android phones.
Now, on Android devices the NFC technology is open for all, meaning developers could build an application for the phone and then access the NFC technology. This is the case for applications such as Maybank Pay and CIMB Pay. Samsung uses it as well with their Samsung Pay app which uses both NFC and MST (magnetic strip technology). MST is the key differentiator, it basically emits a signal to older POS terminals which uses a magnetic strip of the card to read the card data. What this means is that more and more POS terminals are already compatible and should be able to pick up Samsung Pay transmission.
Human behaviour mostly revolves around habits, our habits include normally taking out our credit card or cash to make payment. Our habit might trigger us to just give the card to the cashier as this has been engraved in our brains for the past 10 years. Now, there needs to be a change and if you want to change habits, you need to change the cue, the routine and introduce a reward. McDonalds Malaysia has done quite well with that, offering a free frozen coke whenever you make a payment using wireless payments. Still that is one merchant only.
Merchants countrywide needs to continually adopt this technology and train their staff to encourage customers to use these new technologies. Most of the time customers are faced with a cashier who insists that their reader doesn’t accept these sort of payment when the terminal itself has the contactless payments logo on it.
To merchants, it is a choice of whether they want to accept customers using cards and contactless payments which in the long run saves them cash and manpower (the cost of handling cash can outweigh the transaction fees imposed by the banks).
Long Term Play
The long term play by the regulators worldwide is to reduce the amount of cash in circulation and move towards a cashless society relying on technology instead. I see the adoption will be dependent on not the large merchants but rather the smaller merchants, those on the streets and those in the market.
For that to happen, changes in technology and the backend need to be done in order to fulfil the needs of these small time traders. Most of them rely on the cash they earn each day for their business as well as for their own livelihoods. If banks and payment gateways take even just 1 day or longer for the cash to be recognised in the trader’s accounts, means that they will have to work around that. Again the usual argument would be, what isn’t broken shouldn’t be changed.
Chicken and egg situation.