Imagine this. For every purchase you make, you get to accumulate reward points and cashback. That goes for every part of your life that money touches – groceries, food, entertainment and even utility bills!
But savings and rewards are only one aspect of why more and more Malaysians are embracing eWallets.
With close to 50 eWallet providers circulating around at the moment (plus many fizzling out as competition gets fiercer), those who aren’t so familiar might be wondering about the true nature of eWallets.
How do they even work in the first place?
What exactly is an eWallet?
An eWallet is a digital version of a traditional wallet. You store funds in a secure environment by transferring it over from your debit card, credit card or via online banking.
You can then use the funds in your eWallet for anything a traditional wallet might – paying for goods and services, transferring funds to someone else etc.
Why the need for this extra step, you might ask?
Using eWallets allows for a much swifter payment process. Shopping online? Instead of logging in to your online banking account or typing in your card details, all you have to do is pay from your digital wallet.
The same goes for offline shopping. When making a purchase from a merchant, all you need is your phone and you’re set – no scrambling through your handbag or having to worry about having enough cash in your wallet.
In short, the authentication process is simplified drastically while still keeping your funds safe and secure. Not to mention, all the sweet eWallet deals that the provider or merchant will offer as an incentive.
Network-based vs Card-based eWallets
Most Malaysians are familiar with eWallets as mobile applications – Boost, GrabPay and Touch ‘n Go eWallet – all come in this form. These are network-based eWallets.
In most cases, network-based eWallets function on a prepaid basis. Contrary to popular belief, these eWallets are not connected directly to your bank account – hence why funds have to be loaded in before they can be used.
Mobile applications aside, you’ve also got your card-based eWallets, who may partner with credit card networks such as Visa, Mastercard or UnionPay. These include BigPay and AEON wallet among others.
Such eWallets issue physical cards as well, so you can still enjoy swiping and scanning as you would with a debit/credit card.
All eWallets can also be classified further into closed, semi-closed and open, though that’s a topic for another day.
Flowchart of the eWallet process
If you’re wondering how eWallets work and how many parties are involved in every eWallet transaction, ask no more.
Below, we’ve simplified the flow of the eWallet process in Malaysia.
|How eWallets work in Malaysia|
|1- Verify user identity|
|2- User deposits funds|
|3- Funds are stored in a licensed trust account|
|4- User scans merchant’s QR code to pay|
Verify user identity
The user might be asked to provide personal details to verify their identity. These usually include a front and back photo of their IC/Passport and a clear selfie.
User deposits funds
The user deposits funds into their eWallet via credit card, debit card or online banking. They may also choose to set up auto-deduction here.
Funds are stored in a licensed trust account
The funds are deposited into a trust account with a licensed financial institution as per requirement by Bank Negara.
User scans merchant’s QR code to pay
To confirm the transaction, the user will scan the QR code presented by the merchant. For dynamic QR codes, all the user has to do is authenticate the transaction. Static QR codes on the other hand, will require the user to input the transaction amount.
Some eWallets also work the other way round, where the merchant scans the QR code presented by the user.
What’s the eWallet landscape like in Malaysia?
Here in Malaysia, eWallets must meet certain criteria and fulfill specific requirements to obtain licensing by Bank Negara. Click here for the official Guideline on Electronic Money.
Not all eWallets are subject to these requirements though. These requirements don’t extend to “closed eWallets” which operate only within their own company ecosystem (think Starbucks!).
How many eWallets are there in Malaysia now?
As of April 2020, there are 43 non-bank e-money issuers in Malaysia. Among these, GrabPay, Boost and Touch ‘n Go eWallet are among the most popular and enjoy a fair chunk of the market.
You could say it’s a hot and fiery landscape for sure. Most recently in December 2019, we saw Digi’s eWallet vcash throw in the towel.
“How do eWallets work in Malaysia?” is the first addition in our eWallet 101 for Malaysians series. We’ve only just scratched the surface on this topic – keep up with us on our blog here!