Mobile Payment Systems in Malaysia: Its Potentials and Consumers' Adoption Strategies

Mobile Payments (M-Payments) Introduction

M-payments are payments made using mobile handsets and other devices, either to directly purchase or to authorise payment for goods and services. Such devices are playing an increasing end evolving role in the wider development of electronic payment systems around Asia Pacific, which includes Malaysia.

Mobile network operators (MNOs) have played an important role in pushing the technology necessary for m-payments. In many cases, however, the early efforts to launch m-payment services were met by suspicion from financial institutions, including banks and card companies. Just a few years later, these stakeholders are now collaborating to trial a range of services including:

~ m-banking
~ m-wallet solutions that store credit or debit card information on a SIM chip
~ pay-as-you go or 'contactless card' technologies
~ text messaging systems that can facilitate or enable payments.

MNOs are approaching m-payments strategically, in their bid to retain customers and develop wider sources of revenue from lines of business which can be strongly complementary. Fixed-mobile convergence is one manifestation of this, as it gives telecom operators an opportunity to unify their payments platforms on an internet protocol basis and offer discounts or loyalty points on m-payments as part of bundled service.

M-Payments As A Channel

The speed with which mobile technologies are being adopted shows no sign of relenting. The number of people using mobile phones overtook the number of fixed line phones. Even people without bank accounts often own mobile phones and have incorporated them into their way of life.

Along with the spread of mobile networks globally, there have been major advances in technology, especially in the 'secure element' aspect of SIM cards. This has made financial institutions in particular feel more comfortable about the potential for adoption of m-payment systems.

While banks are starting to explore opportunities in m-banking, other sectors are also embracing these new technologies. For example:

~ Transportation companies are offering 'touch and pay' access to ticket barriers where a stored-value card is either attached to the handset, or embedded in the SIM
~ Retailers are offering loyalty cards, using similar means of payment, as they seek to reduce the amount of cash they have to handle and carry
~ Credit card companies see mobile handsets as a means to widen their catchment of commercial transactions
~ Advertisers are building web-links into posters in trains and buses and on buildings which can be activated by 3G+ phones from short distance leading to more website visits and more purchases by mobile phone
~ Vending machine operators sell soft drinks and other consumables by enabling payment by phone
~ Content providers, including music and information sites, auction sites and rapidly growing Web 2.0 community sites such as MySpace and YouTube, become globally accessible to paying customers.

These initiatives show that there is not only one comprehensive e-payments marketplace, but rather an increasingly diverse range of ecosystems. Payment platform companies such as PayPal can potentially link the vendors with these different ecosystems - but they can also operate quite independent of each other.

Business Models And The M-Payments Value Chain

There are five types of mobile payments, each driven by different incentives and revenue-earning opportunities. These are business-to-consumer (B2C), business-to-business (B2B), consumer-to-consumer (C2C), person-to-person (P2P) and remittance. These can be further categorised as commercial transactions (B2C, B2B and C2C) and private transactions between individuals (P2P, remittance).

Emerging Business Models

Malaysia's m-payment market has developed more quickly, but less organically than the Thai market. Emerging services have received government support, but uptake in the market has been limited. Existing services are focused predominantly on bill payment and m-banking, growing slowly into m-wallet services, remittance and top-up/transfer offerings.

Maxis and Maybank in Malaysia both provide a simple m-banking service for subscribers (bill payment, balance enquiries, fund transfers), which can also be used to top-up Maxis accounts, download Maxis content and pay for products such as pizzas and movie tickets. Maxis also began international remittance services, but only with Globe subsribers in the Philappines. Maxis customers are changed less than half of what the banks charge for sending money overseas.

Another Maxis competitor, Digi, is providing many of the same services - except that its remittance business is focused on Indonesia and it banking partner is Citi's Global Transaction Services.

An interesting twist on the payment gateway model has been provided by Mobile Money International (MMI), a samll Malaysian company, that focuses on enabling m-transfer functions (limited m-banking or m-wallet services). This is in contrast to the early Korean PG provider focus upon content and downloads - perhaps reflecting the more conservative, less digitally aware make-up of the Malaysian market. MMI's transaction fee is in contrast to the existing bank rate (depending on the merchant size). By 2007, MMI had some 12,000 partner merchants. The largest partner merchant is Tenaga Nasional Berhad (TNB), Malaysia's main energy provider, however, the vast majority of the merchants are small.

There are two possibilities for future development. The first is in the growth of P2P and remittace usage nationally. The second is in the development of content, or value-added, downloads - both of which could dramatically drive these markets.

Industries Perspectives On M-Payments

In recent years, companies from a wide range of sectors have adopted and participated in different tupes of m-payments. The transport industry, for example, is the champion of contactless or'tound-and-pay' solutions, whereas the retail industry has driven m-wallet applications. Each of these types of m-payment have different value chains.

The industries most directly involved in the uptake of m-payments are telecommunications, banking, retail, transpostation, media and entertainment. Different mobile payments business type are being adopted by each industry:

~ Telecommunication: content downloads, top-up and m-wallets.

~ Banking: Mobile banking.

~ Retail: M-wallets, touch-and-pay, remittance and auction.

~ Transportation: Touch-and-pay and m-wallets.

~ Media and entertainment: Content downloads, payment gateways and m-wallets.

* Touch-and-pay = 'Touch-and-Go' (Touch 'n Go) transport smartcards, used for expressway tolls and public transport, are provided by Touch 'n Go Sdn Bhd (formerly known as Rangkaian Segar Sdn Bhd).

Reference:

http://www.neowave.com.my/sellmore/wp-content/uploads/2008/01/mobile-payments-asiapacific-kpmg.pdf