EFFECTS OF CASHLESS SOCIETY ON THE ECONOMIC GROWTH IN MALAYSIA

MUHAMMAD NABIL FARHAN BIN AZMUDIN

Labuan International campus, Universiti Malaysia Sabah, Labuan, Malaysia
muhammad_nabil_bg21@iluv.ums.edu.my

ABSTRACT.
Money is an essential means of transaction for any economy. In order to enhance a barter
system, money arises as an intermediary and a store of values. The use of cashless finance
often involves the use of digital currency, plastic without cash, or paper currency. The ability
to regulate economic activity continues to be a significant driver of the development of the
digital economy. The impact of accepting cashless payments on Malaysia's economic
development and growth is closely examined in this study. The amount of electronic money
transactions in Malaysia has dramatically expanded over the past fifteen years due to the
rapid expansion of the digital economy. The use of electronic money is on the upswing. the
rises brought on by society's and the government's growing acceptance of utilising electronic
money. While doing so, In Malaysia, the velocity of paper money tends to decline at this
time. Money supply (M1) has expanded in order to maintain the nation's economic growth
despite a downward trend in money velocity.
Keywords: impact of a cashless society, economic growth, Malaysia
INTRODUCTION.
By allowing non-digital payment methods like checks or digital transfer payments, a cashless
payment would enable the smart country spot community to stop using currency as a form of
exchange for goods and services (Tee and Ong. 2016). In 1990, the use of online
transactions begins to permeate daily life, and at the same time, digital investment boosts
the economy. By 2010, electronic payment methods were widespread and common in many
states, including PayPal usage by businesses affiliated with Apple, contactless cash
separate from digital cards or smartphones, online banking, and digital statements. The
ability to accept digital payments helps us effectively interact with a cashless society. Most
studies (Premchand & Choudhry, 2015) show that theft using cashless payments is rapidly
spreading outside of the world, the residual hard currency flexible. By adopting digital
payment methods, an economy moves closer to a cashless society. A cashless transaction
not only ensures payment because the client would also, but it also boosts income and
improves operational coherence for the company. However, despite all of these benefits
combined with e-payment, lack of ICT knowledge among consumers and security breach
anxiety cause the most agitation among professionals, people, and companies in charge of
information systems (Kamaruzaman, Handrich & Sullivan. 2010). There is a noticeable
slowdown in public sector and government institution adoption of digital payment systems
(Hussein, Mohamed, Rahman Ahlan & Mahmud. 2011).
ASEAN leaders decided in 2003 to establish the ASEAN Economic Community (AEC) by
2020 in order to make ASEAN a safe, prosperous, and fiercely competitive area with
adequate economic development, reduce poverty, and correct socioeconomic imbalances.
As a result of ASEAN's perceived loss of competitiveness against China and India, the goal
date for the AEC has been advanced to 2015. The establishment of the AEC has caused
considerable concerns about economic and financial integration in the ASEAN nations.
ASEAN member nations have a major desire for an integrated payment system as the AEC
gets underway. Under the new system, any individual user outside of ASEAN is competent
to make financial payments without spending a significant amount of money or time using
electronic money, ATMs, or credit cards. In order to profit from a recognised form of
payment, it is also necessary for the region to establish a smooth payment system. One of
the most energising aspects of this will be supporting the use of improved non-cash payment
mechanisms (cashless transactions). In addition to payments made using prepaid, e-money,
and stored value cards, cashless transactions also include those made with credit cards,
debit cards, direct debits, cheques, and direct credit transfers. In ASEAN nations, electronic
money will expand quickly and significantly. The demand for money would rise if more
people started using electronic money.
BATTLE OF THE BRANDS ON CASHLESS PAYMENT IN MALAYSIA.
While the popularity of cashless payments continues to rise throughout the globe, Malaysia
is getting ready to implement a similar strategy that will make Alipay more prevalent in the
retail sector through a number of collaborations. This is in addition to the fact that WeChat
Pay, a formidable rival, can soon enter the market and do so successfully because of the
continued development of its authorization application. WeChat's continued observation of
Malaysian retail is not shocking. Back in 2015, WeChat announced that Malaysia played a
crucial role in the app's retail sales as it decided to change community engagement within
policies for a trademark interaction among customers. After a year, in July 2016, the Global
Web Index (GWI), which examines digital consumer habits and trends, further revealed that
WeChat usage has increased by 60% in Malaysia from 2015. According to Grace Yin, head
of WeChat Pay's worldwide business, in a July interview with Reuters, Malaysia will gain
from early retail sales confronting the legislation that covered mainland China and Hong
Kong. Customers in Malaysia will also be able to use WeChat Pay to link their local bank
information and make purchases in ringgit, the local currency in Malaysia. WeChat app act
forecasting toward cover the way with regard to Chinese digital technology massively
infiltrating the retail business has struck a striking consensus. Due to the current quick pace
of development, many new businesses in the retail sector are acting frantically to prepare for
the effective future of the move toward cashless payments made possible by Alipay and
WeChat Pay. The conical concluded different circumstances such requirement facing
prevailed smoothed out being a sleek evolution of a comprehensive-flagged cashless
payment community, despite various commerce competitor (A+M) criticising toward
accepting the contemporary development.
According to Sean Sim, CEO of McCann Erickson Malaysia, it is imperative that brands or
stores continue to be developed with cashless payment ineffective future in mind. Otherwise,
a business that manages large money activity would be even more stretched. Sim, who has
served as the pivot in China for around ten years as the executive creative director of Ogilvy
& Mather Shanghai, has long been a devoted user of the Alipay and WeChat apps.
However, smaller stores and street vendors would definitely have more trouble assimilating
into the new cashless payment ecosystem. These are the businesses who need quick
access to regular money nearby, especially if they need to pay their suppliers who just
demand regular money. Sim contrasted this by saying he doesn't forecast certain brands or
stores. Despite its size, the populace is hesitant to accept a significant amount of company
decline and is only somewhat accepting of cashless payments.
Sunway Malls and Theme Parks' chief, HC Chan agreed with Sim that such a test would act
with assurance regarding the framework and that it should be attended to. Before embracing
this contemporary type of volume medium, customers must continue to be convinced of the
security of the framework, he added. Another area of consideration is the CAPEX project.
According to Chan, money would be supplied "on the off chance that the money-saving
advantage evaluation focuses towards improved ROI." Chan said that traders' acquiring is
also an expensive problem since costs might rise to a certain level before cashless
payments can become widely accepted. The benefits of cashless instalment are obvious from
a retailer's standpoint because it aims to give a deeper grounded framework along tiny
exchange rate. This suggests fewer occurrences of shoplifting by salespeople or other
employees, and a decreased likelihood of financial loss as a result.
ALIPAY’S GETTING AGGRESSIVE IN MALAYSIA.
Meanwhile, Alipay has also recently expanded into Malaysia through a variety of
partnerships with merchants and banks. In March of this year, it previously collaborated with
Maybank and CIMB through its administrator Ant Financial Services Group. In addition to
enabling Alipay's mobile wallet in Malaysia, the partnership also lets Chinese visitors to pay
for their exchanges in yuan without worrying about currency rates. Brands including
FamilyMart convenience store chain, DiGi Telecommunications, and Genting Malaysia were
leading this initiative alongside CIMB to accept Alipay mobile wallet payments in Malaysia.
With 94% of its 2,100 locations nationwide implementing the new payment system as of
May, 7-Eleven Malaysia also became the first retailer in the country to accept Alipay mobile
wallet payments. Big shot owns the chain of comfort stores. Tan Sri Vincent Tan, who
founded Berjaya Corporation GHL Systems, a provider of payment solutions, also
announced in June that it is enabling more than 100 merchants in Malaysia to accept Alipay
as a form of payment. This will enable the 500 stores that these dealers, including KK Super
Mart and myNEWS. com, now own.
Thanks to its most recent collaboration with Touch 'n Go, which is operated by CIMB Bank,
Alipay made another leap in July. This most recent deal also intends to develop a cashless
payment system for the near future by sending ten million Touch 'n Go cards to clients. Jack
Ma, the creator of both Alibaba and Alipay, has been Malaysia's advanced economy
consultant since just before the year ended. Local digital entrepreneurs and well-informed
professionals applauded the announcement and predicted that the agreement will likely
support the expansion of our computerised economy.
ADVANTAGES OF A CASHLESS ECONOMY.
The ease of managing financial transactions is perhaps the biggest aid in progress.
Moneyless instalments provide a few key advantages that aren't possible with the traditional
method of payment, including high exchange productivity, respectability, protection,
resemblance, sufficiency, accommodation, portability, risk, and low monetary secrecy (J.
Keck. 2011). There are several benefits to a cashless system, including the following:
The ease of carrying out financial transactions: Early on, there was an ease to managing
financial transactions, which is perhaps what sparked computerization the most. There is no
compelling reason to communicate package about trade or continually develops long lineups
at the bank in the cashless instalment. Its demand is easily satisfied by carrying cash with
you when travelling. It wants to take especially helpful action in the case of therapeutic crises
nowadays. Additionally, you may easily pay throughout working hours.
Reduced Cost, Defilement, and Tax Evasion: The strategy will assist combat
debasement/illegal tax avoidance and reduce the risk of money transmission.
Decreased Tax Avoidance: Thirdly, the absence of currency has the benefit of lessened
expense avoidance. Computerized exchanges are also advanced by the continued waiver of
the administrative fee for card exchanges. This has persisted via a progression about the
junction and free presents. People want to get a discount on early purchases that will lower
their costs. Calculate using these impressive financial results, along with discounts provided
by mobile wallets similar to Paytm, as well as efficient benefit focuses and devotion rewards
against the real shop and credit cards, and it keeps assisting you to significantly increase
your revenue.
Diminished Tax: Taxation, in addition to the limited availability of indurate funds located in
mansions and additional banks, the negligible extent of salary concealment and tax
assessment avoidance during additional citizen acts, ultimately results in a negligible
percentage of tax collection when considering the entire country (P. Sparrow. 2016).
Straightforwardness: Not only is it the simplest method to carry out, but it also makes the
financial system, which governs the era of black money, much more transparent.
Decrease costs of land: Additionally, it will lower land prices due to the control over dark
cash because a larger portion of dark cash is invested in land expenses, which drives up the
price of land.
Cleanliness: By eliminating the bacterial progress caused by handling money and notes, it
will also aid in improving cleanliness on site.
Lessened Fear of Theft: It wants to reduce risk, behaves in a way that makes blocking a
charge card or portable wallet easy, but it struggles to get your money back.
Decreased Red Tapes and Bureaucracy: Effective wire exchanges, such as cashless
transactions over digital platforms, are followed, and people behave responsibly, which reduces
defilement and increases benefit time.
Minor Interest Rates: More money in the bank will encourage the distribution of cash in a
strong economy, leading to more liquidity and, ultimately, to lower lending charges (P.
Sparrow. 2016).
Productivity: As time is spent on collecting, checking, and organising cash, it will become
easier, which will result in increased efficacy. Existent desire acts more significantly than
present interest programmes, which include monetary transfers that are directed precisely at
recipients with successful records. Promote it reduces exchange/preparing fees, increases
handling/exchange speed, provides a variety of payment options, and provides clients with
prompt notification of all exchanges.
Track on Spending: If all transactions outweigh the document, it wants to act solely in
consideration of people in order to keep track of how much they are spending.
Advantages toward Banks: It has similar benefits for effective banks and dealers; they
include widespread products and services, advancement and branding, a rise in customer
loyalty, individualised relationships with customers, and simpler documentation and
exchange processes (H. Moses-Ashike. 2011).
CASHLESS TRANSACTION IN MALAYSIA.
The main competition to Alipay, which debuted in Malaysia in June 2017, is WeChat Pay,
which will be available in 2018. Large local banks including PBB, MBB, CIMB, and Genting
have successfully partnered with the cashless system from China (Alipay, for example).
WeChat Pay is destined to be a huge success in terms of digital payments because the
services will be integrated into the WeChat messaging app, which already has a sizable user
base of 20 million users in Malaysia. By contrast, the current Alipay is currently only
available to tourists visiting from China. WeChat Pay is thought to be increasing popularity
and impact, particularly now that Tencent has just eclipsed Facebook in terms of net value
after becoming the first Asian technology company to reach a net worth of USD 500 billion.
This demonstrates how Malaysia, which is influenced by China, is not far from adopting a
cashless society.
In addition, the government is putting in place a digital payment system akin to Alipay and
WeChat Pay to increase our local influence over a cashless economy. For instance,
Sarawak has made a contribution to the local cashless movement by creating its own digital
payment system called Sarawak Pay that enables its citizens to pay for all local government
services. According to the local government, Sarawak Pay will gradually advance to be
integrated with F&B establishments under the control of the Sarawak Economic
Development Department as well as making it possible for this e-wallet system to be
connected with other nearby nations like Indonesia, Thailand, and China.
In Malaysia, the number of e-money transactions increased significantly between 2010 and
2014, from 699 million transactions to 1.1 billion transactions. Figure 1 depicts the steady
growth of e-money transactions in Malaysia from 2010 to 2014. The growth of e-money
transactions in Malaysia, which increased by 15% between 2010 and 2011 and 2011 and
2012, 14% between 2012 and 2013, and 12% between 2013 and 2014, tends to stay
constant. The government's promotion of adopting electronic money and more societal
awareness are two factors contributing to the rise.

Figure 1. E-money in Malaysia

Source: Bank Negara Malaysia Statistics

The graph below illustrates how the GDP, money supply (M1), and money velocity changed
between 2010 and 2014. The expansion of the money supply and the GDP have both had
an impact on the rise of money velocity (M1). Figure 2 demonstrates how the velocity of
money varies year over year and seems to be declining as a trend. Despite an improvement,
Malaysia's money velocity by the end of 2014 had fallen to its lowest point.

Figure 2. GDP, M1, and Velocity of Money Growth in Malaysia

Source: Bank Negara Malaysia Statistics

DISCUSSION.
Every transaction in Malaysia of RM 25,000 or more must be reported to the control bank,
Bank Negara Malaysia, starting on January 1, 2019. This new mechanism is being
implemented in an effort to control any large-scale money transfer that resembles financial
activity in 1997.
A new IOT note will be suggested in this document. With reference to Figure 1, an electronic
currency has, on average, seen consistent growth over the past ten years. However, as
shown by the green curve in Figure 2, the velocity of paper money has decreased
concurrently. Financial institutions have developed an electronic currency that is unrelated to
paper money. When electronic money is used in a cashless transaction, Bank Negara
Malaysia will begin to lose money. As illustrated in Figure 3 [14], an IOT note for several
sessions will be attached to a genuine paper money note in this article. As each IOT note will
be beaded on the paper money stored by the banks, as shown in Figure 4, the control
authority can follow the movement of IOT notes across many transactions. The velocity of
the paper's currency may also be determined from all transactions. It has completed. In its
current form, electronic money has been issued by banks or other financial institutions with
no oversight from the central bank. In this IOT system, the Bank Negara Malaysia will be in
charge of managing the money supply (M1) and the flow of money.
 Figure 3. IOT Notes for Multiple Transaction with Digital Signature from Each Transaction

Figure 4. The IOT Note Will Also Keep Track of The Serial Number Being Used

CONCLUSION.
A cashless economy is one where financial transactions are not governed by real coins or
banknotes but rather by the exchange of digital information between the parties involved in
the transaction. The study finds that such an adaptation of the cashless economy practise
can accelerate the improvement of the nation's financial balance. The community is
becoming more and more concerned about the cashless economy, and there are major
steps the community is taking even before the cashless economy is fully implemented.
The cashless economy will force critical changes for the purpose of a thriving economy, and
the cashless system will be helpful in the fight against corruption and money laundering. One
of the most crucial aspects of the cashless economy is the presumption that the liability
associated with carrying cash would reduce. Armed robberies, thefts, and cash losses will
significantly diminish as a result of increased activity desire to immediately act resolve
electronically and community intention to maintain minimal need to pass along currency. An
IOT note for several sessions that is tied to actual paper money has been suggested in this
study. In a cashless future, the suggested would obliquely give the central bank a way to
regulate the speed and expansion of electronic money.
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