E-wallets are becoming increasingly popular in Malaysia with Bank Negara having issued over 40 e-wallet licenses so far. As the country heads towards being a cashless nation by 2020, mobile based payments are cropping up at almost every retail store, F&B outlets, supermarkets, and even fruit stalls along the roadside!
It is difficult to shop without coming across at least one e-wallet option being advertised when you pay for your purchases at the cashier. There is almost no need for cash or cards, as your smartphone easily does almost everything. But like all financial products, these e-wallets come with their own benefits and drawbacks.
Pros of using an e-wallet:
Can be a budgeting aid
If all transactions are on record, it will be very easy for people to keep track of their spending which will result in better budgeting. It will also help while filing tax returns and in case of any inspection by authorities, people will find it easy to explain their expenditures. Various apps and tools available in the e-wallet can help people analyse their spending patterns and provide insights over a selected period.
Safer than cash in some circumstances
Digital transactions are generally safer and can be tracked more reliably, which reduces potential instances of fraud. Plus, all e-wallets require some form of verification before payment, which means even if someone steals your phone, they can’t steal the money in your e-wallet.
Faster and more convenient
Most e-wallets today basically work the same way. You enter either your credit card or debit card info into an app ahead of time and then at a store, you launch the app and have the cashier scan it, or you tap your phone on the pad. The phone is a proxy for your card. This eliminates the hassle of having to count your cash before paying or those awkward moments when you get your change back and must quickly stuff it back into your wallet while holding up the cashier line.
May have rewards for spending
Because the e-wallet space is a competitive one, many of them offer various benefits to encourage usage. This may come in the form of instant cash back, rewards points, and even daily or weekly challenges that yield more rewards when completed.
Cons of using an e-wallet:
You can’t use it everywhere
This is probably one of the biggest problems with e-wallets. The accessibility of the e-wallet that you use depends on what phone you have, what stores use the system and which countries that will accept it). Alipay, Google Pay and Apple Pay are the most widely accepted ones right now but even some countries don’t accept it. Theoretically you can use them at any retailer equipped with the latest contactless credit card terminal but not every retailer updates their equipment.
They can encourage spending
While there is no denying the convenience of e-wallets, it could open a spending trap for the unsuspecting. The pain of parting with money feels more real if you use physical cash instead of something digital. Hence, using cash instead of e-wallets acts as a natural stopgap measure for people who find it difficult to control their spending. This means that using an e-wallet could encourage overspending, throwing your budget into disarray.
Giving away sensitive information
Another big fear is the risk of identity theft and loss of sensitive information. Since we are culturally not attuned to digital transactions, even well educated people run the risk of falling into phishing traps or accidentally giving away their personal information. Coupled together with the rising incidence of online fraud, the risk of hacking will only grow as more people hop on to the digital platform.
The risk of the mobile wallet failing
One reliable thing about physical cash is that unless it is torn or burnt, it rarely fails whereas an app on the phone might lag (when there’s patchy internet connection) or even fail. When that happens, and you are left without any other forms of payment and will be stranded. This can be especially problematic if you are traveling abroad or in smaller towns or villages with a lack of banking system or other payment options. As you are dependent on your phone for all your on-the-move transactions, losing it can prove to be a double whammy. Another drawback is that you need to keep your phone constantly charged. If the phone dies on you, and you’re all out of electrical plugs or power banks that can be a real headache.
Hopefully, this will help with some of your questions about e-wallets and give you a better understanding of this rising trend globally. If you haven’t jumped on the bandwagon yet, perhaps the above points can help you decide whether to pick up that phone and download an e-wallet.