Cash is king! Or, is it? As digital transactions transform the global financial landscape, many countries are moving toward a cashless society.

From enjoying a meal at our favorite kopitiam to settling bills with large businesses, cashless transactions now account for approximately 55% of daily transactions in Malaysia. Many business owners have embraced the convenience of digital payment solutions, particularly e-wallets like Touch ‘n Go, SPay Global (formerly Sarawak Pay), and GrabPay, which enable seamless transactions for their customers. Additionally, digital payments have enhanced financial tracking, minimised accounting errors, and reduced the risks of the theft of cash kept on business premises. As a result, more businesses are expected to make the shift toward a cashless economy. 

This growing adoption of cashless payments is not limited to businesses; government initiatives are also driving this shift. The success of the Cashless Boleh 4.0 campaign in 2024 highlights this trend, with 138.82 million cashless transactions recorded, making up 86% of transactions across 20 participating government agencies. Building on this momentum, Deputy Finance Minister Lim Hui Ying announced in January this year that Cashless Boleh 5.0 will expand to include over 80 government agencies.

With these advancements, the question arises: should Malaysia fully move towards a cashless future? While the benefits are undeniable, potential challenges must also be addressed to ensure a smooth and inclusive transition.

Global Context: Learning from Other Nations

Several countries have made remarkable progress toward becoming cashless. Sweden, for example, is one of the most advanced cashless societies, with less than 10% of transactions involving physical cash.  China, led by platforms like WeChat Pay and Alipay, has revolutionised digital payments, making cash almost obsolete in urban areas. South Korea, too, has successfully minimised cash usage by heavily promoting card payments and mobile transactions. 

However, the transition is not always smooth. India’s 2016 demonetisation initiative, aimed at reducing cash dependence, led to economic disruptions, disproportionately affecting those without access to digital banking. These international experiences provide valuable lessons for Malaysia as it moves towards an economy with more cashless transactions.

The Case for a Cashless Malaysia
Convenience & Efficiency
A cashless system enhances convenience, allowing for faster transactions, reduced waiting times in shops, and seamless online purchases. Consumers benefit from the ability to pay bills, transfer money, and shop with just a few taps on their smartphone or with a debit or credit card via a payWave facility.

Financial Transparency & Crime Prevention
Reducing cash transactions can curb illicit activities such as corruption, tax evasion, and the black-market economy. Digital payments leave a traceable record, making it harder for criminals to hide their financial activities.

Benefits to Government & Businesses
For the government, the move towards digital transactions will reduce the cost of printing, distributing, and managing cash. Additionally, businesses can streamline operations, reduce cash-handling errors, and improve financial tracking.

Challenges & Risks: Who Could Be Left Behind?
The Digital Divide
One of the biggest challenges of a cashless society is ensuring financial inclusivity. Many Malaysians, especially those in rural areas, lack access to smartphones, internet connectivity and even to bank accounts. Likewise, low-income groups who rely on daily cash wages may struggle to transition to a world where cash is no longer king.

Additionally, the elderly, accounting for 11.6% of the population (about 4 million people), have voiced frustration and expressed distrust with cashless transactions. Saravanan Thambirajah, CEO of the Federation of Malaysian Consumer Associations (FOMCA), while touting the benefits of a cashless society also emphasised the importance of digital literacy programmes to assist seniors in using these digital payment platforms.

Without proper measures, these groups risk being excluded from the digital economy.

Cybersecurity and Fraud Risks
The more a society relies on digital payments, the more it becomes a target for cybercriminals. Hacking, phishing scams, and data breaches pose real threats, requiring robust security measures to protect users.

Technology Dependence and System Failures
A cashless society is heavily dependent on technology. Power outages, internet failures, or cyberattacks could disrupt financial transactions, causing inconvenience or even economic instability. A recent example of this occurred in Australia in November 2023, when a major internet outage involving Optus led to widespread business losses. Many businesses, unable to process digital payments, saw a sharp decline in sales as customers were unable to complete transactions. This incident showcases the risks of relying entirely on digital systems, reinforcing the need for backup payment options such as cash. 

What Would It Take for Malaysia to Go Cashless?

For Malaysia to transition successfully, several steps are necessary. Firstly, it would need to strengthening cybersecurity to protect consumers from fraud. This also includes strengthening privacy laws as digital transactions leave personal data trails. At the moment the European Union leads the way in this regard with the General Data Protection Regulation.

Secondly, it is important to ensure financial inclusivity by providing digital banking access to all citizens. For the elderly and low-vision members of the public, intuitive interfaces with larger text and voice-assisted navigation may be helpful in creating inclusivity.

Next, moving to a cashless society involves educating the public on safe digital payment practices with adequate government oversight. The Domestic Trade and Consumer Affairs Ministry need to be vested with greater resources to investigate consumer complaints. At the moment, almost half of all complaints made to this Ministry involve complaints about online transactions. This is anticipated to rise as more businesses move into the cashless sphere in the coming years.

A Gradual Transition is Key

Going cashless offers undeniable benefits, from convenience to financial security. However, challenges such as accessibility, cybersecurity, and the needs of vulnerable populations must be addressed. Rather than a sudden shift, a hybrid system – where both cash and digital payments coexist – may be the most pragmatic approach for Malaysia’s diverse society for the time being. Therefore, cash will still be king, while we iron out the kinks of navigating to a cashless society!