Mobile payment system in Malaysia: It's potentials & consumer's adoption strategies

Mobile payment in Malaysia is new but fast-growing alternative payment method. Mobile payment is the collection of money from a consumer via a mobile device such as their mobile phone, SmartPhone and Personal Digital Assistant (PDA) or other such device. A mobile
phone can pay for a wide range of services and digital or hard goods such as songs, computer games, books and magazines.

The most popular mobile payment system is Mobile Money, a PIN-based Mobile Payment Solution which allowing a registered users to pay for their goods and services at anytime , anywhere using only a mobile phone coupled with a 6-digit security PIN (Personal Identification Number) via SMS (Short Messaging Services). The main advantages here is the consumer has the purchasing power whether to buy their desired goods and services whenever they like using their mobile phone without physically present at the store.


The potentials of Mobile payment system are:

1. Consumers prefer a low-value transaction. However, it will continue to grow as consumer’s needs & confidence on mobile payment increased.
2. An increasing companies in Malaysia are using m-payment system in order to be more profitable.
3. Mobile payment providers have a large market share to grab on while the competition are relatively low in the newly developing stage in the market.
4. High acceptability and adaptability among consumers as the number of mobile users are increasing from year to year.

The adoption strategies will be :

1. Collaborate with banks and companies in order to expand the ability to purchase goods and sevices via mobile which helps to enhance consumer's confidence and satisfaction.
2. Enhancing the security during the purchasing transaction on goods and services.
3. Maintain the customer's loyalty by providing the best satisfaction in terms of security, services, and ease of use of the system.
4. Gifts and rewards offered from the company to m-payment consumers when they reach a certain level of purchasing of goods and services in order to build consumer's confident.

The application of pre-paid cash card for consumers

This is how prepaid credit cards applications work– You put money on the card, which you can do over the counter, on the phone or online, and then you use the card to make purchases. You can continually put money onto the card if you want, but you cannot spend more than the balance you have left. This means there is no risk of running into debt as it has no credit or overdraft facility. A prepaid cash card looks like a credit or debit card, and gives users the ability to purchase products and services with a card. The total amount will be taken from your card immediately and the transaction is complete.

A popular prepaid cash card is the Octopus Card in Hong Kong. It is widely used in payment system for transportation, supermarkets, fast food restaurants, car parks as well as other point of sale application such as service stations and vending machines.

In Malaysia, we have our own prepaid cash card- Touch 'n Go. The Touch ‘n Go card is an electronic purse that can be used at all highways in Malaysia, major public transports in Klang Valley, selected parking sites and theme parks.
Therefore with prepaid debit card, it helps in controlling an individual's spending as purchases are limited to the balance in the card or account, making it a wiser option overall.

Credit card debts: Causes and Prevention

CAUSES:
There are many reasons why people end up with more debt than they can possibly handle on their own. One of the main causes of personal debt is misuse of credit cards.

1) Don’t have credit card education.
Many people get their first credit card as soon as they are allowed to, when they are 18 or sometimes even younger. Many young people see credit cards as "free money" and buy up everything that they want without showing any concern of how they are actually going to pay for it.
2) Emergence of online shopping
With the economy making for a leaner wallet this year, consumers will still likely continue to overspend while surfing the Internet. The reason attribute to overspending on online shopping due to it become more user friendly and convenient to the user. Whenever the users have possessed a credit card, they can just buy the things through online.

3) Encouragement of credit card companies
Even the credit cards have encouraged you to spend money with no worries wherever you go, but the credit card companies have always sent the advertising to assaults you. Card companies often send their consumers all sorts of flyers and deals in the mail that give those individuals rewards and privileges that depend on spending more. It is often these things that hamper their ability to save their money.

4) Lifestyle maintenance
College tuition, cars and mortgages, luxuries house etc are the big expense along the way. Many people focus on one area of finances, neglecting the other so badly that there's not enough money to go around once these life events arise. Therefore, people may then rely on credit to get by.

PREVENTION:

1) Keep a running tally in writing of your weekly or monthly spending versus you budget, and update it before each purchase.

2) Use an online bank account to keep score of your spending. Keep your credit card receipts when you make purchases. At the end of each day or couple of days, use an online bank account to pay the credit card company for the amount you spent. Seeing your balance fall in line with your credit card spending should help you to keep to a budget, and eliminate risk that you overspend during the month.

3) Limit your credit card use to certain categories of spending. Use your credit card to pay only when there's no risk you will overspend. So use it for regular bills, groceries, and expenses where you trust yourself. For areas where you suspect you overspend or spend on impulse, use cash.

"Spending less than you make is what's important."

Electronic Currency

Banks have been able to move currency electronically for decades, only recently that the average consumer had the capability to use electronic transfers in any meaningful way. With the advancement in technology and more computer savvy individuals, global interaction is made available at vastly reduced costs. The Internet and E-commerce have become an increasingly commercial area, where daily payments are rendered for goods, information, services and investment. As a result, electronic payments are becoming the central part to online business between customer and seller.

Electronic money refers to digital currency that you can use on the Internet to buy and sell goods, services and investments by transmitting a number from one computer to another, where it typically involves use of computer networks, the Internet and digital stored value system. These transactions are carried out electronically, transferring funds from one party to another, by either a debit or credit. These funds are instantly cleared and secured by using strong encryption, thus eliminating the payment risk to the consumer.

One major type of Electronic money is the Integrated Circuit Card (ICC). ICC could be broken down further into 2 types - Contact ICC and Contactless ICC.

Contact ICC


Contact smart cards have a contact area, comprising several gold-plated contact pads, that is about 1 cm square. When inserted into a reader, the chip makes contact with electrical connectors that can read information from the chip and write information back. The cards do not contain batteries; energy is supplied by the card reader.

Examples of Contact ICC's:

1. Credit cards
2. Malaysian MyKad
3. ATM cards

Contactless ICC


The chip communicates with the card reader through Radio Frequency Identification (RFID) induction technology (at data rates of 106 to 848 kbit/s). These cards require only close proximity to an antenna to complete transaction. They are often used when transactions must be processed quickly or hands-free, such as on mass transit systems, where smart cards can be used without even removing them from a wallet.

Examples of Contactless ICC's:

1. Hong Kong's Octopus Card
2. Malaysia's Touch n Go Card
3. San Diego's Compass Card

Advantages of E-Currency

Flexibility

There is no need, for example, to carry several cards: one card can simultaneously be an ID, a credit card, a stored-value cash card, and a repository of personal information such as telephone numbers or medical history. Such a card can be easily replaced if lost, and, because a PIN number (or other form of security) must be used to access information, is totally useless to people other than its legal bearer. At the first attempt to use it illegally, the card would be deactivated by the card reader itself.

Security

They are encryption devices, so that the user can encrypt and decrypt information without relying on unknown, and therefore potentially untrustworthy, appliances such as ATMs. ICC's are very flexible in providing authentication at different level of the bearer and the counterpart. Finally, with the information about the user that ICC's can provide to the other parties, they are useful devices for customizing products and services.

Other general benefits of sICC's are:

• Portability
• Increasing data storage capacity
• Reliability that is virtually unaffected by electrical and magnetic fields.

Limitations of ICC's

Security

VISA and MasterCard developed a new standard, SET, in early 1996 in an attempt to get the entire industry on a standard of encryption. Additionally, there are standards such as DES which have been around for years, usable in all forms of encryption which are being used in ICC's. But still some ICC's are not inviolate. Mondex, a maker of banking ICC's, solves this problem by making its transactions possible only between Mondex cards. But in order for ICC's to reach their full potential, they must be able to interact with a host of interfaces. And they must do so securely.

Public Perception

People must believe that the cards are secure. This depends to a great extent upon actual security, but people must also be convinced of it. And once people are comfortable that the card is secure, they must still be confident that a stalker isn't somewhere collecting and analyzing all of the information gleaned from the ICC's use.

Product Complements

While ICC's themselves are fairly cheap, card readers are not. However, in an effort to make ICC's more pervasive, companies such as Netscape and Microsoft are proposing putting software in packages they make. Additionally, Gemplus has created a new pocket reader and other companies are considering adding readers to keyboards.