In one scene in an advertisement of an e-hailing company last Hari Raya, a little boy promptly reminded his big brother that he had yet to give him “duit raya”. The latter then took out his smartphone and effortlessly transfered the money from his e-wallet to the former’s. This is an example of cashless fund transfer using e-wallet or mobile wallet payment solution.
E-wallet is a virtual wallet in which we do not need physical money to make payments or fund transfers. Generally, we can use an e-wallet to make cashless payments for many things—from paying bills, transportations, groceries, food and beverages (F&B) and even giving donations to charities. To start using the e-wallet, one has to download the e-wallet issuer app which is available on the apps store and activate the app by submitting one’s personal details. Once the wallet is set up, one tops up some money into it through online transfer from one’s bank account, and one will able to use the features of the app.
There are two types of e-wallets namely bank and non-bank e-wallet. As its name implies, the bank e-wallet is a virtual wallet provided by commercial banks which is linked to the customer’s debit or credit account maintained with the bank. Once the account is linked or customers load cash into the e-wallet, they will be able to make transactions with a broad range of merchants. To ensure all transactions are secured and only authorised users have access to their e-wallets, the app requires users to enter passcode or fingerprint to login and no sensitive information will be stored on the device. As a matter of fact, in the case if the device is stolen or lost, the bank can remotely disable the account from unauthorised use by the perpetrator.
The non-bank e-wallet, on the other hand, is the one provided by a non-bank issuer. As of June 2018, 44 non-bank e-wallets are active in this country—a 33.44 per cent increase from the 2016 figure. For the record, 25 non-bank e-wallets operated in Malaysia in 2016. Among the popular non-bank e-wallets in the country are Grab Pay, Touch n Go E-wallet, Boost, Lazada E-wallet, vcash etc.
According to a newspaper report, cashless payments make up about 20 per cent of total payments in Malaysia with only half of that involving e-wallet. In 2018, PwC conducted a survey to gain insight on customer behaviour and adoption of the e-wallet in the country. The survey reveals that only 22 per cent of the respondents are e-wallet users who mostly use it for F&B, retail and e-commerce purposes. Low merchant adoption, security risk and poor user interfaces were cited as key concerns among the respondents. For this, most industry observers concede that mobile payments and e-wallet are still at an early stage of development in Malaysia.
Nevertheless, they are also positive that the trend would change. Even Bank Negara Malaysia (BNM) shares the same expectation. This is owing to the fact that the e-wallet has gradually become a lifestyle necessity especially among the young and tech-savvy population. Besides, the internet and mobile phone penetration in the country is also high. According to BNM, as at the end of 2017, 42.4 million mobile phone were subscribed out of which 75.9 per cent were that of smartphones for a population of 32.1 million in Malaysia.
In order to promote greater adoption of mobile payment among citizens, BNM as the main financial regulatory authority has come up with the Guidelines on Electronic Money (E-Money) and Interoperable Credit Transfer Framework (ICTF). Both serve as an enabling environment which facilitates the development of cashless payment in the country.
Briefly, the guidelines outline the broad principles and minimum standards that must be abided by e-money issuers in relation to the operation of their e-money schemes. It contains operational requirements relating to the aspect of governance and integrity, risk management, compliance with other requirements; as well as rights and responsibilities of all e-money stakeholders.
At present, there is no interoperability among the various mobile payment solutions offered by bank and non-bank e-money issuers in Malaysia. As such, the ICTF was introduced by BNM and came into effect on 1 July 2018. It seeks to foster an efficient, competitive and innovative payment landscape by enabling the interoperability of credit transfer services among e-money issuers through fair and open access to shared payment infrastructure.
For bank e-wallet, we already know how its issuer i.e. bank makes money. As the e-wallet is linked with user’s respective debit or credit account with the bank, for those who tied their e-wallet with Islamic account, the issue of compliance or non-compliance to Sharia is therefore not a problem. However, if the issuer is a non-bank establishment, then there might be some Sharia concerns that need to be addressed.
Unlike bank institutions which survive on rotating clients’ money and in the case of Islamic banks, such a process is based on Sharia principles such as mudharabah, musharakah, murabahah, tawarruq, ijarah etc; the non-bank e-wallet issuers make money from several means. They earn commissions from businesses for transactions using the e-wallet. Besides, they also generate income from advertising or marketing fees for promoting merchants and businesses. Since e-wallet users keep some upfront value (e-money) in their e-wallet, the issuers also gain deposit interest from this fund deposited by users.
This raises some important questions especially among Muslim users who are concerned with halal and haram as they have no knowledge where the issuers place the deposit and as to whether the money is used for Sharia or non-Sharia compliant purposes.
E-wallet is mainly used for payments and e-commerce. Thus, this will involve various transactions and contracts between parties and give rise to another Sharia concern. Besides ensuring that all transactions must be entirely free from elements of riba (interest), gharar (uncertainty) and maisir (gambling); the contracting parties must also know the type of aqad applying to the contract and whether all terms and conditions of the aqad are fulfilled because this will determine the validity of such contracts from the Sharia point of view.
In the guideline on electronic money, BNM among others, generally mentions that the issuer of e-money shall not use the money collected to extend loans to any other persons or extend credit to the user or pay interest or profit in the e-money balances or anything that would add to the monetary value of the e-money. But the bank does not state that the issuer – especially the non-bank issuers – should create a separate account to consolidate deposit received from Muslim users.
Similarly, issues underpinning aqad apply to the transaction. Based on the writer’s limited knowledge, there is no guideline or regulation that governs “Islamic e-wallet” and its related transactions. As the e-wallet adoption is still at its infancy in the country, it would therefore be better for relevant authorities to look into these concerns and address them from the beginning. This can help provide assurance to Muslim users to receptively adopt the payment technology with confidence
