Types of eWallets in Malaysia

5/13/2020Shen Lee

In the second instalment of our eWallet 101 series, we’ll be diving into the two different types of eWallets currently present in Malaysia. But before that – read our previous article here on how eWallets work in Malaysia to get all caught up! 

By now, you’re probably no stranger to eWallets. You might use them on the daily for convenience’s sake or to save money on your spendings. 

But did you know there’s more than one type of eWallet in Malaysia?

Read on to learn how the two types of eWallets differ from each other, how they work, and when you should be using which. 

The 2 Types of eWallets in Malaysia

eWallets in Malaysia can be broadly categorised into two types – open-loop and closed-loop

  1. Open-loop 

Open-loop eWallets are ubiquitous in Malaysia. When you think of eWallets in general, this type is most likely what comes to mind.

Grab and Touch ‘N Go eWallet for example, are both open-loop. 

Open-loop eWallets here are typically prepaid, meaning that instead of connecting directly to your bank account or credit card etc, they have to be topped up first and the balance used up from there. 

You can use this type of eWallet to pay for goods and services at select merchants that have partnered up with the eWallet issuer. Merchants can include your everyday F&B outlets and retail stores, but also charity organisations and insurance! 

Either way, you’re capable of paying at many different locations from a centralised eWallet. It also goes without saying that the more merchants a particular open-loop eWallet issuer provides, the more convenient it is for you as the user. 

In terms of licensing and regulations, open-loop eWallets are required to obtain an e-money license in order to operate in Malaysia. Below is the official definition of e-money as per Bank Negara’s Guideline on Electronic Money.

“E-money is defined in the Payment Systems (Designated Payment Instruments) Order 2003 as a payment instrument, whether tangible or intangible that:

  • stores funds electronically in exchange of funds paid to the issuer; and
  • is able to be used as a means of making payment to any person other than the issuer.”
  1. Closed-loop 

The less popular counterpart, closed-loop eWallets are prepaid as well – but function very differently. 

With this type, you’re only able to use your funds to make purchases at a specific retailer. Being exclusive to a specific company means that there’s no need to seek authorisation as well as not being subject to any regulations in Malaysia. 

A great example is Starbucks’ loyalty program. You’re offered a physical card which you can buy and load cash directly into the card over the counter. Everytime you make a purchase from Starbucks, the amount is deducted from the balance in your card and you earn reward points in exchange (sounds familiar?).

Open-loop vs Closed-loop eWallets [Comparison]


Open-loop
Closed-loop
Usage Capability
Can be used at multiple merchant locations
Can be used with the specific issuer only
Pros
Convenient as can be used for a variety of purchases at a multitude of merchant locations
Allows for faster payment processing
Cons
Payment process is lengthier for security purposes.
Funds are kept locked up and cannot be withdrawn for purposes other than purchasing from the specific issuer
Fees
Fees typically absorbed by the merchant or issuer
Joining fees usually required
Examples
GrabPay
Boost
Touch ‘N Go 
ShopeePay 
kiplePay 
GoPayz
BigPay
AEON Wallet
The Coffee Bean Card 
Starbucks Card

Which Type of eWallet Should I Be Using?

Use open-loop eWallets if: You find it difficult to limit your spending and want more value for your money. 

Using closed-loop eWallets at your favourite stores may encourage you to spend more to utilize the funds that you’ve committed to the issuer. On the other hand, being able to use open-loop eWallets for various purposes such as utility bills and insurance means you get more bang for your buck from the rewards reaped. 

Use closed-loop eWallets if: You’re a regular shopper and faithful to the retailer.

Opting for this type of eWallet can be a smart money-saving move if (and only if!) you know for sure that you spend on a regular basis with the retailer in question. The supermarket you buy your groceries from every week, the java spot where you get your coffee without fail every single day etc.

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