Developing a Computerized Simulation Model through a System Dynamics Approach: A Case Study on the Digitalization among the Business Community in Kedah State, Malaysia.

Digitalization in the economic sector of the Kedah state, Malaysia needs to be strengthened to ensure the development goals in 2035 can be achieved. The launch of the Kedah Cashless campaign by the state government in 2020 is the beginning of the digitalization policy in the Kedah economic sector. However, the cashless payment method in the state is still at a low level which is around 10 percent among the business community. In this regard, this study aims to evaluate the effectiveness of the cashless payment by the business community in Kedah state through a computerized simulation model. Accordingly, a survey among 631 merchants was conducted around the state. Findings from the research such as cost, sales price, percentage of customers who buy goods, and profit rate are simulated using computer aid through the system dynamics approach. System dynamics is a computer-aided simulation method based on mathematical modeling. Two scenarios on different cashless implementation rates among merchants were developed. When comparing the two scenarios, a 90 percent cashless payment rate reflects a difference of 2.46 percent profit in the twelfth week of operation. Consequently, the implementation of cashless payments is expected to increase state revenue as well. By implementing a high cashless transaction policy among the business community, the target to improve the state’s revenue is achievable. Subsequently, the findings of the study will be used to develop a cashless roadmap policy in the Kedah state.