Malaysia Makes Progress in Migration to e-payments

Malaysia is at a turning point in the migration to electronic payments (e-payments), helped by the 1.8 billion ringgit (MYR) allocation announced by the government in its Budget 2014 for implementing the second phase of the country’s high-speed broadband (HSBB) project, said Bank Negara Malaysia (BNM) deputy governor, Datuk Muhammad Ibrahim.

He said the central bank has called on banks to widen access points for the public to conduct e-payments, including via automated teller machine (ATM) networks. “While Malaysia’s population stands at 29.7m, there are 41m ATM cards with debit application that can be used to make purchases at merchant outlets.

“This provides an opportunity for banks and businesses to leverage on, to improve the coverage of point-of-sale (PoS) terminals to facilitate the use of the debit card as a means to reduce the need for cash as well as to increase tourist spending at more merchant outlets,” he said in his keynote address at the Payment System Forum and Exhibition held in Kuala Lumpur

He noted that an efficient, reliable and secure payment system is critical to the stability of a country’s financial system, besides enhancing its economic growth and competitive position.

To encourage systematic migration to electronic payments, BNM has set targets in the Financial Sector Blueprint to reduce the number of cheques processed per year by half, to 100m in 2020 from 204m in 2012, he added.

At the same time, there are also targets to increase the number of PoS terminals to 25 units per 1,000 inhabitants from nine in 2012 and to increase e-payment transactions per capita to 200 by 2020 from 56 in 2012, said Muhammad.

Only by migrating from cheques and cash to electronic payments could Malaysia achieve further cost savings and efficiency gains.

“Another notable achievement in the country’s payment system infrastructure is in the migration from magnetic stripe payment cards to chip payment cards, where Malaysia is the first country in Asia-Pacific to do so,” said Muhammad.

While the migration costs banks about MYR200m, the industry move has proved beneficial as the savings in terms of potential fraud avoidance offset the cost in around two-and-a-half years

With a safer payment card infrastructure, Muhammad said tourists have increased their spending via credit cards in Malaysia to MYR7.7bn in 2012 from MYR4.7bn in 2006, recording a growth of 9% per year.

“Research has suggested that a successful migration to e-payments has the potential to drive further efficiency gains and cost savings of about 1% of gross domestic product [GDP] annually,” said Muhammad

“But to realise these benefits, we require more enhancements in payment infrastructure and a change of behaviour from users of payment systems.”

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