Payment Systems in Malaysia
Malaysia's Payment System
Systemically Important Payment System (SIPS)
A systemically important payment system or large value payment system (LVPS) typically processes high-value and time-critical payments. It is an essential payment system to ensure the smooth functioning of the economy, financial system and financial markets, and its failure could trigger disruptions or transmit shocks within the economy and the financial market, both at the domestic and potentially at the cross-border level. RENTAS is the only LVPS for Malaysia and it is operated under Real Time Gross Settlement (RTGS) basis.
Real Time Electronics Transfer of Funds and Securities (RENTAS)
RENTAS was implemented in July 1999 with the objective to improve the overall efficiency of the large value payment system, particularly in respect of reducing interbank settlement risk. It enables the transfer and settlement of high value interbank funds and scripless securities transactions. There are two types of transactions handled by RENTAS namely Interbank Funds Transfer System (IFTS) and Scripless Securities Transfer System (SSTS). The following transactions can be performed by RENTAS members via the system:
- Interbank funds transfer;
- Cash withdrawals from Bank Negara Malaysia;
- Statutory reserve adjustment;
- Money market settlement;
- Ringgit leg of foreign exchange; and
- Scripless securities transfer.
Currently, there are 69 participants in RENTAS, which comprise of commercial banks, Islamic banks, investment banks, Development Financial Institutions as well as institutions that are active players in the money market or capital market.
There is no limit set for the transfer of funds between members. However, the minimum transaction amount for third party payments (payments that originate from a non-RENTAS member or beneficiary) is set at RM10,000. This limit does not apply for payments to and from Bank Negara Malaysia and government agencies.
In November 2006, Bank Negara Malaysia in collaboration with the Hong Kong Monetary Authority, implemented the Payment versus Payment (PvP) infrastructure for settling interbank ringgit-US dollar trade transactions. The direct link between RENTAS in Malaysia for the settlement of ringgit and the USD CHATS system in Hong Kong for the settlement of US dollar, enable the simultaneous settlement of ringgit in Malaysia and US dollar in Hong Kong during Malaysian business hours, thus eliminating foreign exchange (FX) settlement risk for ringgit and US dollar FX transactions.
As part of the Bank's continue effort in improving and enhancing the capability of RENTAS to support cross-border payments and settlements, the onshore multi-currency funds and securities settlement facility was launched for renmimbi (RMB) settlements in March 2012. The new RENTAS facility will enhance the efficiency of RMB trade settlements for Malaysian corporate by reducing costs and ensuring finality of settlements.
Retail Payment System
In general, the retail payments in Malaysia can be divided into three - Retail Payment Systems, Retail Payment Instruments and Retail Payment Channels.
Types of retail payment systems
Bank Negara Malaysia had in 2008 implemented the National Electronic Cheque Information Clearing System (eSPICK) to replace the previous Sistem Penjelasan Imej Cek Kebangsaan (SPICK) cheque clearing system. eSPICK was fully rolled out nationwide in July 2009.
The implementation of eSPICK was part of the Bank's effort in enhancing the efficiency of the payment system. The Bank together with the banking industry have migrated the cheque processing phase from physically sending cheques for clearing at the clearing centres into a fully image-based cheque clearing process.
Customers and businesses will benefit from the speedier and more efficient cheque clearing system, especially in the timing of the availability of funds from the deposit of outstation cheques. Under the eSPICK, customers will receive funds from the cheques deposited during business hours on the next business day, compared to between 2 to 8 business days previously.
Shared ATM Network (SAN) enables bank customers to access their funds from any of the participating banks’ automated teller machine (ATMs). There are currently two shared ATM networks, namely, the MEPS SAN and HOUSe. The MEPS SAN is operated by the Malaysian Electronic Payment System Sdn Bhd (MEPS), which services offered includes cross-border cash withdrawal, interbank ATM funds transfer (IBTF), interbank mobile prepaid top-up and credit card and loan repayment. As at to date, 14 domestic banks and 7 foreign banks have participated the MEPS SAN.
Link to MEPS Website
Established in 2006, HOUSe is owned by four locally-incorporated foreign banks, namely, HSBC Bank, OCBC Bank, Standard Chartered Bank and UOB Bank. Services offered includes cash withdrawal and balance enquiry.
The Interbank GIRO (IBG) refers to a payment system that provides funds transfer services amongst its participating financial institutions
Direct debit, which is operated by MyClear Sdn Bhd, is an interbank collection service for regular and recurring payments enabling automated collection directly from a customer’s bank account at multiple banks with a single authorization.
Types of retail payment instruments
A cheque is a paper based payment instrument. It is a form of written order directing a bank to pay money to the beneficiary. Based on the market practices in Malaysia, a cheque is generally valid for six months after the date of issue. The use of cheques has traditionally dominated Malaysian non-cash payments. Despite the development of other payment instruments, cheques remain an important form of non-cash payments.
A credit credit card enables its holder to buy goods and services with a credit line given by credit card issuer and the amount will be settled at a later date. Cardholders are billed on a monthly basis and cardholders would have to bear finance charges (interest) on the outstanding amount if payment is not made by the due date. For a hefty fee, a credit card can also be used for cash advances at Automated Teller Machines (ATMs) and at respective credit card issuers' counters. Examples of credit card brands are Visa, MasterCard and JCB. A tiered pricing structure for credit cards was implemented in July 2008 with the objectives to promote prudent financial management and inculcate good financial discipline amongst credit card users. The tiered pricing structure is based on the following tiers:
Tier 1 - Maximum of 15% per annum (those who promptly settle their minimum payment due for 12 consecutive months);
Tier 2 - Maximum of 17% per annum (those who promptly settle their minimum payment amount due for at least 10 months in a 12-month cycle); and
Tier 3 - Maximum of 18% per annum. The Bank had in 2011 introduced new credit card guidelines to inculcate sound financial and debt management among credit card users. The new measures covers eligibility criteria, prudential requirements for non-bank issuers, risk management requirements, pricing and consumer protection.
See also: Press release on New Measures on Credit Cards to Promote Prudent Financial Management and Responsible Business Practices
The functionality of a charge card is similar to a credit card. However, charge card holders must settle their outstanding amount in full by the due date every month. Since charge cards are often associated with prestige, the fees are generally higher than credit cards. This is compensated by the differences in terms of benefits, with charge cards generally offering more privileges. Its popularity has dropped in Malaysia.
A debit card is a payment card where the transaction amount is deducted directly from the cardholder's bank account upon authorisation. Cardholders can manage their finances more effectively and need not worry about late payment penalties, finance charges, and snowballing card debts. There is also no income requirement to qualify for one. In Malaysia, anyone having a bank account with a domestic bank and has an ATM card can make payments using the card at any merchants displaying the Bankcard logo, as it doubles as a debit card. There are also international brand debit cards under the VISA and MasterCard brands as well as cards with both international debit and domestic PIN-based ATM applications.
E-money is a payment instrument that contains monetary value that has been paid in advance by the user. E-money users can use their e-money to purchase goods and services from merchants. When users pay using e-money, the amount will be automatically deducted from their e-money balance. E-money comes in different forms and can be broadly categorised as card-based and network-based, which are currently accessible via the internet and mobile phones.
Types of retail payment channels
Internet banking provides a fast and convenient way of performing common banking transactions, such as transferring funds from the customers' savings account to their current account, or even to a third party's account. Through Internet banking, customers could also repay their loan and card outstanding amount, make payments to relevant parties, such as utility bills, assessment tax, and others. If you have a computer with Internet access, a web browser and a registered account for Internet banking service from your banking institution, you'll be able to do your banking and payments from the comforts of your home, office, or virtually anywhere else in the world.
All internet banking transactions are secured to ensure that users' information could not be stolen. However, users should also practise precaution, which include keeping their Login ID, password or PIN confidential; checking that they have logged into the right website; logging-off at the end of each session and clearing the memory cache and history after logging out from the website; and protecting their personal computer from viruses and malicious programmes by installing an up-to-date hackers firewall and a reputable anti-virus program.
Link to list of offering Banks
Mobile banking is similar to Internet banking in that it provides a fast and convenient way of performing common banking transactions. To enjoy the benefits of mobile banking, all you need is a mobile phone that is equipped with the features required by your bank that provides this service. Once you obtained a registered account for mobile banking from your banking institution, you'll be able to do your banking transactions from anywhere that has your mobile telecommunication network coverage.
All mobile banking transactions are secured to ensure that users' information could not be stolen. However, users should also practise precaution, which includes not leaving their mobile phone that is linked to their account unattended to; keeping their PIN confidential; and never reply to any SMS claiming to be from their bank or asking for their banking details.
In early 2012, three major banks collaborated with two major mobile network operators had offered a new mobile banking and payment services, MyMobile. With MyMobile, registered users can perform various banking transactions such as fund transfer, bill payments, mobile prepaid reload and credit card repayment at any time and from any location. The advantages of MyMobile are among other, its ability to support fund transfers using the mobile phone numbers of beneficiaries instead of bank account numbers, and it is accessible through all types of phones.
See also: 1. MyClear Website on MyMobile
2. List of offering Banks
Mobile payment allows you to make payments to selected merchants by using your mobile phones. Bill payments and purchase of goods and services are among the cashless transactions that can be made. To enjoy the benefits of mobile payments, you have to register and open an account with mobile payment service providers. Non-bank mobile payment services are provided using an e-money account. For more information on e-money, please refer to the e-money section.