Bank Negara Urges Businesses to Adopt E-Payment

Migrating to electronic bill payments would lower the estimated RM2.7 billion transaction cost as well as RM113 million annual cheque handling cost while providing businesses with a faster, more secure and more efficient means of collecting payments, according to Bank Negara Malaysia’s Deputy Governor Datuk Muhammad Ibrahim.

Speaking at the launch of the JomPAY electronic payment initiative in Kuala Lumpur Muhammad said consumers should also take advantage of the increased convenience of making bill payments via this new channel.

“By migrating to electronic bill payments, a lot of time and effort previously incurred by travelling and queuing to make over-the-counter payments can be saved and redirected to more productive use,” he said at the launch of the JomPAY initiative in Kuala Lumpur today.

In a nutshell, JomPAY addresses the limitations of the current bank-centric model by establishing an open electronic bill payments platform which leverages on the combined infrastructure and network of the entire banking industry.

In Malaysia, bill payments made via electronic channels are still relatively low at 2.4 transactions per capita in 2014 compared to more than 10 transactions per capita in countries with successful electronic bill payment platforms such as Australia, according to Bank Negara.

“With JomPAY, merchants only need to maintain a banking relationship with one bank, in order to receive bill payments from customers of all other banks,” Muhammad pointed out. “Likewise, customers only need to maintain an account with one bank in order to make bill payments to the entire network of merchants registered with JomPAY.”

The JomPAY model thus reduces duplication and facilitates the pooling of resources from the entire banking industry. This in turn will enable us to build a wider and more efficient network for online bill payments.

While efforts are being made by the authorities to facilitate the wider acceptance of payment cards, bill payments in Malaysia today are still predominantly made by either cash or cheques.

“Malaysia’s cash usage measured by currency-in-circulation (CIC) over GDP (gross domestic product) was about 6% in 2013, which is 100% higher than the average in advanced economies,” revealed Muhammad. “Likewise, Malaysia’s cheque usage per capita was 6.6 in 2013, which is 33 times higher than that in advanced economies.”

However, since the introduction of the Pricing Reform Framework in May 2013 as well as increasing focus to promote the use of Interbank GIRO (IBG), Muhammad noted that cheque usage declined at a faster rate of 10% last year compared to only 3% in 2013.

At the same time, the number of IBG transactions increased by 36% in 2014 compared to 19% in 2013. Consequently, Malaysia’s cheque usage had fallen from 6.6 per capita in 2013 to 5.8 per capita in 2014.

To reduce the country’s reliance on cash usage, Muhammad said the central bank has issued the Payment Card Reform Framework (Framework) which took effect in stages beginning January 2 this year. The Framework aims to ensure that the cost of accepting payment cards is fair and reasonable, whilst creating an enabling environment for the wider acceptance of payment cards, especially by smaller merchants.

“Over the next six years till 2020, together with the banking industry we plan to expand the payment card acceptance network from about 240,000 terminals to 800,000 terminals and further accelerate the use of debit cards,” added Muhammad.

Source : Bloomberg TV Malaysia / 9 April 2015