- E-payment use in M’sia has surged to 291 transactions per capita, targeting 400 by 2026
- Bank-fintech collaboration crucial, combining trust and security with fintech’s innovation
“What Malaysia has is the benefit of having a real-time payment system that is second to none.” Farhan Ahmad, Group CEO of PayNet who was speaking at the Sasana Symposium 2023 (SS2023) hosted by Bank Negara Malaysia on Thursday, 8 June praised Malaysia’s digital payment infrastructure as superior and more reliable when compared to other countries, including China and India.
Yet, he emphasised, there is potential for further utilisation despite the country having a strong real-time payment system. “However, it is not yet being harnessed to its maximum capacity. That’s a collective responsibility,” Farhan said.
The SS2023, a one-day event, aims to stimulate meaningful dialogue on the pivotal issues and necessary changes needed for the prosperity of the Malaysian economy. A key aspect of this symposium’s discussion centred on digitalisation in payments.
Malaysia’s strides in developing a robust digital payment infrastructure are not insignificant. The Assistant Governor of Bank Negara Malaysia, Suhaimi Ali, reported a notable increase in the average number of e-payment transactions made by each Malaysian. In 2019, the figure stood at 144 transactions; this jumped to 291 transactions in 2022. The goal is to further boost this figure to 400 transactions per capita by 2026.
Ongoing efforts and initiatives
Several initiatives are currently in progress to bolster the development of digital payments in Malaysia. Suhaimi underscored the Bank Negara’s focus on cross-border payment efficiency, enhancing trade relations with its partners. Notably, Malaysia, in collaboration with ASEAN five and the BIS Innovation Hub based in Singapore, is taking part in Project Nexus. This undertaking is dedicated to establishing a multilateral payment platform optimised for cross-border transactions.
PayNet, Malaysia’s national payment network and the backbone of its financial markets’ infrastructure, is another key player shaping the nation’s digital payments landscape. The organisation is leading three primary projects: PayNet Authenticate, PayNet Connect, and PayNet Secure. PayNet Authenticate presents a digital authentication solution for network participants, PayNet Connect offers a technology blueprint for open data exchange, and PayNet Secure represents a holistic strategy for safeguarding Malaysia’s digital payment ecosystem.
The robust growth of digital payments in Malaysia can be attributed to successful partnerships between the government and the private sector. Alan Ni, Group CEO of TNG Digital, said the “surge of digital payments in Malaysia is a good story of collaboration between the public sector and private sector,” and noted that numerous initiatives and regulatory frameworks have been strategically implemented to foster the flourishing digital payment ecosystem.
Farham, Suhaimi and Alan were on a panel, Digitalisation and Payments, during SS2023.
Potential obstacles and challenges
Ensuring security and trust within the digital payment landscape remains paramount. While the panellists praised Bank Negara’s recent efforts to set up the National Scam Response Centre (NSRC) with its single 997 hotline number to facilitate reports, there is also the need for more fraud prevention and consumer protection measures.
As an example, Alan shared a story of how scammers in China now using face changing technology to pull off scams using video conferencing. Farhan agreed and said, “the biggest threat for us is not the things we’re working with… (what scares us) today will sound like child’s play in just a year or two years’ time.”
Another point that the panel discussed was the current proliferation of wallets in the ecosystem. As of now, there are 50 entities that have been approved to be an E-Money Issuer in Malaysia, and Farhan believes that these companies have set their focus wrong. “I would actively discourage anybody from being a wallet anymore,” said Farhan. “Storing money causes more problems than benefits.”
In particular, Farhan says that currently low Merchant Discount Rates (MDR) and low interchange rates means that being a money store becomes a costly proposition. He would rather see apps provide services like lending to consumers and merchants, but partner with banks who will take care of the money.
He also said that fintechs should look beyond the consumer space, and get familiar with the pain points in the business-to-business (B2B) space. “The B2B market is maybe five times bigger than the consumer market,” he highlighted. “Really learn it, study it, get deep into it, and then solve that problem.”
Collaboration and innovation
Fintech and bank partnerships, in particular, hold the key to delivering innovative solutions and services. By combining the strengths and specialties of both parties, these partnerships can solve friction points, offer new products, and ultimately serve customers better. As Farhan pointed out, “Each [ party] brings something different to the table: the banks provide trust and security, while the fintech companies drive technological innovation.”
Moving forward, public and private sectors, financial institutions, fintech companies, and regulators must now align their efforts, sharing information, and resources to develop comprehensive strategies that benefit all stakeholders.
Bank Negara in particular sees the role of regulators being very relevant, especially given Malaysia is a small market. “There’s always this tension between small players and big boys in the ecosystem and sometimes it is difficult to reconcile,” said Suhaimi. As a result, key areas like the common QR code, cross border transfers, and cybersecurity need to be mandated to get everybody on the same page. “The regulators need to come in and play their role to ensure that everybody’s aligned, especially when it comes to putting in place the necessary infrastructure for the country.”
However moving forward, he also sees the partnership between all the players becoming even more critical. “In the first blueprint (and) the second blueprint, there were a lot of things that we could do by ourselves from 2001, to 2011, to 2020. Now the interlinkages and spillover effects in this economy (means) the order of the day is a public-private and whole of nation approach,” explained Suhaimi. “Otherwise, this country will not move fast enough to be able to benefit from all the innovation that is happening around us.”