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The
smooth and efficient operation of the payments system is a critical
factor in a country’s economic growth process. It is also
important to have a safe and efficient payments system to maintain
financial stability. In addition, a safe and efficient functioning
payments system enables the Central Bank to implement its monetary
policy effectively. In modernizing the payments system in line with
new technology and current needs of the users of payment systems,
efforts have been directed at facilitating more efficient means
of making online payments. This includes the development of the
Financial Process Exchange that provides a multi-bank Internet payment
platform to businesses and consumers. The Bank has therefore, given
priority to ensuring the safety and efficiency of the payments system.
In the recent period, efforts have been focused on reviewing the
legal framework on payments system, and monitoring the industry’s
efforts in enhancing the safety and efficiency of payment instruments
as well as collaborating with the police in combating payments fraud.
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There
is a broad choice in payment methods in the country, the common
ones being cash, cheques, debit cards, credit cards, charge cards,
electronic purse and credit transfers. While the use of most electronic
payment methods using payment cards, and interbank payment system
has been on an increasing trend, the use of cash and cheques continue
to remain high in Malaysia. The use of cash is indicated by the
value of notes and coins in circulation, which had doubled as at
end-December 2002, as compared to end-December 1992, and the notes
and coins in circulation per capita had increased from RM652 to
RM974 during the same period. The cheque is also an important mode
of payment compared with other cashless payment instruments as shown
in the chart below.
While cash payments and withdrawal are generally free (unless withdrawal
is made at another bank’s automatic teller machines or exceeding
a specific number of transactions), and the issuance of cheque cost
very low to the issuer, the related costs on cash and cheques are
highly significant. The Bank incurs high cost on printing, minting,
distribution, control and destruction of notes and coins, while
the banking industry and retail sector, in handling cash and cheques,
incur costs related to transportation, security, insurance, fraud
and robberies apart from staff and administration costs. While the
provision of electronic payment systems involves substantial investment
by the banking industry, the cost incurred by a bank to process
an electronic payment transaction is less than the cost of processing
a paper-based payment if a critical mass for the electronic payment
method is achieved. A sufficiently high number of transactions will
enable the positive network externalities and economies of scale
for the electronic payment method to be reaped. The bank’s
transaction cost in processing electronic payments reduces as the
number of transaction increases. In countries that have migrated
to electronic payments, the electronic payment systems generally
cost in the range of one-half of a paper-based system. |
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Creating wider public acceptance of electronic payment systems and
instruments requires the public confidence that the systems and
instruments are secure and convenient. This includes the strengthening
of the legal and regulatory framework governing the payments system,
inculcating sound credit risk management practices in credit card
operations and enhancing safety of automatic teller machines (ATM)
transactions. In addition, efforts are underway to promote MEPS
Cash as the national electronic purse scheme with the extensive
deployment of the supporting infrastructure including ATM and the
card acceptance devices. The increase in the payment card acceptance
terminals will enable the consumers to use the electronic payment
instruments conveniently. MEPS Cash, created in line with the Multipurpose
Smart Card flagship application under the Multimedia Super Corridor
project, is the national electronic purse scheme that is to be accepted
as a means of payment by all merchants. The supporting infrastructure
is also being further improved. The Government’s plans over
the next few years in meeting the targeted number of personal computers,
Internet and broadband users in Malaysia augurs well for this migration
to happen. The wider use and acceptance of payment channels and
instruments is also encouraged through extensive consumer education
and promotional programmes. |
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