Payment System in Malaysia

Transcription

1 Payment System in Malaysia Presentation by: Amir Akmar Basir and Mario B. Lamberte 1 February 29

2 Indicators of flow of funds Indicator Year Year Year M2/GDP (%) 15% 124% NA M2/Cash Market capitalization (RM billion) (USD billion) , (% of GDP) - equity market 131% 172% NA Outstanding bonds (% of GDP) - bonds market 78% 87% NA Total trade (exports + imports)(% of GDP) 22% 173% NA Capital flows (Inflows + Outflows)/GDP (%) NA NA NA Remittances (RM million) (USD million) NA 11,227 3,395 NA Transactions in foreign exchange market (average daily, RM million) (average daily, USD million) 1, , , , , Source: Bank Negara Malaysia s Monthly Statistical Bulletins

3 Stylized pattern of payment system development in Malaysia From 195s to late 199s, payment modes were mostly paperbased In the late 199s and early 2s - modern payment services based on networks and internet started to be actively introduced After 24 Evolution of payment system in Malaysia Increased in the number of retail payment service providers and payment channel varieties* The government started to provide e-payment and services * Due to the adoption of liberalization policy in order to increase competition among payment service providers (in accordance with the Financial Sector Master Plan 21)

4 Evolution of payment system in Malaysia ,11 Cash in circulation 36,29 4, 35, 3, 25, 2, 15, 5.7 1, 5, Cash in circulation (RM million) Cash in circulation as a percentage of GDP Although cash in circulation as percentage of GDP has declined, cash remained an important mode of payment in Malaysia Source: Payment System Policy Department, Bank Negara Malaysia E- payment s 2% Share of retail payment by value 21 Cheques 98% Share of retail payment by value 27 E- payment s 7% Cheques 93% Despite the promotion of e- payments, in terms of transaction value, cheques still account for a significant portion of non-cash retail transactions (at 93% in 27) Source: Payment System Policy Department, Bank Negara Malaysia

5 Evolution of payment system in Malaysia (RM) Value of e-payment transaction per capita IBG Credit card Internet banking (RM) Value of e-payment transaction per capita Debit card Charge card E-money 37.3 Mobile banking FPX IBG, credit card and internet banking are the major e-payment instruments in terms of value Mobile banking and FPX usage is still very low (RM) Volume of e-payment transaction per capita E-money Credit card Internet banking Source: Payment System Policy Department, Bank Negara Malaysia (RM) Volume of e-payment transaction per capita Debit card Charge card IBG Mobile banking E-money, credit card and internet banking are the major e- payment instruments in terms of volume Mobile banking, debit card and charge card usage is still very low

6 Evolution of payment system in Malaysia (%) Internet banking growth Source: Central Bank of Malaysia s Annual Report Penetration of internet subscribers to total population Penetration of internet banking to internet subscribers Internet banking registered a strong growth in Malaysia 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Trend of Government Payment by Volume E-payments Cheques % 9% 8% 7% 6% 5% 4% 3% 2% 1% % Trend of Government Payment by Value E-payments Cheques The government s usage of e-payment scheme has increased Source: Bank Negara Malaysia s Annual Report 27

7 Benefits to SMEs provided by latest innovations in payment system Economic growth Comparative advantage of SMEs and the country s economy can be increased SMEs contribute about 32% to GDP and 19% to exports Increased efficiency Cost reduction Wider choices Adequate security Fast settlement cycle of electronic payment systems Eg. Receipt of payment either on T+ or T + 1 using interbank Giro. Fully image-based cheque clearing process expedites cash conversion cycle Cost of insurance and risk of losses due to robberies are reduced Transportation cost due to frequent visits to banks, customers and suppliers could also be reduced Online services by the government reduces admin cost SMEs can opt from a range of payment instruments such as IBG, FXP, electronic cheques, debit cards and mobile banking according to its market size and the level of technological, capital and labor intensiveness SMEs enjoy efficiency and security simultaneously - Adoption of Europay- Mastercard-Visa (EMV) standard - Implementation of twofactor authentication for Internet banking - Disaster recovery exercises by system operators - Issuance of guidelines on electronic banking Lack of quantitative empirical studies on the economic benefits of e- payment scheme in Malaysia

8 The global financial crisis and impact on capital flows and payment systems Malaysia has a high degree of economic openness and financial openness has increased in recent years A nation s payment and settlement system will become more interconnected with the global payment infrastructure as the nation s financial sector s openness increases The tighter interconnection has increased the potential for disruptions to spread quickly and widely across multiple systems and markets In Malaysia, foreign capital flows and exchange rate have shown sign of higher volatility during the global financial crisis

9 The global financial crisis and impact on capital flows and payment systems Balance of Payment: Malaysia Other investment Portfolio investment 4, Direct investment 3, Capital flows have been more volatile 2, 1, -1, 1st Qtr 25 2 nd Qtr 2 dr Qtr 4 th Qtr 1 st Qtr 26 2 nd Qtr 3 rd Qtr 4 th Qtr 1 st Qtr 27 2 nd Qtr 3 rd Qtr 4 th Qtr 1 st Qtr 28 2 nd Qtr Source: Bank Negara Malaysia s Monthly Statistical Bulletin, Various Issues -2, -3, -4, -5, -6, 4. RM/US$ daily exchange rates Volatility of exchange rates have increased 3.5 Source: Bank Negara Malaysia s Monthly Statistical Bulletin, Various Issues 3. Shifted to managed float system RM million RM

10 The global financial crisis and impact on capital flows and payment systems Higher volatility of foreign capital flows did not have major effect on inter-bank money market Inter-bank Money Market 4. 18, , ,. 12,. 1,. 8,. 6,. Jan. / Jan. Feb. / Feb. Mac / Mar. Apr. / Apr. Mei / May Jun / June Jul / July Ogos/ Aug. Sep./ Sep. Okt./ Oct. Nov./ Nov. Dis./ Dec Jan. / Jan. Feb. / Feb. Mac / Mar. Apr. / Apr. Mei / May Jun / June Jul / July Ogos/ Aug. Sep./ Sep. Okt./ Oct. Nov./ Nov. Dis./ Dec Jan. / Jan. Feb. / Feb. Mac / Mar. Apr. / Apr. Mei / May Jun / June Jul / July Ogos/ Aug. Sep./ Sep. Okt./ Oct. Nov./ Nov. Interbank rates 4,. 2,.. Volume of Transaction in Interbank Money Market Overnight money RM million 1 week 1 month 3 month Source: Bank Negara Malaysia s Monthly Statistical Bulletin, Nov 28

11 The global financial crisis and impact on capital flows and payment systems It is important that institutions and service providers at the centre of key interdependencies have especially strong risk management controls and local authorities to establish close cooperation with cross border regulatory authorities In Malaysia, among the controls to mitigate systemic risks are Limitation of membership in large value payment system to principal dealers Issuance of guidelines on liquidity and supervisory actions Payment versus Payment (PvP) infrastructure Cooperative oversight arrangement with foreign regulator Adopting best practices issued by international standard setting bodies such as the Bank for International Settlement (BIS) Future enhancements to payment system should consider increasing the transparency in Over-The-Counter market

12 Thank you