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Malaysian Payment Systems

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Types of Payment Systems

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Malaysia's Payment System

z Systemically Important Payment System (SIPS) or Large Value Payment System

(LVPS)
{ Real Time Electronics Transfer of Funds and Securities (RENTAS)

z Retail Payment System

{ Systems
{ Instruments
{ Channels

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:

i. Interbank funds transfer;

ii. Cash withdrawals from BNM;
iii. Statutory reserve adjustment;
iv. Money market settlement;
v. Ringgit leg of foreign exchange; and
vi. Scripless securities transfer.

Currently, there are 65 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

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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 BNM and government agencies.

In November 2006, BNM 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.

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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

i. Cheque Truncation and Conversion System (CTCS)

ii. Shared ATM Network
iii. Interbank GIRO
iv. Financial Process Exchange
v. Remittance

Types of retail payment instruments

i. Cheques
ii. Credit cards
iii. Charge cards
iv. Debit cards
v. E-money

Types of retail payment channels

i. Internet banking
ii. Mobile banking
iii. Mobile payment

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Types of retail payment systems

Cheque Truncation and Conversion System (CTCS)

BNM had implemented the Cheque Truncation and Conversion System (CTCS) in the
Klang Valley and neighbouring states to replace the previous Sistem Penjelasan Imej
Cek Kebangsaan (SPICK) cheque clearing system on 13 June 2008. It would be rolled
out progressively to the rest of the country by middle 2009.

The objectives of CTCS are to implement a paperless cheque clearing process, achieve
a common dayhold throughout the nation and increase the efficiency of the clearing and
settlement process.

In cheque truncation, the clearing of cheques are based on the image and Magnetic Ink
Character Recognition (MICR) Codeline data of the cheque and not the physical cheque.
In place of the physical cheque, the image and data of the cheque, such as the MICR
fields, date of presentation, presenting bank, etc., would be transmitted electronically
throughout the clearing process. Thus, the need to move the physical cheque from the
collecting bank to the clearing house and the paying bank will not be necessary. This
would effectively reduce the time required for clearing of cheques.

In CTCS, in the event of dishonour, where the cheque can be represented, the original
cheques will not be returned. Instead, an Image Return Document (IRD) will be issued,
where these can be represented. The IRD acts as a substitute for the original cheque.

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 CTCS, outstation as well as local cheques will be cleared
on the same day and funds made available as early as the next business day, compared
to between 5 to 8 business days for outstation cheques currently.

Link to press release on CTCS

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Shared ATM Network (SAN)

MEPS Shared ATM Network

Malaysian Electronic Payment System Sdn Bhd (MEPS) is a major retail payment
system service provider in Malaysia, who operates Shared ATM Network, Interbank
GIRO (IBG), Financial Process Exchange (FPX) and e-Debit.

Link to MEPS Website

HOUSe
Four locally-incorporated foreign banks, namely, HSBC Bank, OCBC Bank, Standard
Chartered Bank and UOB Bank had, in July 2006, teamed up and established a new
shared ATM network known as HOUSe, which offers cash withdrawal and balance
enquiry services.

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InterBank GIRO

The Interbank GIRO (IBG) services facilitate bulk electronic interbank credit transfers of
up to RM100,000 per transaction on either T+0 or T+1 basis (depending on when the
payment is submitted to the banking institution).

Link to MEPS Website

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Financial Process Exchange

Financial Process Exchange (FPX), is an Internet-based multi-bank payment platform

that facilitates online payment for e-commerce transactions. The FPX leverages on the
banking institutions' Internet banking services to provide the online payments.

Link to MEPS Website

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Remittance

When a fund is transferred from one location to another (usually between countries), the
process is called 'remittance'. An entity performing this service for a customer is therefore
providing a remittance service. Providers of remittance services must be licensed by
BNM. Remittance services in Malaysia are not only offered by banking institutions but
also by non-bank remittance service providers (RSPs).

Link to list of non-bank RSPs

Before deciding to undertake the transaction, please read the terms and conditions
carefully, and be informed on the exchange rates and total cost of the remittance.

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Types of retail payment instruments

Cheques

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.

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Credit Cards

A 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

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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:

i. Tier 1 - Maximum of 15% per annum (those who promptly settle their minimum
payment due for 12 consecutive months);
ii. 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
iii. Tier 3 - Maximum of 18% per annum.

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Charge Cards

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.

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Debit Cards

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.

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E-money

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.

Link to list of approved e-money issuers

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Types of retail payment channels

Internet Banking

Internet banking provides a fast and convenient way of performing common banking
transactions, such transferring funds from your savings account to your current account,
or even to a third party's account. Through Internet banking, you could also make
payments to relevant parties, such as your utility bills, your assessment tax, and others. If
you have a computer with Internet access, a web browser and a registered account for
Internet banking 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 your
Login ID, password or PIN confidential; checking that you 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 your 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

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Mobile Banking

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
your mobile phone that is linked to your account unattended to; keeping your PIN
confidential; and never reply to any SMS claiming to be from your bank or asking for your
banking details.

Link to list of offering Banks

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Mobile Payment

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.

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