Mobile Payment Systems in Malaysia.

Nowadays people living in an environment characterised by rising prices. Therefore there is the need to adjust and adapt to these new conditions through the adoption of a more expedient and efficient means of payment to reduce costs. Function and responsibility of the Central Bank is to promote the development of safe and efficient payment systems. Any inability to make payments in an economy would have a far reaching and widespread impact on society.

As the electronic payment channels become more easily accessible. It would thus provide the opportunity to shift the remittance flows from the informal to formal channels. Indeed, electronic payment increases operational efficiency and improves productivity levels through expedient payments and receipts of funds; provide the speed and convenience of making payments from any place or time. Accelerating the country's migration to electronic payments has therefore become a part of Malaysia's larger national agenda to increase the efficiency of the nation's payment systems which would ultimately improve the competitiveness of our economy.

Credit cards, ATM cards, debit cards including the e-purse application embedded in the MyKad are among the card payments possibilities in Malaysia. The increased use of cards is an international trend and is expected to gain significance in Malaysia. Giro transfers, other credit transfers and direct debit are also gaining significance by both individuals and businesses. Finally, Internet banking has also begun to experience stronger growth. However, in 2006, Malaysian consumers on average made only 0.7 transaction via direct debit and credit transfer and 0.2 transaction via debit card transaction as compared to 84.7 and 109.5 transactions. In this regard, the Bank has formulated an Electronic Payments Roadmap aimed at bringing together relevant stakeholders to address the barriers that have impeded the increased adoption of electronic payment in a comprehensive and strategic manner.

1. Payment infrastructure. The infrastructure for making payments would need to be widened and enhanced to provide the convenient access to electronic payments. In addition, solutions need to be developed to enable users to integrate easily with the payment offerings.
2. The product range. The range of services would need to be expanded to cater for the different payment needs of consumers and business sectors.
3. The pricing framework. The formulation of a transparent and cost-effective pricing framework is important to provide the incentive structure that would spur the adoption of electronic means of payments.
4. Consumer awareness. Programmes need to be implemented to inculcate the behavioral change among consumers. There needs to be trust and confidence in the electronic payment systems.
5. The standards. The setting of common standards to address the interoperability of systems including standardising the payment messaging format is vital to the wider acceptance of electronic payment.
6. Ensure the security and integrity of the payment system which requires the supporting regulatory and legal framework to be in place.

Potential of mobile phones to make the transformation

Maxis announced that it is currently trialling a mobile phone multi-payment service incorporating credit card and prepaid transit payments with Maybank, Visa International and Touch 'n Go. Maxis 'touch to pay' employs Near Field Communications ("NFC") technology which leverages on a short-range wireless connectivity standard embedded in mobile phones. This 'touch to pay' trial reflects Maxis' commitment to lead in mobile payment services. This technology, currently available on Nokia 6131 NFC, allow users to touch their handsets against contactless payment readers to make a purchase. Transforming the use of mobile phones into a conduit for swift, cashless payments using the one accessory people are going to carry around with them above others.

Mobile phones become the electronic devices offence catch on hands of most Malaysians. Given the significant pay-offs from the low cost technologies in accelerating the adoption of electronic payment. Mobile phone is identified as one of the delivery channels that should be leveraged on. Indeed, payments via text messaging has the potential to grow in importance. The high percentage of mobile phone subscriber and the high rate of participation of the population in the banking system are important pre-conditions for the significant use of the mobile phone as an ideal platform for personal payments. Indeed, the large mobile subscriber base and the positive transformational effects of mobile banking and payments offer a unique opportunity to open up the financial system to more customers and communities in order to achieve financial inclusion for all segments of our society.

It is important to identify the gaps in the service offerings, and plan the way ahead for Malaysia to make the quantum leap in e-payment adoption. Market participants need to address the mismatch between what consumers expect and what is being offered. Openness and inter-connectivity are also critical in the mobile banking and payment initiatives. Exclusive and proprietary services where the target market is limited to the customer base of individual mobile operators or individual banks will not allow for the potential to be realised. Any lack of interoperability across mobile operators and across banks will not achieve the required critical mass and will also result in high transaction cost for consumers.