Payment Systems in Malaysia: Recent Developments and Issues

Abstract

Payment systems in Malaysia have been undergoing changes in recent years. Among the notable changes is the emergence of electronic-based payment systems. The central bank has been playing an active role in shaping the development of payment systems, particularly in the gradual introduction of electronic-based payment schemes, in the belief that these have the potential to increase efficiency in the economy as whole. The active introduction of e-payment instruments has increased both the value and volume of transactions per capita use of e-payment instruments in recent years. Checks continue to be the major payment instrument, however. Small- and medium-sized enterprises could benefit tremendously from the use of e-payment schemes through more efficient business operations, cost reductions, enhanced security and wider payment channel choice. Noted improvements have also resulted from the introduction of large-value payment systems, such as the payment versus payment infrastructure for the settlement of Malaysian ringgit-United States dollar foreign exchange trades and the delivery versus payment settlement for United States dollar securities that are issued, deposited, and traded in Malaysia. The development of the domestic payment system is becoming more important in the development of a deep and active domestic financial market that promotes financial market stability and the reinvestment of savings in the country. Closer financial market integration in the region and closer cooperation and policy coordination among the monetary authorities in the region is becoming increasingly important. Eight years after implementation in Malaysia, the epayment schemes should be studied to assess any economic benefits they may have provided.