Smooth banking operations

Reliable payment systems build public trust in service instruments

LAST year, the payment and settlement systems continued to support the growth of the banking sector and the broader economic and financial system.

Apart from promoting the smooth operation of the payment and settlement systems and strengthening the mitigation of associated risks, Bank Negara’s efforts were also directed towards fostering efficient and effective payment services to support Malaysia’s transition towards being a high-income economy.

The bank aims to ensure the continued reliability of the major payment systems and thus promote public confidence and trust in the retail payment systems and instruments. Its primary focus of oversight will be directed at the major interbank clearing and settlement systems and the widely used payment instruments.

The objective of the bank’s oversight is to mitigate systemic risks that may arise from disruptions in the operations of the payment systems, to promote the efficiency of payment systems, and accord adequate protection for users of the payment systems and instruments.

The Real-time Electronic Transfer of Funds and Securities System (Rentas) is a real-time gross settlement system designed for the transfer and settlement of high-value interbank payments and securities transaction. Malaysian Electronic Clearing Corporation Sdn Bhd, a subsidiary of the Bank Negara operates the system.

Last year, Rentas increased its value to 55.3 times of the country’s GDP compared to 51.5 times in 2010. This was due to an increase in foreign direct investments nd higher capital flows.

Overall fraud losses have remained negligible, accounting for only 0.001% of total value of retail payment transactions in 2011, a trend since 2006 following the industrywide migration to chip-based Automated Teller Machine (ATM) cards and the Euro pay-mastercard-Visa standard for credit cards.

In combating fraud, greater focus was given to promote the secure use of credit cards which is a widely used e-payment instrument in Malaysia. As a result, credit card fraud losses were contained to less than 0.05% since 2006.

Moving forward, the use of personal Identification Number for verification for card transactions performed at the point-of-sale may be adopted to replace the current requirement of signing on a paper receipt.

E-payments at Electronic Funds Transfer at Point of Sale terminals continued to record steady growth with more consumers and merchants preferring the efficiency and convenience of payment cards over cash.

E-money usage continued to expand in 2011, growing by 15.4% and 40.8% in terms of the number and value of transactions respectively. 806.8 million transactions worth Rm3.8bil were made in 2011 (2010: 699.3 million transactions worth Rm2.7bil).

The ATM is also widely used for interbank fund transfers, loan and card repayments, and bill payments. In 2011, 42.1 million financial transactions totalling Rm37.3bil were made via ATM (2010: 38.8 million transactions worth Rm31.3bil).

The use of mobile phones for payments has also expanded following moves by banks to enhance mobile banking applications to support a wider range of mobile banking transactions. and the introduction of mobile banking services by a major bank during the year.

Cash-in-circulation, a proxy for cashusage, increased from rm47.7bil in 2010 to Rm53.5bil in 2011. While remaining high, its share of the total value of private consumption expenditure declined from 82% in 2000 to 68% in 2011, signifying the displacement of cash by more convenient e-payment alternatives, such as payment cards and electronic banking.

In 2011, the total number of cheques cleared decreased further to 204.9 million (2010: 206.7 million).