mobile payment system in malaysia its potentials and consumers adoption strategies

A mobile payment or m-payment may be defined, for our purposes, as any payment where a mobile device is used to initiate, authorize and confirm an exchange of financial value in return for goods and services. Mobile devices may include mobile phones, PDAs, wireless tablets and any other device that connect to mobile telecommunication network and make it possible for payments to be made. The realization of mobile payments will make possible new and unforeseen ways of convenience and commerce. Unsuspected technological innovations are possible. Music, video on demand, location based services identifiable through mobile handheld devices – procurement of travel, hospitality, entertainment and other uses are possible when mobile payments become feasible and ubiquitous. Mobile payments can become a complement to cash, cheques, credit cards and debit cards. It can also be used for payment of bills (especially utilities and insurance premiums) with access to account-based payment instruments such as electronic funds transfer, Internet banking payments, direct debit and electronic bill presentment.

A mobile payment service in order to become acceptable in the market as a mode of payment the following conditions have to be met :

a) Simplicity and Usability: The m-payment application must be user friendly with little or no learning curve to the customer. The customer must also be able to personalize the application to suit his or her convenience.

b) Universality: M-payments service must provide for transactions between one customer to another customer (C2C), or from a business to a customer (B2C) or between businesses (B2B). The coverage should include domestic, regional and global environments. Payments must be possible in terms of both low value micro-payments and high value macro-payments.

c) Interoperability: Development should be based on standards and open technologies that allow one implemented system to interact with other systems.

d) Security, Privacy and Trust: A customer must be able to trust a mobile payment application provider that his or her credit or debit card information may not be misused. Secondly, when these transactions become recorded customer privacy should not be lost in the sense that the credit histories and spending patterns of the customer should not be openly available for public scrutiny. Mobile payments have to be as anonymous as cash transactions. Third, the system should be foolproof, resistant to attacks from hackers and terrorists. This may be provided using public key infrastructure security, biometrics and passwords integrated into the mobile payment solution architectures.

e) Cost: The m-payments should not be costlier than existing payment mechanisms to the extent possible. A m-payment solution should compete with other modes of payment in terms of cost and convenience.

f) Speed: The speed at which m-payments are executed must be acceptable to customers and merchants.

g) Cross border payments: To become widely accepted the m-payment application must be available globally, word-wide.

The Malaysian Electronic Payment System, commonly known as MEPS, is the only interbank network service provider in Malaysia.

Malaysian Electronic Payment System (1997) Sdn Bhd is a payment consortium owned equally by 12 local banks. Its subsidiary companies are MEPS Currency Management Sdn Bhd (MCM) and FPX Gateway Sdn Bhd (FPX).
MEPS plays a role in the implementation of smart card for Automated Teller Machine (ATM) card, which is an upgrade to chip-based card from previous magnetic-stripe card issued to all banks customer.

The card is also known as Bankcard, a card with multiple functions. There are three main functions that can be used namely ATM (with various combinations of banking transactions), e-Debit (online purchase payment) transactions at participating merchants and MEPS Cash (load in a monetary value into your Bankcard chip) and pay of participating merchants.

MEPS provides the following services in its network to all participating banks:

1.Shared Nationwide ATM Network, provides the switch which enable bank customers to conveniently access their funds anywhere from any of the participating banks’ ATMs.

2.Shared Regional ATM Network, a cross-border ATM link with Indonesia (ArtaJasa, Rintis), Singapore (NETS), Thailand (ITMX) and China (CUP) that offers participating banks’ customers the convenience of making cash withdrawals via ATM in the said countries and vice versa.

3.e-Debit, enables the purchase amount to be immediately deducted from the savings or current account direct into the retailer's or merchant's bank account. This provides consumers with better cash management and peace of mind as all transactions are PIN based. In addition, the new card is embedded with a sophisticated, tamper-resistant smart chip to protect consumers against the risk of fraud.

4.Mobile Prepaid Top-Up via ATM, offers more convenience for mobile phone subscribers to top-up through MEPS’ ATMs.

5.Interbank ATM Fund Transfer (IBFT), allows bank customers to transfer funds from one account to another account in another bank. The beneficiary will receive the funds immediately and instantaneously, as the transfer is online and in real-time.

6.Interbank GIRO (IBG), makes interbank funds transfer more convenient to bank customers via an electronic channel. It enables payments to be made without the need to raise physical supporting vouchers or documents such as cheques, bank drafts, etc. It is an interbank fund transfer system that facilitates payments and collections via the exchange of digitized transactions between banks. For corporations, it is ideal for high volume interbank payments up to a maximum of RM100,000 per transaction such as payroll and dividend/warrant payments. As for individuals, it is ideal for transactions such as credit card payments and loan repayments. It offers bank customers, be an individual or corporation, a secure interbank fund transfer system/channel for all sorts of payments through direct debiting of the customers' account(s) and crediting into the beneficiaries account; with any IBG participating banks.

7.Financial Processing Exchange (FPX), opens new doors for e-Commerce, in particular business to business (B2B) and business to commerce (B2C) payments. FPX is an alternative payment channel for customers to make payment at e-market places such as websites and online stores as well as for corporations to collect bulk payment from their customers. It leverages on the Internet banking services of participating banks and provides fast, secure, reliable, real-time online payment processing. FPX provides complete end-to-end business transactions, resourceful payment records, simplified reconciliation and reduced risks as fund movements are between established financial institutions.