Fintech & Legislation
Published at 11 August 2022, 1.18 a.m.
The Covid-19 Pandemic has undoubtedly accelerated the growth of the electronic commerce (“e-commerce”) industry and the rise of cashless transaction in Malaysia. Cashless payment method including payments made via electronic money (“e-money”) was highly encouraged during the Covid-19 outbreak as it can effectively avoid physical contacts and facilitate social distancing. In fact, even before the Covid-19 Pandemic, Malaysians were no stranger to e-money. One of the most recognizable form of e-money which is widely used in Malaysia is the Touch n’ Go card.
Generally, e-money can be utilized by consumers to purchase goods and services from any third-party merchants who are willing to accept this form of cashless payment method. However, it may be a concern to the consumers and merchants of the security of the e-money stored in their electronic wallet (“e-wallet”) or physical card. In this article, we will discuss about the governing laws, regulatory approvals and the safeguards in place in relation to e-money transactions in Malaysia.
E-money is one of the payment instruments in Malaysia which is governed by the Financial Services Act 2013 (“FSA”) where it contains monetary value that is paid in advance by the user to the e-money issuer.
It is defined under the Financial Services (Designated Payment Instruments) Order 2013 as a designated payment instrument, whether tangible or intangible that:
stores funds electronically in exchange of funds paid to the issuer; and
is able to be used as a means of making payment to any person other than the issuer.
E-money can be issued in two forms, such as card-based which are prepaid cards and network-based which can be accessible via the internet, mobile phones or any other devices.
An issuer of e-money (“EMI”) refers to any person that is responsible for the payment obligation and assumes the liabilities for the e-money being issued.
Besides Touch n’ Go Sdn Bhd, some other examples of non-bank EMIs are AEON Credit Services (M) Bhd, BigPay Malaysia Sdn Bhd and ShopeePay Malaysia Sdn Bhd.
According to the list of regulatee of Bank Negara Malaysia (“BNM”) for EMI, there are 47 non-bank EMIs and 6 bank EMIs which are approved by BNM (as of the date of this article).
An approval by BNM pursuant to Section 11 of the FSA is required for the issuance of any designated payment instruments in Malaysia and this includes e-money.
BNM seeks to ensure the safety and soundness of e-money schemes in Malaysia via the issuance of the e-money Guideline and recently the Exposure Draft which will be implemented upon its finalization. It is a fact that there must be an adequate level of security and reliability in e-money schemes to preserve and enhance the confidence of consumers and/or merchants in the usage and acceptance of e-money.
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