Bank Negara Malaysia has issued the Interoperable Credit Transfer Framework (ICTF) on 20th March 2018, which has taken into account feedback received during the public consultation period on the Exposure Draft released on 7 December 2017.
This new policy document has far and wide implication to Malaysia’s payments landscape beyond just QR codes and to understand what the implications are for a cashless Malaysia, the Fintech News team decided to take a dive into what BNM’s ICTF entails.
What Is The Purpose of The ICTF?
Bank Negara Malaysia’s ICTF seeks to foster an efficient, competitive and innovative payment landscape in Malaysia by enabling the interoperability of credit transfer services. The policy also aims at promoting collaborative competition between banks and non-bank electronic money (e-money) issuers which includes the likes of TNG Digital, Grabpay, Boost, vcash and many more. This is to be done through fair and open access to shared payment infrastructure.
Which is a fancy way of saying that regardless of whether you’d like to transfer money from one digital wallet to another, from one bank to another digital wallet or vice versa in can be done so once this policy comes into effect on the 1st of July 2018.
Commenting on the importance of the ICTF framework during the Malaysian Fintech Expo, Tan Nyat Chuan, Director of Payment Systems Policy, Bank Negara Malaysia, said that the products offered by Malaysian banks currently only meets the needs of one of the bubbles illustrated in Figure 1 whereas the digital wallet players products are likely to be more well suited for the other two bubbles of adults without online banking account or banking accounts in general alluding to how an interoperable framework will help serve the populace across the three bubbles. He emphasised that the central bank needs a new set of disruptors to serve the market that is not adequately addressed by the banks.
What is the ICTF?
Describing the framework, Tan said, “It’s a very unique framework.. we don’t have frameworks that we can cut and paste for our local situation given our circumstances, we will be probably the first in this part of the world to open to open up our clearing access to used to be bank centric to non-banks”
Real Time Payments Platform
The policy paper outlines a national Real-Time Retail Payment Platform which consists of the National Addressing Database which is repository that links an account to unique identifiers like a mobile number or an NRIC number to facilitate payments to specific recipient and a an interoperable QR scheme and a common QR code that facilitates to facilitate the transactions as illustrated in Figure 2.
According to a previous announcement by ACI, the Real-Time Retail payment platform is built by ACI, operated by Paynet that is the result of the merger between Malaysian Electronic Clearing Corporation (MyClear), with Malaysian Electronic Payment System (MEPS), in August 2017.
Innovation Sandbox and Open APIs
The framework also promotes innovation through the establishment of an innovation sandbox and a requirement for the shared payment infrastructure operator and participants to publish and permit any third party to use the published APIs which are subject to the relevant laws, policies and guidelines on dealing with data privacy and security
What will the ICTF Mean for a Cashless Malaysia?
Having the ability to transfer money irrespective of the provider will do a great deal in adding functionally especially for peer-to-peer payments, in addition to that having a interoperable common QR code will likely make payment acceptance. A combination of these two will likely accelerate the Malaysia’s ambitions of becoming a cashless society.
Another aspect that stood out for us that we feel will help drive cashless adoption is the fact that fees for transactions less RM 5,000 will be waived, which means for the most part consumers will not be charged for a majority of their money transfer and payment needs.
To get a sense of what the industry feels about the new framework, we’ve reach out to payments industry veteran Danny Leong who’s currently serving as the Group CEO of one of the leading payments companies in Malaysia, GHL.
Commenting on the matter he said “With the traditional move from cash to credit card and debit card payments, we believe that the new wave of cashless migration will be driven by QR Codes and Mobile Payments. With ICTF, we believe it will further encourage adoption as all payment instrument issuers can then allow their customers to complete payment transactions outside their proprietary payment eco-system. This will definitely proliferate electronic payments.”
