The rapid adoption of digital payments has revolutionized how we make transactions, offering benefits such as speed, affordability, and seamless experiences. This shift towards digital payments is not limited to domestic markets but has extended to cross-border transactions, with the ASEAN region witnessing significant activity in this space. 

However, as digital payments continue to grow, so do the risks associated with fraud and cyber threats. Maintaining public confidence in digital payments requires the collective efforts of financial institutions, authorities, and industry players. 

To address these concerns and explore the future of digitalization in payments, a panel session titled ‘Going Digital with Confidence in an Innovative Landscape’ was organized during the Bank Negara Malaysia (BNM) Sasana Symposium 2023 (SS2023) featuring industry experts.

The panelists comprised Assistant Governor of Bank Negara Malaysia Suhaimi Ali, Group Chief Executive Officer of PayNet Farhan Ahmad, Chief Executive Officer of TNG Digital Alan Ni, and Group Chief Digital Officer of Maybank Kalyani Nair.

Advancing digital payments in Malaysia: vision and outcomes

In Malaysia, the vision for digital payments is focused on achieving financial inclusion and supporting economic growth. This vision encompasses accessibility, affordability, security, interoperability, and informed consumers.

The goal is to ensure that digital payments are accessible to all, regardless of income level or geographic location, and that they are affordable and secure. 

Interoperability is crucial, allowing users to transact across different platforms and service providers. Additionally, fostering informed consumers who understand the benefits and safety measures of digital payments is essential. 

Suhaimi Ali highlighted that the financial sector blueprint outlines three strategies: increasing adoption among businesses and households, ensuring digital payment infrastructure readiness, and balancing development and security.

Increasing adoption and infrastructure readiness

To increase adoption, Malaysia has witnessed a significant migration to e-payment, with notable results during the pandemic. Malaysians made an average of 291 e-payment transactions per person in 2022, compared to 144 transactions in 2019. 

“The bank is working on efforts to migrate to e-payment, targeting that each Malaysian makes an average of 400 e-transactions by 2026. The bank is also focusing on transforming difficult-to-reach or transform areas, with notable successes in Pulau Redang and Sungai Petani,” said Suhaimi.

To ensure infrastructure readiness, Malaysia has focused on enhancing cross-border payment capabilities. While domestic payments are efficient, cross-border transactions still face cost, speed, and transparency challenges. 

To address this, Malaysia is working with ASEAN countries and the BIS Innovation Hub to establish a multilateral payment platform for cross-border transactions. 

This platform aims to make cross-border payments as efficient as domestic transactions, reducing costs and improving speed. Additionally, Malaysia is exploring the use of Central Bank Digital Currency (CBDC) and preparing for its potential implementation.

Sustaining momentum for digital payments

Collaboration between the public and private sectors, along with key factors such as convenience, security, trust, and value-added services, has played a vital role in the success of digital payments in Malaysia and the ASEAN region.

Partnerships with industry players, regulatory backing, and substantial investments in infrastructure have propelled the growth of digital payments.

Alan attributed the surge in digital payments to the collaboration between the public and private sectors, emphasizing the role of various initiatives such as cross-border payments, national QR code adoption, and anti-fraud measures.

Moving forward, sustaining the momentum of digital payments requires a focus on convenience, security, trust, and value-added services. Ensuring universal payment coverage across various sectors, including rural areas and small merchants, is crucial. 

Developing secure and fraud-resistant systems is vital for maintaining trust among users. In addition, providing value-added services beyond payments, such as financial and merchant services, can enhance the overall ecosystem and deliver more value to customers.

Drawing from TNG’s presence in China, Alan discussed the benefits of learning from cross-border experiences and emphasized the importance of collaboration in driving growth.

“The lessons learned from China’s experience in digital payments, highlight the importance of internet infrastructure, affordability, and a delicate balance in regulatory frameworks to ensure low transaction costs while maintaining commercial viability,” said Alan.

The role of RPP in Malaysia’s digital payment landscape

Farhan highlighted the transformative impact of the Real-Time Payment Platform (RPP) on Malaysia’s digital payment landscape. RPP provides an enabling environment for the industry to compete at the product level to benefit end users.

“With an extensive global view, RPP’s performance in Malaysia has been impressive, ranking among the top three to five platforms globally.” said Farhan.

“Despite boasting an outstanding infrastructure, the RPP’s potential is yet to be fully harnessed. This collective responsibility involves various stakeholders, from payment providers to merchants and consumers. The objective is not merely to digitize payments but to add value to the populace,” he added.

Strategies such as merchant adoption, user-friendly interfaces, strong regulations, technological readiness, and fintech-bank partnerships are crucial to ensure future success. India’s Unified Payment Interface (UPI) provides valuable lessons. 

Cross-border transactions are also important, aiming to create an alternative to established players such as Visa and Mastercard. Malaysia’s digital payment landscape is set for exciting times by fostering collaboration, innovation, and user-centric approaches.

Redefining SME banking with digital solutions

As technology continues to reshape industries, it has become increasingly essential for small and medium enterprises (SMEs) to embrace digital technologies to stay competitive.

Maybank recognizes the need to help SMEs embrace digital technologies for their businesses. By providing cross-border transaction capabilities, the bank aims to expose SMEs to a broader market and increase their exposure. However, implementing digital solutions is not enough – educating SMEs about using these digital tools is equally important.

Digital maturity cannot be assumed for all businesses, so banks must guide and support SMEs. This includes providing insights to help enterprises to up their game, offering peer-to-peer (P2P) payment options, and thinking about embedded financing.

“We recognize that financial literacy is not universal; thus, part of our mission is to educate SMEs fectively using digital tools for business. Payments are critical to enable SMEs to transition smoothly into the digital sphere,” said Kalyani.

Moreover, Maybank acknowledges the potential for open data and banking to help SMEs with capabilities such as invoice payment and trust building.

The Impossible Trinity and maintaining trust in digital payments

The Impossible Trinity is the delicate balance between three critical aspects of the financial industry: promoting financial inclusion, ensuring security, and facilitating convenience. This trinity presents a challenge for regulators and industry players alike, as enhancing one aspect often comes at the expense of the others.

“Financial inclusion aims to provide access to financial services for all individuals, regardless of socioeconomic status. However, expanding access may require relaxing security measures, increasing vulnerability to fraudulent activities,” said Suhaimi.

“On the other hand, prioritizing security may limit convenience, making transactions more cumbersome for users. Striking the right balance among these three elements is crucial for a sustainable and thriving financial ecosystem,” he added.

Ultimately, the key lies in adapting to changes and finding innovative solutions to maintain financial inclusion, security, and convenience concurrently.

Security in digital payments

The integral role of security in digital transactions cannot be overstated. Both conventional financial institutions and emerging fintech companies are making concerted efforts to safeguard users and uphold confidence in their services. Security is a fundamental aspect of digital payments.

Some of these measures include removing hyperlinks and enhancing customer awareness about potential fraud threats.

On the one hand, making transactions friction-free enhances customer convenience, but it also invites potential fraud threats. Therefore, finding the right balance in maintaining customer trust is crucial while offering an efficient and hassle-free transaction process.

“As technology continues to evolve, so do the techniques employed by fraudsters. Constant innovation is required to stay ahead of the curve and maintain a secure digital payments ecosystem. The rise of quantum computing and artificial intelligence (AI) poses new challenges and threats that need to be addressed proactively, ” said Farhan.

“In addition to fundamental security hygiene measures like eliminating links and implementing transaction alerts, the industry should strive to share information and data on fraud incidents and suspected fraud, he added.

Looking ahead, consumer education will remain essential but may not be the most effective means of combating fraud. Instead, an open sharing of data and information among industry players can provide real-time insights into fraudulent activities and help protect end users.

The importance of public-private partnerships for advancing innovation

Amidst the ever-evolving landscape of digital payments, one thing remains clear: public-private partnerships are the order of the day. The financial sector has witnessed significant progress, evident in the succession of blueprints and initiatives implemented from 2001 to 2020—however, the true potential lies in the interlinkages and collective actions of all stakeholders. 

“Embracing a whole-of-nation approach that involves collaboration among industry players, regulatory bodies, and the government is paramount for propelling the nation forward,” said Suhaimi. 

“By uniting forces and pooling resources, we can foster an environment that thrives on innovation, ensuring that Malaysia and the ASEAN region remain at the forefront of advancements in digital payments. It is through such collaborations that we can unlock the full benefits and seize the opportunities presented by the rapid pace of technological advancements,” he added.