Singapore is separated from Malaysia by a 1,056-meter (or 0.65-mile) Johor-Singapore Causeway, yet crossing the narrow strip of water separating the city-state of Singapore and its 5.6 million residents from the nation of Malaysia and its 32 million citizens means moving between two entirely different payments universes.
To say Singapore is payment card-enthused would be an understatement. The average Singaporean has between two and six of them, and 60 percent of the nation’s spend is done through the payment method, according to Leslie Choo, ACI Worldwide’s Asia vice president and general manager of payment cards. In addition, the digital payments they enable are just part of consumers' standard background music.
“In Singapore, consumers are in the habit of using cards, and accustomed to using them at the point of sale and not having to carry cash,” Choo said.
The situation in Malaysia is very different. Some consumers use payment cards, but the payment method's penetration is nowhere near as wide and universal for consumers — and the same can be said for their acceptance among merchants.
But, perhaps this will change in the years to come. According to Choo, Malaysia is undergoing a national initiative to modernize its infrastructure by building a real-time retail payments platform (RPP).
Building PayNet to Power the Next Generation of Payments Infrastructure
Malaysia’s premier payments and financial market infrastructure provider, PayNet, was created earlier this year by the Malaysian central bank following the merger of the Malaysian Electronic Clearing Corporation (MyClear) — a wholly owned subsidiary of the Malaysian central bank — and the Malaysian Electronic Payment System (MEPS). The combined organization will run as an independent entity to accelerate ePayment adoption in the nation.
PayNet has several objectives, Choo explained. First, it will modernize the existing real-time payments infrastructure. Malaysia has an existing Instant Transfer service running on ACI’s Base24 Classic, which handles more than 120 million real-time transactions in Malaysia annually. However, usage is largely targeted at consumers with limited corporate use. PayNet will migrate Instant Transfers to a new, modern platform to expand its utility and functionality to encompass extended data payloads within the payment transaction to facilitate orchestration of complex business transactions, real-time direct debits and request-to-pay for invoicing, as well as B2B payments.
The second part of the initiative is to create a common digital standard allowing consumers with mobile phones to use them to pay at merchants. That, Choo said, will come via an in-country QR code that will not only enable real-time person-to-person (P2P) payments, but also enable acceptance at merchants.
Consumers living in Malaysia are already familiar with mobile and online payment platform Alipay and are comfortable using it. The mobile payments secret is out of the box — and Malaysian consumers have demonstrated they are at least interested in them and the expanded access they provide. The Malaysian government's efforts look to tap into this enthusiasm to create a neutral network enabling a wider swatch of payments across the entire nation.
“Moving forward, any payments related transactions in Malaysia — whether that is paying for transport, government services, peer-to-peer payments or cash out online — eCommerce will all use this system,” Choo said.
By providing a common space for all participants in the ecosystem that includes banks, institutions, businesses, consumers and the government, PayNet has an opportunity to build out a solid Malaysian digital commerce ecosystem, Choo said. And, since nearly 97 percent of Malaysians own mobile phones and more than 70 percent have smartphones, there’s a lot of potential to accelerate the digitization of payments once the right infrastructure is in place.
The Bigger Potential
PayNet will leverage ACI’s Universal Payments platform to create its real-time payments infrastructure. Given the similar work ACI has unveiled in places like Singapore, Thailand and the Philippines, PayNet is also a chance for Malaysia to be part of an emerging Southeast Asian commerce ecosystem, Choo said.
“We will soon be able to cross-borders and link all these national systems together to form a bigger, interoperable ecosystem,” he noted of what the future of the PayNet system looks like in context, given its ability to potentially connect 600 million consumers.
It has massive potential, though Choo admits the work to get there will be almost equally massive.
Bringing together customers who speak different languages, use different payment types and have different cultures — and then syncing them into a single system that can work harmoniously — is a big effort, he explained, but also one that consumers increasingly demand. Choo emphasized that consumers across the region want a seamless cross-border commerce experience, and they don’t want to have to rely on cash to enable that — particularly since dependence on cash keeps them out of a digital marketplace.
Moreover, though the initial appeal of real-time payments will be to consumers, the utility of a real-time payment platform will soon be felt outside the consumer segment with small- and medium-sized businesses (SMBs) and corporates. That, Choo, believes, is where the ultimate potential lies.