Cardholders need to start using PIN to resolve teething problems

Credit and debit card holders need to start using their PIN for transactions to assist Bank Negara Malaysia (BNM) and the banking industry to uncover and resolve teething issues in its implementation.

BNM Director of Payment Systems Policy Department Tan Nyat Chuan said the migration to PIN-based cards is expected to be completed in one or two months' time and card holders have to get use to using PIN for the next six months before signature ability at point of sales (POS) terminals is turn off on July 1.

"Collective efforts and support in the migration are key to ensuring its success.

"Migration to electronic payment (e-payment) is a key enabler for greater economic efficiency, productivity and competitiveness," he said in a media interview in conjunction with the three-day Financial Carnival 2017 hosted by BNM which ended today.

Tan said in the Financial Sector Blueprint from 2011-2020, BNM has embarked on efforts to transform the payment landscape to move out from cash and cheque towards a safer e-payment which would bring about cost savings and efficiency gains, thereby enhancing the country's competiveness.

He said the central bank was targeting to reduce cheque transactions by half in 2020 from 205 million cheques per year in 2011 and was on track to achieve the target with a notable decline of 35 per cent in the use of cheques in 2016 at 134 million cheque transactions.

The key instruments to displace the cheques are electronic fund transfer services i.e. interbank GIRO (IBG) and Instant Fund Transfer which are accessible to 99 per cent of savings and current account holders.

"In an effort to correct price signal, in May 2013 the IBG fee was brought down from RM2 to 10 sen and cheque fee was brought up to 50 sen in January 2015 to encourage public to do more e-payments.

"As a result, the volume of IBG and Instant Transfer increased 292 per cent from 66 million a year to about 260 million in 2016," he said.

Overall, he said the momentum for cheque migration was progressing very well, but the cash side posed a bigger challenge.

Tan said Malaysians boasted about 44 million automatic teller machine (ATM)/ debit cards, of which 18 million were actively used mostly for ATM cash withdrawals for a bankable population of about 22 million.

As the economy grow, more cash are needed to support its activities and BNM will have to print more bank notes, which have to be processed by the banks to be provided to end users through ATM machines and the process will recycle, hence costing the country quite significantly, he said.

To counter the increase in cash, he said it was hoped that the people would change their behaviour and use debit card in their payments, whereby their ATM card was also a debit card.

"In the past, people were not using much of debit cards compared to cash, which I believe, due to lack of awareness and perhaps habit," he said.

Meanwhile, most POS terminals are also with higher-tier merchants as the merchant discount rate (MDR) may not be affordable to lower-tier merchants and therefore, less opportunity to use debit cards.

To foster the use of debit cards to displace cash, BNM had issued a framework in 2015 to address the distortions and ensure the cost of accepting payments cards is fair and reasonable.

The framework saw the interchange fees for debit cards were lowered which resulted in a decline in the MDR.

Tan said the debit card usage was now growing much faster than that of the credit cards, with the transactions increasing from 23 million in 2011 and estimated close to 96 million as at end of 2016.

He said the debit card growth from 2011-2016 was about 20 per cent, while that of credit cards increased between two and four per cent for the same period, signifying a trend that people were taking less cash from ATM machine, instead use them directly at POS terminals.

On the migration to PIN-based payments cards, he explained that it was one of the initiatives to further enhance the security of the payment card infrastructure.

Malaysia took a bold step to migrate into chips in 2005 to stem the tide of counterfeit fraud from gaining ground.

After being on chips for a long time, Tan said the country was now moving a step higher to enable pin to be used at POS in order to make e-payment card safer.

On concerns over contactless payment of not being safe, he said with contactless functionality set on a chip, it would be very difficult to make counterfeits.

If ever some defrauders are able to steal data from the chips, he said at this juncture they would still be unable to produce another chip card as the technology used advanced cryptographic, thus preventing it from being cloned.

Tan said even e-commerce transactions would be a daunting task for the defrauders as cardholders were protected by fraud monitoring systems like unusual activity alert by banks, as well as requirement for strong authentication through one-time password which would be sent to mobile devices. - BERNAMA