Cheques Make Way For Sexier E-Banking [Updated]
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Remember cheques? They are not as popular as it used to be, but most companies still use them to make various payments. Using cheques to pay for things can be a hassle, when you have to take extra care to write a cheque, signing it, and then hand it over to someone to make the payment. Then the recipient would send it to their bank, and the bank will send it to some other banks, and you are left with the job of balancing your cheque book every month to figure out which cheques have reached the bank and which ones have not.
It all sounds like an overly complex procedure just to make a single payment.
To make matters worse, cheques leave you vulnerable, in that a bunch of things can go wrong and you could be penalised for it. If you find yourself overdrawn, be ready to face a wave of fees and troubles.
With the advent of the Internet, people are slowly abandoning cheques for the sexier and cooler Internet banking. However, for those who are still holding on to good old cheques, this may be the final push you need to embrace newer payment methods.
Banks will impose a new fee for cheque at 50 sen on the issuer of the cheque with effect from January 2, 2015* as Bank Negara Malaysia (BNM) sets a new pricing strategy to promote greater efficiency. This is a 35 sen increment from the previous rate of 15 sen per cheque leaf.
Why the increment?
As part of BNM’s effort to address the price distortion between electronic payments and cheque payments, the central bank has announced an increment in transaction fee for each cheque payment. This is to discourage payers from using cheques and instead, opt for online banking, an easier paperless transaction.
Charges for electronic payment methods were also reduced, as of May 2013, to incentivise businesses and consumers to adopt the more cost effective electronic payment method while higher charges would be levied on cheques to reflect its higher cost.
To reduce the cost and inefficiencies associated with the use of cheques, the charge for cheques will be progressively increased to reflect its production cost, which is currently at RM3.00. Businesses and the general public are given a grace period of one year to adapt to using Inter-Bank GIRO (IBG).
In the past one year period, BNM has been working closely with the financial industry to further improve the payment infrastructure to ensure payment services are easily accessible, secure and convenient.
The response
The Association of Banks Malaysia (ABM) anticipates an increase in the number of people switching to online banking with the new fee structure.
“Our member banks have been receiving rising queries on their e-payment products,” said Chuah Mei Lin, ABM executive director to The Star.
As of March 2013, BNM has cited 1.6 billion financial transactions being carried out using electronic means, double the amount in 2006.
“While the progress is positive, the target is to increase the number of electronic payments per capita from 56 in 2012 to 200 by 2020 and to reduce the number of cheques cleared in the country by half from 204 million to 100 million during the same period,” said BNM in a statement.
This exercise will ensure that meeting the targets will result in annual savings of up to 1% of GDP. The need to accelerate the migration is even more important now as Malaysia transitions towards a high value added, high-income economy.
However, there have been naysayers in the new regulation as well.
Federation of Malaysian Consumers Association’s (Fomca) communications director, Mohd Yusof Abdul Rahman shared similar views with Perkasa vice president and Consumers’ Association of Subang and Shah Alam (Cassa) chairman Jacob George. They are of the opinion that banks are burdening the rakyat with the increased fee for cheque transaction.
The question of security
For skeptics, online banking may not sound like a secure alternative. However, Kenny Goh, CEO of Macro Kiosk Bhd, a mobile messaging technology company with a presence in 14 countries, assured the general public that e-payment was much safer compared to conventional methods.
“Cheques are even more dangerous. What if someone forged your signature? E-payment is safer, with second factor verifications like the Transaction Authorisation Code (TAC),” Goh stressed.
Generally, this new fee structure is lauded by most as Malaysia aims to shape itself into a high-income nation.
In addition to cheques and IBG, adjustments in pricing for other payment channels and methods, including automatic teller machines (ATM) will be rolled out progressively to increase the adoption of more cost effective electronic payment methods.
By 2020, pricing of all banking services would be based on the cost of providing the service.
* The implementation date has been updated to reflect the latest announcement made by Bank Negara Malaysia. In the previous version, the article stated April 1, 2014.
