KUCHING: Analysts at TA Securities Holdings Bhd (TA Research) believe the new payment card reform framework would be immaterial towards banks’ earnings, but was overall optimistic on this move as it leads towards a more efficient cost structure.
On Tuesday, Bank Negara Malaysia issued a new payment card reform framework, which should encourage greater acceptance of the debit and prepaid cards due to a more efficient cost structure.
Through the new framework, an objective and transparent mechanism for the reimbursement of fees among payment card network participants will be established.
This would result in lower card acceptance cost, thus facilitating greater card acceptance, especially among small merchants. TA Research said the interchange fees are reflected in the merchant discount rates (MDRs) paid by merchants.
“To the banks, we foresee the earnings impact from this new framework to be immaterial as lower fees could be offset by greater transaction volumes as consumers would be able to use payment cards more widely,” it explained in a note yesterday.
“Current account and savings account (CASA) balances would also likely improve further given that the card provides cardholders electronic access to their bank account,” it added.
“While some cards bear a stored value with which a payment is made, most would relay a message to the cardholder’s bank to withdraw funds from a payer’s designated bank account. We estimate that fees from card transactions account for less than 20 per cent of the sector’s fee income.”
The framework will be implemented in phases from Jan 15, with the majority of the measures, including the interchange fee ceilings, coming into effect on July 1.
Following the framework, the interchange fees for domestic payment card transactions will be subject to ceilings: for domestic brand debit cards it is 0.15 per cent or 50 sen plus 0.01 per cent, whichever is lower, while for international brand debit/prepaid cards, it is 0.21 per cent or 70 sen plus 0.01 per cent, whichever is lower.
For both these categories, the interchange fee ceiling is zero per cent for payments to the Government or its agencies.
The interchange fee ceiling for credit cards, meanwhile, is at 1.10 per cent from 2015 to 2020 and at 0.48 per cent from 2021 onwards.
“We make no change to our earnings projections for the sector as we do not envisage the earnings impact from this new payment card reform framework to be material.”