TUTORIAL 7: MONEY TRANSMISSION & PAYMENT SYSTEMS

There are currently two Shared ATM Network system operating in Malaysia, namely
MEPS and HOUSe. Discuss the differences between the two systems.

MEPS:

shared ATM Network, enable bank customers to conveniently access their funds anywhere from
any of the participating banks’ ATMs, adopted by all local banks in Malaysia

Eg: When the MEPS just started, Maybank customers can withdraw money from RHB bank for
RM 1 transaction cost, which are all transaction between local bank only.

In 2010, foreign bank join MEPS, so HSCB bank can withdraw money from any local bank (eg
Maybank). There will be a charge for RM 1 for transaction cost when Bank A customers
withdraw money from Bank B. Now, all banks in Malaysia will waive RM1 MEPS fee for
interbank withdrawals until end of MCO.

HOUSe:

a separate ATM system, is shared by four locally-incorporated foreign banks which are United
Overseas Bank (Malaysia), OCBC Bank (Malaysia), HSBC Bank Malaysia and Standard
Chartered Bank Malaysia.

Eg: HSBC Bank can withdraw from OCBC Bank, which are transaction between foreign bank
only. These were because MEPS excluded foreign bank join at the beginning.

There will be a charge for RM 1 for transaction cost when Bank A customer withdraw money
from Bank B. Now, all banks in Malaysia will waive RM1 MEPS fee for interbank withdrawals
until end of MCO.

Discuss the similarities and differences between mobile banking and mobile payment.

Similarities:

Fast- as it works through the internet, the money can be sent or received instantly even in the
remote areas.

Accessibility- easy to access from anywhere & anytime. Initiate transaction we can use a mobile
banking & mobile payment 24 hours and 7 days a week but subject through the operating
guideline of PayNet.
Differences:

Mobile Banking Mobile Payment

allows a user to operate a bank account allows users to do similar transactions with a mobile
using one's mobile phone. phone but in this case, the focus is basically on
making mobile payments from an account that doesn't
have to be a normal bank account.

requires one to first have a normal bank account holder doesn't have to open a bank account or
account that requires a valid utility bill and visit the bank before he starts making payments or
personal form of ID transactions virtually with a mobile phone.

Money transmission is the transfer of money from one party to another, normally from the
receiver of goods and services to the supplier of goods and services. It is a central function
in today’s society as the transfer of value is involved in almost every aspect of everyday life.
A payment system facilitates money transmission by increasing the efficiency of money
transfer.

Discuss bank payment systems in Malaysia

Large-value Payment: Used for making large-sized payments between banks, interbank
settlements, settlement of specific large transactions by customers of the banks. Eg : Jo has an
account in MBB, she needs to pay home loan in HSBC. Every month she will need to give
instruction to MBB to make payment to her home loan in HSBC. MBB and HSBC have to make
a settlement saying that MBB will send money to HSBC.

Retail Payment System/ low-value Payment: Used for smaller sized payments. Most payments
by individuals & small businesses are retail payments. Eg : ZY has to pay RM100 to buy clothes
in a boutique

Banks provide a number of payment services to facilitate money transmission. One of the
payment services is known as ‘Standing Instructions’. Describe how standing instructions
work.

It happens when customers wish to make payments at regular intervals. The customer gives a
standing instruction (in writing) to the bank requesting the bank to make payments to the
beneficiary on a particular date (Eg : monthly, quarterly, half-yearly or yearly) as the case may
be. The bank may charge a fee for making these payments. However, whenever there is a change
in the amount of the regular payments, the customer must write to the bank to notify it of the new
payment amount. Eg : Mr A gives instruction to MBB to transfer to Mr B RM1000 every month.
Mr A will sign a standing instruction, stating clearly the amount and when the money that would
be transferred to Mr B.

Syarikat Makanan Hadri, a company manufacturing canned food in Penang, has been
demanded by one of its suppliers in Negeri Sembilan to pay RM200,000 immediately. The
amount has been outstanding for 3 months. The supplier issued a letter stating that if they
do not receive RM200,000-00 three days from the date of the letter, they will stop supplying
the raw material. The letter was dated 2 Jan 2018. En Hadri was away from the office and
only read the letter on 5 Jan 2018.

Critically discuss TWO (2) most suitable alternative methods of payment through the
banking system that Syarikat Makanan Hadri can use to pay its supplier and provide a
description of how each method works.

Interbank GIRO (IBG) System:

A system for the transfer of payments (quickly) between banks, when a paying bank receives an
instruction to make the payment (without a cheque)

It processes payments of up to RM1million per transaction for settlement on either same day /
next day, depending on the time of day when the payment instruction is made.

Generally, for commercial banks in Malaysia, there are few cut-off time for the credit transfer
service. So, if En Hadri able to do the payment instruction before 5 pm of the entire business
day, the supplier should be able to receive the payment on the same day. If not, the supplier
would receive the payment on the next business day.

The charges for IBG transfer is only RM1.00 for ATM machines transaction, RM0.10 for
Internet Banking transactions and RM2.00 for transaction over the counter transaction.

For now, some banks have waived their IBG fees (MBB, PBB, CIMB) and some bank charges
RM0.10 for IBG per transaction while over the counter charges are subjected to individual
banks.

Real-Time Electronic Transfer of Funds and Securities System (RENTAS):

RENTAS is the only large-value payment system in Malaysia

RENTAS operates on a real-time gross settlement (RTGS) basis which means that transactions
are settled throughout the day, as they occur (‘in real time’) and settlements are for the full
amount (for gross amount) owed by one bank to another.
So, the supplier would receive En Hadri’s payment on the same day. (If payment is made before
the cut off time at 3pm, if not the next business day)

The cost to make a RENTAS transfer is higher. It normally cost in between RM5 to RM14
depending on banks versus RM0.10 to RM2 for GIRO Transfer.

Although RENTAS is designed for large value payments, there is no minimum limit for
payments between member institutions.

However, there is a minimum limit of RM10,000 for payments that originate from a non-
RENTAS member, but this limit does not apply to payments to or from the government or Bank
Negara Malaysia itself.

The supplier eventually ended the business relationship with Syarikat Makanan Hadri.
Now, the only option available to the company is to import the raw materials from the
Netherlands. Discuss the most appropriate method that the company can use to send
payment orders to its Netherlands supplier’s bank and provide a description of how this
method works.

Syarikat Makanan Hadri can use Telegraphic Transfer to send payment orders to its Netherlands
supplier’s bank. Telegraphic Transfer is the fastest mode of money transfer and is used for
payments, in or out of Malaysia. This service is applicable to transfers in all currencies.
Telegraphic Transfer payments may pass the money between several different banks before it
arrives at its destination. (EG ：jo acc in HSBC Mal/ WJ acc in UOB SG) Jo want to pay WJ
(HSBC MAL to HSBC SG to UOB SG) S2: WJ acc is in HSBC SG). Each of these banks will
have different fees and processing times, which is why telegraphic transfers can be a little more
costly and time-intensive than other money transfer services. The network of banks that the
money passes through is referred to as the SWIFT network. The banks are called “correspondent
banks” because the money only passes between banks which have commercial relationships.
Generally, the telegraphic transfer processing time is between one and two days. Receive
instruction from Yilin at 10 am and have 3 hours processing time to the payment.

What are the payment options available for a company to make monthly payments to :

TNB

The payment instruments available for a company to make monthly payments to TNB are cash,
cheques, debit cards, credit cards and e-money. Cash is one of the most common and easiest
forms of payment. For example, company’s employees can pay their TNB bill through TNB
branches, ATM, Pos office and other third party (7 Eleven and bank). Cheques is that they
provide a safe and convenient method of transferring money. For example, they can mail their
TNB payment to TNB by cheque. Debit card is used to authorise payments directly from the
cardholder’s bank account. For example, TNB’s Direct Debit Bill Payment Facility is an
electricity bill payment method, which will debit company’s bank account based on the total of
electricity bill amount or company can use online banking to pay. Credit card is the seller of the
goods or services receive immediate payment, but the cardholder does not pay until a later date.
For example, TNB’s Auto-Pay Payment Facility is an electricity bill payment method, which
will debit company’s credit card automatically every month, based on the total electricity bill
amount. E-Money is company can transfer money from their bank account to the e-money card,
and the balance on the electronic money that can be used to spend on services that accept the
card for payments. For example, company can use GrabPay, TNG and Boost to pay their TNB
bill. JomPay

Astro

The payment instruments available for a company to make monthly payments to Astro are cash,
debit cards, credit cards and e-money. Cash. For example, company’s employees can pay their
Astro bill through other third party (TM Point, 7 Eleven and 99 Speedmart). Debit card. For
example, Astro will automatically collect recurring or recurring payments from debit cards or
company can use online banking to pay. Credit card. For example, Astro will automatically
collect recurring or recurring payments from credit cards. E-Money. For example, company can
use Shopee, GrabPay, TNG and Boost to pay their Astro bill. JomPay
 Discuss the difference between paper payments and electronic payments in the context of
payment methods facilitated by banks in Malaysia.

PAPER PAYMENTS ELECTRONIC PAYMENTS

TYPE Eg : cheques, drafts, postal orders, Eg : electronic funds transfers, direct credits
Government warrants, travelers’ or debits, internet banking, and e-commerce
cheques payment systems.

PAYMENT paper payments mostly depend on the However, electronic payments solve these
PROCESSIN manual tasks that come with high- problems as people may transfer the money
G COSTS dollar expenses. Additionally, the time instantly to a third party within a short
spent managing paper payments makes period
it hard to take advantage of early
payment discounts.

RISK OF some steps needed to go through by they will not face this problem as they can
LATE using a paper check and the time for transfer the money to a third party instantly
PAYMENT banks to process a check usually will
take 1-3 working days

SAFETY Less secure compared to the electronic safer to be used as people may not need to
AND payments because paper payments bring those cash and checks along since
SECURITY such as cash and checks are more electronic payments mostly conducted
likely to be stolen by someone through devices such as ATM, mobile
devices, tablet and laptop.