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Malaysian economist predicts bigger payment role for banks with intro of chip card

July 27, 2003

KUALA LUMPUR, Malaysia -- The introduction of BankCard, a chip-based, multi-purpose payment card that includes ATM, debit and e-cash functions, will likely mean fewer single purpose prepaid cards such as telephone and toll cards will be introduced into the market.

Financial institutions will assume a more important role in Malaysia's payment system as they begin to coordinate more non-cash payment instruments and transactions, said Dr Loke Yiing Jia of School of Social Science, Universiti Sains Malaysia, speaking at the recent Convention of Malaysian Economic Association.

According to a report in The Star, the BankCard will give more Malaysians access to non-cash retail payments.

Because merchants are now guaranteed a critical mass of potential point-of-sale shoppers, they will be less reluctant to invest in terminals that will enable them to accept non-cash transactions, Loke said.

(See related story Malaysia hopes to drive more debit with chip cards)

Banks' focus will likely shift from attracting new cardholders to attracting retailers and merchants for processing services. Banks' biggest challenge will be providing adequate infrastructures to support and promote the use of e-cash and debit, Loke said.

He said the shift toward non-cash transactions would eventually lead to a fall in the demand for money.