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27 NOVEMBER 2017 Recent Developments on 'E-Money' Consumer Groups Had Previously Questioned the Imposition of Surcharges On

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27 NOVEMBER 2017 Recent Developments on 'E-Money' Consumer Groups Had Previously Questioned the Imposition of Surcharges On Contact Persons: 27 NOVEMBER 2017 Lambert Rasa-Ratnam Partner DID: +603 6208 5859 Recent Developments on ‘E-Money’ Fax: +603 6201 0122 Email: lr@lh -ag.com BANKING & INSOLVENCY Consumer groups had previously questioned the imposition of Kumar Kanagasingam surcharges on the usage of “Touch ‘n Go” cards at parking lots. [1] Partner This is an issue relating to electronic money. DID: +603 6208 5803 Fax: +603 6201 0122 Email: kk@lh -ag.com Electronic money is a designated payment instrument prescribed by Sean Yeow Huang-Meng Bank Negara Malaysia. [2] Electronic money essentially allows users Partner to store funds electronically and make payments electronically. [3] It DID: +603 6208 5867 Fax: +603 6201 0122 can be tangible (like Touch ‘n Go cards or other prepaid cash cards) Email: yhm@lh -ag.com or intangible (such as a mobile wallet managed and accessed online through a mobile device). Andrew Chiew Ean Vooi Partner DID: +603 6208 5852 New issuers Fax: +603 6201 0122 Email: ac@lh -ag.com Electronic money has recently gained traction in Malaysia with the entry of new issuers in the market: Mong Chung Seng Partner DID: +603 6208 5864 In November 2016, Telenor Group Ltd, an internationally- Fax: +603 6201 0122 Email: mcs@lh -ag.com known mobile operator launched the “Valyou Mobile Wallet”. This mobile wallet is accessible via smartphones. It allows Hoi Jack S’ng users to store funds and make bill payments, reload their Partner DID: +603 6208 5908 prepaid network accounts, and transfer funds among domestic Fax: +603 6201 0122 and international users; [4] Email: hjs@lh -ag.com CONSTRUCTION In March 2017, Jack Ma announced that “Alipay”, the world’s Dato’ Nitin Nadkarni largest mobile wallet with 450 million users, would be launched Partner in Malaysia very soon. [5] DID: +603 6208 5866 Fax: +603 6201 0122 Email: nn@lh -ag.com In May 2017, 7-Eleven Malaysia Berhad became the first Darshendev Singh retailer in Malaysia to accept payments with the Alipay mobile Partner wallet; [6] DID: +603 6208 5845 Fax: +603 6201 0122 Email: ds@lh -ag.com In June 2017, MobilityOne Limited, a company based in Jersey and listed on the London Stock Exchange, obtained approval CORPORATE & COMMERCIAL DISPUTES from Bank Negara to issue Electronic Money for general retail Rosli Dahlan purposes; [7] Partner DID: +603 6208 5804 Fax: +603 6201 0122 In July 2017, Touch ‘n Go announced that it would team-up Email: rd@lh -ag.com with Alipay to launch a new mobile wallet. [8] A joint venture G Vijay Kumar entity known as TNG Digital Sdn Bhd would be incorporated. In Partner DID: +603 6208 5870 November 2017, Bank Negara gave its approval for the Fax: +603 6201 0122 incorporation of the same. [9] Email: vkg@lh -ag.com SM Shanmugam In November 2017, DiGi.com Berhad partnered Valyou Sdn Partner Bhd, an existing e-money issuer in Malaysia, to introduce a Tel: +603 6208 5865 Fax: +603 6201 0122 new e-wallet mobile application known as “vcash”. This e-wallet Email: ssm@lh -ag.com will allow users to pay, send and store money in their Ang Hean Leng smartphones. It was announced that DiGi would impose a fee Partner of 0.8% for each transaction to all participating merchants. [10] Tel: +603 6208 5809 Fax: +603 6201 0122 Email: ahl@lh -ag.com Bank Negara’s statistics show that from 2012 to 2016, electronic money recorded the highest annual transaction volume per capita, [11] compared with other designated payment instruments. Central bank’s guideline Electronic money issuers are required to comply with the Guideline on Electronic Money (E-Money) [12] issued by Bank Negara in 2008. The Guideline sets out the broad principles and minimum standards to be observed by electronic money issuers in their operations. Breach of the guideline can result in Bank Negara revoking its approval to the issuer for its electronic money business. [13] The Guideline does not expressly prohibit issuers from imposing surcharges. Instead, it merely requires issuers to set out all applicable fees and charges in their terms and conditions in a clear and accessible manner. [14] Whether Bank Negara supervises the fees and charges imposed by issuers — and if so, to what extent — is unclear. On the contrary, the Guideline prohibits the issue of electronic money at a discount, the payment of interest or profits on balances, and anything that would add to the monetary value of the electronic money. [15] This seems to be inconsistent with the principle of money having time value. Given that conventional banks are offering interest rates of at least 2% per annum for savings accounts, it is arguable that issuers should be allowed to offer financial incentives for using electronic money. If this were regulated instead of prohibited, it would support initiatives by the government towards developing a cashless society in Malaysia. Chan Mun Yew If you have any queries, please do not hesitate to contact the author or his team partner Mr G Vijay Kumar ( vkg@lh -ag.com ). Lee Hishammuddin Allen & Gledhill Published by the Dispute Resolution Practice Group © Lee Hishammuddin Allen & Gledhill. All rights reserved. The views and opinions attributable to the authors or editor of this publication are not to be imputed to the firm, Lee Hishammuddin Allen Level 6, Menara 1 Dutamas & Gledhill. The contents of this publication are intended for purposes of general information and Solaris Dutamas academic discussion only. It should not be construed as legal advice or legal opinion on any fact or No. 1, Jalan Dutamas 1 circumstance. 50480 Kuala Lumpur Malaysia T +603 6208 5888 Feedback Unsubscribe F +603 6201 0122/0136 E enquiry@lh ­ag.com W www.lh ­ag.com [1] Arman Ahmad, “Why pay a surcharge? ”, The New Straits Times (22 May 2017) https://www.nst.com.my/cbt/2017/05/241571/why -pay -surcharge [2] Financial Services (Designated Payment Instruments) Order 2013, O 2(d) [PU(A) 202/2013]. The three other designated payment instruments are credit, debit and charge cards. [3] Ibid [4] “Telenor launches mobile wallet in Malaysia”, Retail News Asia (19 November 2016) https://www.retailnews.asia/telenor -launches -mobile -wallet -malaysia/ [5] “Jack Ma optimistic about launching Alipay mobile wallet service”, Free Malaysia Today (23 March 2017) http://www.freemalaysiatoday.com/category/nation/2017/03/23/jack -ma -optimistic -about -launching -alipay -mobile -wallet -service/ [6] “7-Eleven first Malaysian retailer to accept Alipay”, The Star Online (22 May 2017) http://www.thestar.com.my/business/business -news/2017/05/22/7 -eleven -first - malaysian -retailer -to -accept -alipay/ [7] “”MobilityOne Subsidiary Gets Approval to Issue e-Money in Malaysia”, Morningstar (26 June 2017) http://www.morningstar.co.uk/uk/news/AN_1498492689960669500/mobilityone -subsidiary -gets -approval -to -issue -e-money -in -malaysia.aspx [8] Risen Jayaseelan, “CIMB’s subsidiary Touch ‘n Go to launch e-wallet together with Alipay”, The Star Online (24 July 2017) http://www.thestar.com.my/business/business -news/2017/07/24/cimb -in -major -fintech -move/ [9] “Bank Negara gives approval for Touch ‘n Go-Alipay joint venture”, the Sundaily (13 November 2017) http://www.thesundaily.my/news/2017/11/13/touch -%E2% 80%98n -go -alipay -gets -nod -jv [10] B K Sidhu, “DiGi goes into mobile payment business with vcash”, The Star Online (10 November 2017) https://www.thestar.com.my/business/business - news/2017/11/10/digi -goes -into -mobile -payment -business -with -vcash/ [11] It is uncertain whether the phrase “transaction volume per capita” in Bank Negara’s statistics refers to the average transaction volume per population or per electronic money user [12] http://www.bnm.gov.my/microsite/ps/gl_016_3.pdf [13] Financial Services Act 2013, ss 20(d)(i), 33 and 272(b) [14] Guideline, para 9.3 [15] Ibid , para 13.1.
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