Comparative Analysis of Malaysian Payment System and International Payments

introductory

With the rapid development of the global digital economy, the evolution of payment systems has become an important topic in the FinTech space. As one of the important economies in Southeast Asia, Malaysia's payment system is affected by local market demand as well as facing competition and integration of international payments. In this paper, we will compare and analyse the similarities and differences between Malaysia's payment system and the mainstream international payment methods from multiple dimensions, and discuss the future development trend.

1. Characteristics of the Malaysian Domestic Payment System

1.1 DuitNow: national instant money transfer system

DuitNow is a real-time retail payment platform (RPP) launched by Bank Negara Malaysia (Bank Negara Malaysia) that supports instant cross-bank transfers and QR code payments. It integrates traditional e-banking channels such as FPX (Financial Process Exchange) to enable individuals and businesses to complete transactions quickly. DuitNow focuses more on the convenience of the domestic market than the internationally popular SWIFT cross-border transfers or SEPA Eurozone clearing system.

1.2 Popularity of e-wallets such as GrabPay and Boost

Homegrown e-wallets such as GrabPay, Touch 'n Go eWallet and Boost are widely used in Malaysia due to high smartphone penetration and the government's policy of promoting a cashless society. These platforms not only support everyday spending, bill payments and P2P transfers, but are also deeply integrated with public transport systems (e.g. Touch 'n Go cards). In comparison, similar services in the international market include globalised solutions such as Alipay, WeChat Pay or Apple Pay/Google Pay.

1.3 FPX and the interbank settlement system

FPX allows users to make online payments directly from their bank account without the need to enter credit or debit card information; this model is similar to iDEAL (Netherlands) and SOFORT Banking (Germany) in the European region. However, the coverage is still limited compared to global networks such as Visa/Mastercard.

2.Mainstream international cross-border and regionalised solutions

2 . SWIFT vs RENTAS: Differences in the efficiency of cross-border financial flows.

• SWIFT (Society for Worldwide Interbank Financial Telecommunication) is the most widely used inter-financial institution communication protocol globally, but it can take several days to process and is expensive.
• RENTAS, on the other hand, is an efficient and low-cost real-time gross settlement (RTGS) mechanism in Malaysia, but only for domestic transactions.

case (law):: If an enterprise needs to send money to a supplier in China, it may take 3-5 working days via traditional SWIFT; however, using the Alipay+ co-operation channel, it may be reduced to the level of minutes.

3 . Regulatory environment for development impact

It can be seen that Bank Negara Malaysia is more concerned with protecting the safe and stable development of its industries, while the European Union emphasises market competition for innovation.

4 . Projections of future trends

4.a ) Accelerated harmonisation of QR code standards
Currently, DuitNow QR is compatible with PromptPay in Thailand and NETS in Singapore, and is expected to be further expanded to other ASEAN countries to form a regional interconnection network.

Challenge.
Lack of harmonisation of technical standards (e.g. Line Pay in Japan uses a proprietary format) and the risk of exchange rate fluctuations still need to be addressed.

# Conclusion

Overall:

• In terms of domestic convenience, the Duit Now + e-wallet combination offers an excellent experience.
• However, in terms of internationalisation, Visa/Mastercard is still the preferred choice for cross-border transactions.
• As RPP interconnection plans advance (e.g., connecting to BI-FAST in Indonesia), regional integration will close the gap.
  Consumers are therefore advised to choose flexibly according to their scenarios: local programmes for high-frequency small amounts; large amounts/transnational preferences for services from established institutions!

5. Differences in user experience and payment habits

5.1 Payment Preferences of Malaysian Users
The main reasons why Malaysian consumers prefer to use localised payment tools include:
- Government policy push: e.g. e-Tunai Rakyat (e-wallet cash subsidy) programme had encouraged people to use Touch 'n Go eWallet, GrabPay, etc.
- Integration of localised functions: For example, Boost supports payment of utility bills, purchase of cinema tickets and other lifestyle services, whereas international payment platforms (e.g. PayPal) have less coverage of local scenarios.
- Low Credit Card Penetration: Compared to Europe and the US, Malaysia has a low credit card ownership rate (~20%), making bank transfers and e-wallets more popular.

In contrast, international users typically rely on the following:
- Credit/debit cards (Visa/Mastercard) - used worldwide but with higher fees;
- Digital wallet (Apple Pay/Google Pay) - relies on NFC technology and has high penetration in developed countries;
- Cross-border money transfer services (Wise/Revolut) - better exchange rates but additional registration process required.

5.2 Transaction speed versus cost
| Indicators | DuitNow (MY) | SWIFT (International) | Alipay+ (Regional Co-operation) |
|——|————-|————-|——————|
| Arrival time | <10秒 | 1~3工作日 | <1分钟 | | 手续费 | ~免费或极低费用 (~RM0.50) | $15-$50不等 +中间行扣费^* Proportionate charge to the amount (~1%) |

*Note: SWIFT fees are highly influenced by the transit bank and may incur hidden costs if the route is complex. *

It follows from this:
- DuitNow has an absolute advantage in small domestic transfers;
- SWIFT is suitable for large but time-sensitive transactions;
- Emerging programmes such as Alipay+ fill the gap in the Southeast Asian market.

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6 . Comparison of security and risk control mechanisms

While all modern financial systems use encryption (e.g., TLS/SSL), there are differences in implementation.

6.a ) Strictness of authentication
✅ BNM Provision.
→ Dual authentication (OTP+Fingerprint) is required for more than RM1000.
→ Suspicious transactions are automatically frozen and notified to the customer.

❌ Some international platforms require only a password or facial recognition to complete high-value payments (e.g. Venmo allows $5000 in a single transaction in the US).

This means that the Malaysian system sacrifices a certain level of convenience for a higher level of security - in line with Islamic financial prudence.

6.b ) Data sovereignty issues
Due to the GDPR norms, EU companies must store European user information on servers within the country; while Malaysia does not have similar mandatory requirements for the time being, resulting in some foreign organisations may host their data in places such as Singapore, raising privacy concerns.

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#7 . Future Challenges and Directions

Despite the good progress made so far, the following key issues need to be addressed.

7.a ) How can cross-border compatibility be improved?
Example: Even though DuitNow is connected to the PromptPay system in Thailand, the daily exchange limit cannot exceed RM15,000 (~$3200) due to foreign exchange restrictions, which hinders the promotion of business use.

It is recommended to learn from the Indian UPI model - real-time foreign currency settlement through multilateral agreements to reduce the risk of exchange losses.

7.b ) Will digital currencies (CBDC) change the landscape?
Bank Negara is currently experimenting with "Project Dunbar" (Multi-country Central Bank Digital Currency Bridge Project), which, if successful, may bypass traditional correspondent banking operations and directly complete cross-border clearing to significantly increase efficiency!

However, decentralised assets such as Bitcoin also pose regulatory challenges that need to be weighed against the pros and cons of developing an appropriate regulatory framework...

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# Final Summary and Action Guide

Taken together the two systems have their own merits:

✔️ choose a homegrown programme if:
→ Mainly for daily domestic consumption & transfers;
→ Emphasis is placed on zero commission and instantaneous payment features;
→ Requires the use of specific lifestyle service features (Grab taxi discounts / TNG motorway payments).

✔️ prioritises internationalisation channels when it comes to:
↳ Frequent overseas shopping or business travelling needs; and
↳ Desire to harmonise the management of financial flows across multiple countries.
↳ Sensitive to exchange rates and willing to incur slightly higher costs in exchange for convenience!

With the deepening integration of the ASEAN Economic Community (AEC) and the implementation of the RCEP trade agreement, it is expected that borders will be further blurred in the next five years - and we may then see the birth of a truly seamless pan-Asian smart payments ecosystem!