WITH the push towards 800,000 card terminals by 2020, the immediate beneficiaries from Bank Negara’s reforms are the companies that directly supply solutions and terminals for the payment sector.
Another segment to benefit are the third party acquirers – the financial institutions or appointed third party agents who will provide terminals for the merchants.
Furthermore, while the targeted number of card terminals is 800,000, this actually refers to 800,000 merchant outlets. Industry observers said that theoretically, the real number translates closer to 1.2 million terminals.
There are a list of companies listed companies involved in providing the terminals and solutions.
GHL SYSTEMS BHD
E-payment services provider GHL Systems Bhd’s transaction payment acquisition (TPA) business is expected to benefit from Bank Negara’s efforts to boost cashless transactions in the country.
It is one of the leading payment solutions providers in South-East Asia with a market cap of RM522mil.
The company has recently signed an agreement with Global Payments Card Processing Malaysia Sdn Bhd to be the latter’s payment facilitator and payment service provider.
Under the agreements, GHL will install its payment devices a process known as “acquiring” to eligible new merchants and facilitate transactions between these merchants and Global Payments Malaysia.
“As an initial rollout, GHL Group will seek to acquire between 3,000 and 4,000 merchants on behalf of Global Payments Malaysia in 2015 that will be able to accept payments from the various international Card Associations. GHL Group expects the merchant acquisition activity to increase towards the end of 2015,” its group CEO Raj Lorenz says, adding that the deal paves the way for GHL Group to enter the small merchant market.
He expects its business to grow tremendously as it aggressively taps into the underserved small medium businesses and micro businesses. With the new partner, he anticipates more interest from other financial entities to tap into the small merchant segment.
“Bank Negara’s move to reduce inter-rate charges to 0.48% for debit card transactions is too encourage consumers to pay using their debit cards.
“The percentage of credit card holders is relatively smaller compared to debit card holders as some 80% of the population is not eligible for the application of credit card,” he says.
Raj says some banks are exiting the business of providing electronic data capture (EDC) terminals at the rate of between 300 and 400 small businesses per month. GHL, on the other hand, is acquiring 400 to 500.
He says the cost for to install and maintain the EDC terminals are too high for some of the smaller merchants so it will be distributing the mobile point of sales, which costs only a few hundred ringgit.
Its market share for the shared services segment is still sizeable at 20% to 25% as it sold/leased about 50,000 terminals out of the 240,000 terminals in Malaysia.
It will also gain from the system integration and updates for the existing EDC terminals and the new ones that it will place out for the bigger merchants.
“Typically, the EDC terminals can last for 6 to 7 years. The regular servicing and maintenance are mainly for security purposes.”
Out of Malaysia, it targets to grow its presence in other markets such as the Philippines.
It has the lion’s share in the Philippines, supplying about half of the 120,000 terminals in the archipelago.
According to him the terminal per thousand capita is 8.6 in Malaysia and 1.1 in the Philippines.
Riding on Apple’s launch of mobile e-wallet, GHL also hopes to make inroads into the segment going forward.
MANAGEPAY SYSTEMS BHD
Another player which is a beneficiary of Bank Negara’s push is electronic payment solutions provider ManagePay Systems Bhd (MPay),
ManagePay is currently a one-stop hub providing payment solutions and services, merchant recruitment and deployment of EDCPOS terminals & Mobile POS payment acceptance devices for card-present transactions, 3DSecure e-commerce payment gateway method for card-not-present transactions and third party payment processing for Visa and MasterCard member.
MPay owns and operates in Malaysia a network of card acceptance equipment which enable a merchant to electronically authorize, capture and submit card charges at the point of sales and which are capable of connecting multiple card acquirers for authorization and submission of charges.
Its chief executive officer Chew Chee Seng said that for Bank Negara to achieve its target of 800,000 terminals by 2020, it will definitely need to target the smaller merchants. Chew has long recognized the need to go cashless and has already been rolling out products to meet the growing demand.
For instance, one of its latest products is the MPAY PRO, a Mobile POS Solution capitalising on the rising number of smart devices such as smart phones and tablets. Via one’s iPhone or android smartphone or tablets, the merchant is able to accept credit card and debit card payments. MPAY PRO is portable and convenient, enabling even micro merchants to offer cashless payment solutions as opposes to cash/cheques.
Chew said Mpay is looking to further develop its recurring income and to triple and quadruple the sales volumes it handles over the next few years.
For 2014, ManagePay is already processing in excess of RM100mil worth of transactions and is looking to scale this up to RM500mil in year 2015, and closer to RM2 bil-RM3bil in five years time.
In terms of number of card acceptance devices in Malaysia, Chew anticipates the total market size of 1.2 million card acceptance devices to be installed in 5 years time in 800,000 merchant outlets nationwide and MPay is looking to capture 10% to 20% of the total market share.
MPay recently received a grant from the Multimedia Development Corp Sdn Bhd for RM749,185 to develop and commercialise its MPAY Collection on Delivery (COD) Solutions and Services project.
The COD services will be branded as ParcelPay and it is designed to support the growth of e-commerce in Malaysia. It allows the sale of goods by mail or online order where credit cards or debit cards payment is made via MPAY PRO Mobile POS on delivery rather than making the payment online in advance.
SOFT SPACE
The inspiring story of mobile payment technology company Soft Space CEO and founder Chang Chew Soon has probably been told quite a few times.
Back in 2012, Chang’s father ran a motorcycle spare parts distribution business which relied heavily on its sales force to collect orders and cash payment on a daily basis for its operations.
As his father’s sales transactions weren’t large enough, banks refused to provide him with mobile EDC (Electronic Data Capture) terminals unless he paid them very high rental costs. This simply not financially viable for most small and medium enterprises.
“Then one of the salesman fled with a lot of cash on hand. My father was so sad. That was when I decided to start Soft Space. I wanted to provide a low cost technology that would address this obvious need for mobile payments in the market,” said Chang.
Today, Soft Space provides white label solutions to acquirers and banks which is both EMVCo (Europay, MasterCard & Visa) Level 1 and Level 2 certified.
Soft Space is one of very few companies in the world that has been certified by EMV Co Ltd. Getting the EMV certification is both costly and extremely stringent. (Soft Space for the certification 5 months.)
Thus, Soft Space is also the first payment solution in Asia to receive full EMV accreditation, and thus, was also the first in Asia to launch an mPOS solution as well.
Soft Space’s core product is a mobile point of sale (mPOS) platform for card payments. This solution allows merchants to accept card payments through their mobile devices, at a price that is far cheaper than a traditional POS system would cost. A Soft Space card reader would cost about RM250, according to Chang.
Being EMV accredited is a huge deal. The EMV certification is a global security standard for chip card technology, and it enables chip cards to be accepted anywhere in the world.
It is through this accredition, (among other things) that has now enabled Soft Space to expand its point-of-sale systems into 6 countries in South East Asia and partner 14 banks in just over three years.
In Thailand for example, some 80% to 90% of the country’s transactions goes through its system.
“Initially we tried approaching the local banks. That didn’t quite work. However, after we secured Kasikornbank Thailand, things got a lot easier, and soon other banks were enquiring about us,” he said.
In Thailand, we have confinement ladies and mechanics using our Mpos systems!” said Chang.
Chang said that from inception in 2012 until now, it has processed RM1bil worth of transactions in Malaysia. It is looking to double or triple this figure by 2020.
“The move by BNM is definitely positive for us. As the banks increases the acceptance level to the 800,000 mark, we will definitely benefit,” he said.
Last August, Soft Space acquired Fasspay, a payment service provider based in Malaysia.
Soft Space’s Malaysian clients currently include CIMB Group, Hong Leong Bank and Maybank.
Those affected by the cashless
Some of the foreign banks that focused on issuing credit cards may see the lower interchange fee hitting their bottomlines.
To stay competitive in the payment card ecosystem, they need to catch up in the merchant acquiring business. Players who do not strategise their business plans based on Bank Negara’s new guidelines will eventually feel the pinch.
HSBC Malaysia retail banking and wealth management head Lim Eng Seong says: “HSBC has been working with BNM on the card payment framework and welcome its publication. HSBC is active on the e-payments initiative being one of the lead banks in the National Bill Payment system.”
He adds that the framework is aligned with HSBC Malaysia’s efforts to convert payments into electronic form.
On the flipside, banks that have acquired merchants and place out many EDC terminals will gain although competition may put the acquirers’ margins in check.
One the banks with a big merchant acquiring business is Maybank.
Maybank Group head of cards B Ravintharan says: “Maybank’s card business strategies are set in the right direction and the bank is ready in supporting the reform and commitment.
“There would be some repositioning of products or segments. Heavier emphasis will be placed in the area of growing contactless cards and deploying more card acceptance points.”
He concedes that the new framework will have a slight impact in its total revenue and there are strategies outlined to cushion the impact and address the shortfall.
“It would mean that we need to have some minor tweak to our acquiring and issuing business strategies. We are also committed to meet Bank Negara’s key performance indicators on growing acceptance points and debit transactions.”
He adds that this as an opportunity to expand and accelerate Maybank’s growth in its card base as the reduction in interchange fees will ultimately benefit the card holders and help merchants to be more aggressive in promoting a cashless society.
“Coupled with the innovation and growth in contactless platforms and the transformation journey towards card payments, we expect to see a positive growth to business and revenues.”
It will also leverage on its network of branches and where appropriate may engage strategic external/ third party to drive higher volume of merchant acquiring.