Bank Negara Malaysia issues Policy Document on Payment Cards Framework
29 August 2022
Bank Negara Malaysia (‘
BNM’) issued a Policy Document on
Payment Cards Framework (‘
Policy Document’) on 19 August 2022.
The Policy Document applies to:
- issuers of credit cards, debit cards and international brand prepaid cards;
- registered merchant acquirers1 of credit card, debit card and international brand prepaid card transactions;
- approved operators of payment systems2 including operators of a payment card network3.
The Policy Document enhances measures implemented by BNM under the
Payment Card Reform Framework (‘
PCRF’) in 2014, in line with the changing payment card landscape.
4
Among the enhancements under the Policy Document are provisions that:
- introduce a revised interchange fee ceiling, which is subject to review by BNM every three years commencing 1 January 2023 or such other date as may be determined in writing by BNM;
- give greater flexibility to merchants to choose the types of payment cards they wish to accept, subject to the acceptance of debit cards as a bare minimum;
- disallow the operator of a payment card network and an acquirer from imposing a condition requiring a merchant accepting debit cards under its network for a domestic transaction, to also accept other payment cards such as credit cards or prepaid cards under the same payment card network;
- require an acquirer to ensure that a merchant who accepts or does not accept a particular payment card to display a prominent notice at the point of sale to inform cardholders about the payment card it accepts or does not accept;
- require the operator of a payment card network to: (i) have in place clear rules and expectations on its participants (i.e. the issuers and the acquirers) pertaining to the surcharging and imposition of minimum transaction amount practices by merchants; and (ii) prominently publish such rules for reference by the public;5 and
- require the operator of a payment card network, in collaboration with the issuer and acquirer, to establish a complaint mechanism (which may be a centralised industry-wide shared platform) to enable cardholders to lodge complaints against any practice of surcharging and the imposition of minimum transaction amounts by merchants, and to regularly publish prescribed general information on the status of such complaints.
The new interchange fee ceilings are generally lower than the corresponding ceilings under the PCRF. A table of comparison of the interchange fee ceilings under the PCRF and the Policy Document is available
here.
Among the requirements carried over from the PCRF to the Policy Document are the following:
- the unbundling of interchange fees by acquirers from the merchant discount rate (MDR);6
- for an issuer of a debit card, a prepaid card or a credit card, to offer to its cardholders, at a minimum, the options of obtaining a basic debit card, a basic prepaid card or a basic credit card, with minimal or no cardholder incentives or rewards, and at zero or a nominal fee; and
- for an issuer of a payment card to offer to its customers the choice of obtaining a payment card that can be used to make payment to merchants in and/or outside Malaysia or only to merchants in Malaysia.
The provisions of the Policy Document came into effect on 19 August 2022 except for the following that will come into effect on 1 January 2023:
- paragraphs 8.1 to 8.6 (interchange fee ceilings);
- paragraphs 10.9 and 10.10 (acceptance of payment cards by merchants); and
- paragraphs 11.1 to 11.8 (addressing surcharging and minimum transaction amount practices).
The documents listed in paragraph 7.1 of the Policy Document are superseded with effect from the respective dates stated in the said paragraph. In particular, the following provisions under the PCRF will continue to remain in force until 1 January 2023:
- paragraphs 8.1 to 8.6 of the PCRF which regulate the interchange fee ceilings; and
- paragraph 9.4 of the PCRF which requires an acquirer to ensure that merchants do not impose any surcharge on domestic debit card, international debit card or international prepaid card transactions.
Alert by Lee Ai Hsian (Partner) of the Banking and Finance Practice of Skrine
1 Registered under sections 17(1) and 18 of the Financial Services Act 2013 (‘FSA’).
2 Approved under section 11 of the FSA or section 11 of the Islamic Financial Services Act 2013 (‘IFSA’).
3 An ‘operator of a payment card network’ is defined in paragraph 5.2 of the Policy Document as an operator of a payment system approved under section 11 of the FSA or section 11 of the IFSA that provides a payment card network operation which enables payment to be made through the use of payment cards.
4 Paragraphs 1.1 and 1.2 of the Policy Document.
5 The absolute prohibition under the PCRF on surcharges on domestic debit/international debit/international prepaid card transactions has been liberalised and removed under the Policy Document.
6 Paragraph 5.2 of the Policy Document defines “MDR” as the merchant fee or merchant discount rate paid by a merchant to the acquirer for each domestic payment card transaction comprising the interchange fee, the processing and other fees imposed by an operator of a payment card network, other costs incurred by the acquirer and the acquirer’s margin.
This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.