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6/5/23, 10:07 PM New Bank Negara Malaysia Policy Document updates e-money regulatory framework : Rahmat Lim & Partners
This article sets out the key changes introduced by the new Policy Document.
Key points
The new Policy Document has introduced certain changes to the e-money regulatory
framework, which include, inter alia :
Background
Over the past decade, electronic money (“e-money”) has evolved and grown significantly due
to the proliferation of mobile technology such as Quick Response (QR) codes and mobile
applications. The form of e-money has also evolved from traditional stored value cards to
network-based solutions such as online accounts or e-wallets.
Given the increasing prominence of e-money in the financial landscape, revisions in the e-
money regulatory framework are required to strengthen the safety and reliability of e-money
issued by e-money issuers (“EMIs”), as well as to preserve public confidence in using or
accepting e-money.
The notable changes introduced by the Policy Document are outlined below.
Re-categorisation of EMIs
Previously, EMIs were categorised into two types of e-money schemes (i.e. “small schemes”
and “large schemes”), depending on wallet size and aggregate outstanding e-money liabilities.
The new Policy Document now categorises EMIs into the following three categories:
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6/5/23, 10:07 PM New Bank Negara Malaysia Policy Document updates e-money regulatory framework : Rahmat Lim & Partners
○ a market share of at least 5% of the total e-money transaction value in Malaysia for a
given year beginning 2017; or
○ a market share of at least 5% of the total outstanding e-money liabilities in Malaysia
for a given year, beginning 2017.
Compared to Standard and Limited Purpose EMIs, this category of EMI is subject to higher
regulatory expectations.
Part B of the Policy Document sets out BNM’s expectations with respect to the governance
arrangements for an EMI. The requirements range from those relating to the composition of
the EMI’s board to the requirements and responsibilities of senior management roles.
Part C of the Policy Document sets out additional operational and risk management-related
conditions to be satisfied by EMIs. Some of the salient conditions are set out below:
Currently, a large e-money scheme issuer needs to maintain minimum capital funds of RM5
million or 8% of its outstanding electronic money liabilities, whichever is higher, and a small
e-money scheme issuer needs to maintain minimum capital funds of RM100,000.
From 30 December 2023 onwards, the minimum capital funds that will have to be maintained
by EMIs will be as follows:
Revised threshold for approval requirement with respect to increase in purse limit
Previously, a large e-money scheme issuer had to obtain BNM’s approval to increase its
maximum purse limit to any amount above RM1,500. Under the new Policy Document, an EMI
will only be required to obtain BNM’s approval if the increase in purse limit is above
RM5,000, or if there will be any changes to the functionality or the product features of the e-
money in question.
In any case, there is also a notification requirement with respect to any increase in wallet 6
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limit which is below the RM5,000 threshold, and where such increase does not involve any
changes in functionality and product features of the e-money.
Safeguarding of funds
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6/5/23, 10:07 PM New Bank Negara Malaysia Policy Document updates e-money regulatory framework : Rahmat Lim & Partners
Notwithstanding the issuance of the Policy Document, the following requirements under the
Superseded Guidelines will continue to apply until 30 December 2023.
Under the Superseded Guidelines, an issuer of a large e-money scheme must deposit funds
collected in exchange for the e-money issued in a trust account with a licensed banking
institution, and such funds may only be used to make refunds to users and make payment to
merchants. The funds may only be invested in high quality liquid ringgit assets (i.e. deposits
placed with licensed banking institutions, debt securities issued or guaranteed by Federal
Government and BNM, Cagamas debt securities etc.). Issuers who are unable to restrict their
activities to e-money business only must deposit and maintain an additional 2% of their
outstanding e-money liabilities in the trust account at all times.
For issuers of a small e-money scheme, the funds collected in exchange for the e-money
issued must be placed in a deposit account with a licensed banking institution and separated
from its other accounts. It should be managed by the issuer in a manner akin to a trust
account arrangement. The issuer should ensure that the funds in the deposit account may
only be used to refund users and make payment to merchants, and the funds must not be
invested in any form of assets other than bank deposits.
● Where a non-bank EMI’s total outstanding e-money liabilities are greater than the funds
in the trust account, a non-bank EMI will be encouraged to deposit funds into the trust
account within one (1) working day to ensure that the funds in the trust account are at all
times sufficient to cover the total outstanding e-money liabilities
● An EMI will be encouraged to spread out the placement of funds received in exchange for
e-money issued in bank accounts maintained at several banking institutions to mitigate
risk exposure to any single banking institution
● A non-bank EMI will have to ensure that it has sufficient liquidity for its daily operations.
At a minimum, an EMI would be required to maintain a liquidity ratio of one
The Policy Document has introduced new requirements with respect to the withdrawal and
refunds of e-money. Insofar as the withdrawal of e-money is concerned, an EMI must ensure,
inter alia:
● any physical cash withdrawal outside Malaysia using e-money is undertaken in foreign
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currency only; and 6
● where e-money balances are remitted into a bank account, any withdrawal of funds from
the e-money account must be paid into the customer’s own bank account with a banking
institution only, unless the EMI participates in the Real-time Retail Payments Platform
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6/5/23, 10:07 PM New Bank Negara Malaysia Policy Document updates e-money regulatory framework : Rahmat Lim & Partners
(RPP) and offers credit transactions by which the withdrawal of e-money balances may
be made to other bank or e-money accounts.
Outsourcing arrangement
From 30 December 2023 onwards, an EMI will be required to obtain BNM’s prior approval
before entering into a new material outsourcing arrangement or making any material changes
to an existing material outsourcing agreement. The Policy Document sets out enhanced
requirements for outsourcing arrangements, which include, inter alia , the specific clauses to
be included in an outsourcing agreement as well as the requirements relating to outsourcing
outside Malaysia and outsourcing involving cloud services.
White labelling
An EMI must obtain BNM’s prior written approval before entering into a white labelling
agreement for the first time or making any material changes to its existing white labelling
arrangement.
A non-bank EMI is prohibited from using its e-money platform or system to promote or cross-
sell any financial products or services except with BNM’s prior written approval.
Enhanced IT requirements
Part D of the Policy Document sets out comprehensive IT-related requirements with respect
to technology risk management, technology operational management, cybersecurity
management, technology audit, internal awareness and training, including control measures
relating to mobile technology such as internet applications, mobile applications and devices,
and Quick Response (QR) code etc. The requirements set out under Part D of the Policy
Document will come into force on 30 December 2023.
The new Policy Document is available on the BNM website www.bnm.gov.my by clicking here.
This article has been prepared with the assistance of Associates Nicole Leng, Aniq Ikhwan bin
Ishak and Yung Jia Heng.
AUTHORED BY:
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6/5/23, 10:07 PM New Bank Negara Malaysia Policy Document updates e-money regulatory framework : Rahmat Lim & Partners
Karen Foong
Malaysia
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