- eWallets in Malaysia must apply for a license from Bank Negara Malaysia (BNM)
- BNM has put in place a number of safeguards to protect users
- eWallets in Malaysia are subject to multiple laws/regulations/legislations
So far in our eWallet 101 series, we’ve covered everything from the pros and cons of eWallets to how safe your money is when held by eWallet companies.
This time around, we’re starting off on a more serious note by looking into the legalities of things.
What are the laws and regulations governing eWallets in Malaysia?
Do we even have any in the first place?
E-Wallet laws and regulations in Malaysia
In recent years, the Malaysian government, Bank Negara Malaysia and other relevant authorities have made their stance on the push for a cashless society clear. They’re all for it!
One of the areas we can see this is in the comprehensive regulatory framework put in place for eWallets, particularly those looking to apply for authorisation.
|No.||Regulation/legislation||What it contains for eWallets|
|1||Financial Services Act 2013 (758)||Official laws and regulations for eWallets.|
|2||Guideline on Electronic Money||Broad principles and minimum|
standards to be observed specifically by eWallets / e-money issuers.
|3||Submission Requirements for Application for Approval to Operate a Payment System or to Issue a Designated Payment Instrument or to be Registered to Provide Merchant Acquiring Services||Procedures and required documents to be prepared by eWallets looking to obtain licensure from Bank Negara.|
|4||Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) – Electronic Money and Non- Bank Affiliated Charge & Credit Card (Sector 4)||Risk management procedures eWallets must comply with in accordance to the domestic anti-money laundering and counter financing of terrorism regulatory framework.|
That’s a lot of documents to go through! Below, we’ve extracted some key points that may be most relevant to you as an eWallet user.
How to apply e-wallet license in Malaysia
- E-Wallet applicants are required to submit an application in writing to BNM together with a covering letter and the documents set out in Submission Requirements for Application for Approval to Operate a Payment System or to Issue a Designated Payment Instrument or to be Registered to Provide Merchant Acquiring Services
- E-Wallets storing more than RM200 per user must possess RM5 million or 8% of outstanding electronic money liabilities in capital funds
E-Wallet Operational and Compliance Requirements
- The Guideline on Electronic Money states that eWallets must submit to the bank its annual audited financial statements and monthly statistical reports on the operation of its e-money scheme
- Maintain separate records and accounts for e-money activities from other business activities
E-Wallet Management of Funds
- Funds collected from users should be deposited and managed separately from the issuer’s working capital funds to avoid commingling
- Funds shall not be invested in any form of assets other than as bank deposits
E-Wallet Risk Management
E-Wallets are obliged to implement a robust security risk management framework that will address:
- Data confidentiality
- System and data integrity
- User authentication
What isn’t covered by our existing eWallet laws and regulations?
According to Payments Compliance, Malaysia’s current regulatory framework does not extend to closed-loop eWallets.
We’ve addressed open-loop vs closed-loop eWallets before, but closed-loop eWallets are essentially eWallets that are exclusive to a specific retailer. A prime example would be Starbucks’ loyalty cards.
Does PIDM protect my money in eWallets?
PIDM is a government agency which protects our deposits in banks.
Outside of banks however, perhaps the biggest concern for users using other forms of financial services (such as investment apps or eWallets) is whether or not our money is protected in the same way.
Yes! PIDM protects eWallet users indirectly by protecting the funds that are placed by eWallet companies in PIDM member banks.
However, remember that non-bank eWallets such as Grab and Boost are not PIDM member institutions, hence PIDM does not directly protect e-money which is being used as a payment instrument.
What does this mean for me as an average eWallet user?
In a nutshell, the eWallet landscape in Malaysia is a pretty safe and secure place for users.
Thanks to efforts from relevant authorities pushing the transition to a cashless economy, we’re lucky to have a comprehensive regulatory framework in place for eWallets applying for licensure.
If there’s one thing to take away from this article, it’s to never use unauthorised eWallets – no matter how irresistible their offers!
Remember that these laws and regulations only apply to licensed eWallets. Click here to view the full list of non-bank e-money issuers.
Now that you’ve got the basics of eWallet laws and regulations in Malaysia down pat, check out our other eWallet resources to make the most of your eWallet usage.