muhammad bin ibrahim : mobile payment – the next wave keynote address by mr muhammad bin ibrahim, governor of the central bank of malaysia ( bank negara malaysia ), at the payment system forum & exhibition 2017 " mobile payment : the next wave ", kuala lumpur, 8 december 2017. * * * welcome to the payment system forum & exhibition 2017. this year ’ s theme ‘ mobile payment : the next wave ’ is the continuation of our country ’ s e - payment transformation that started seven years ago. in 2011, we launched the 10 - year e - payment roadmap in the financial sector blueprint 2011 – 2020. various reform measures were instituted to remove pricing distortions, instill market incentives and induce competition to reduce costs in our effort to create a conducive environment to accelerate migration to e - payments. these measures have been effective in reducing malaysia ’ s usage of cheques and fostering the adoption of e - payments. the total cheque volume has declined by 42 % from 205 million cheques in 2011 to an estimated 120 million cheques in 2017. electronic fund transfers have increased from 66 million transactions in 2011 to an estimated 329 million transactions in 2017, surpassing the number of cheques issued by almost three times. at the current rate of decline, we are likely to achieve the financial sector blueprint target of reducing cheque usage to 100 million in the year 2019, one year ahead of schedule. encouraging progress has also been made in the expansion of the point - of - sale ( pos ) terminal network. the reform measures in the payment card reform framework ( pcrf ) implemented since 2015 have enhanced transparency and competition, bringing about a continued decline in the average merchant discount rates ( or mdr ). merchants have benefited from lower cost of accepting card payments, with an estimated cost savings of about rm422. 4 million from 2015 to september this year. consequently, the annual growth of pos terminals has more than doubled from about 6. 8 % for the period between 2011 and 2014, to 17 % for the period between 2015 and 2017. key trends shaping our payment landscape today since the payment forum in 2015, many developments have taken place in the payment landscape both domestically and internationally. firstly, society has become increasingly digital and connected, driven by the internet and mobile revolution. for a population of 32. 1 million in malaysia, there are 42. 8 million mobile phone subscriptions while smartphone penetration stands at 70 % and is increasing. secondly, payment technology has become

##ting conditions have generated inflationary pressures ; the major period being prior to the asian financial crisis. since the 1990s, monetary policy has been further complicated by volatile capital flows. this was evident in several periods, the early nineties, the mid - nineties, and the outflows during 1997 - 1998, and in the current period following the de - leveraging by financial institutions in the advanced economies. in the early days of the bank, policy actions were focused on the management of liquidity in the financial system through the imposition of statutory and liquidity reserve requirements, and through prescription of interest rates and portfolio restrictions, including ceilings on lending. further progress and sophistication in the financial sector, the deepening of the financial markets and the growing influence of capital flows, resulted in the reliance on interest rate and other market - based instruments for monetary policy. further, with the increased role of expectations, greater clarity in policy signals became desirable. thus in 2004, the new interest rate framework was implemented, in which the overnight policy rate became the new policy rate, thereby enhancing the efficiency of the monetary transmission mechanism. the new framework has also served as a catalyst for efficient pricing of financial products and services by banking institutions. a key issue for monetary policy in an open economy like malaysia has been in maintaining a flexible exchange rate and monetary independence in the face of increasingly large capital flows. to better manage surges in capital flows which have become more prevalent, the range of market - based instruments for monetary policy operations has been widened. the rise in intra - regional trade and investment flows has resulted in greater importance being accorded to stability of the exchange rate against regional currencies. the monetary policy decision - making process at the bank has also been redefined in which the governance for monetary policy is based on the monetary policy committee to achieve a more optimal process for policy making. monetary policy communication and increased transparency have also become highly important in this framework. thus, while the central bank's responsibility towards promoting monetary stability conducive to sustainable growth has remained unchanged since the inception of the central bank in 1959, the strategies, framework and instruments have evolved substantially to ensure its effectiveness in delivering the desired objective. financial sector development a key focus of the central bank during these five decades has been institutional building, financial market development and putting in place the financial infrastructure. the evolution of the financial system has seen its transformation from a rudimentary financial system that was dominated by the banking sector to a highly