- Proposed changes to credit card interchange fees. Bank Negara Malaysia (BNM) has released a Payment Card Reform Framework Concept Paper, outlining some changes to the credit card and debit card interchange fees.

- A cap of 1.00% is proposed, instead of the current 1.2%, effective from 2 January 2015 to 2020... BNM has proposed that the interchange fees for credit card transactions shall not exceed 1.00% of the value of the transaction for the period between 2 January 2015 and 31 December 2020.

- ...and a further cap of 0.48% post 2021. It is proposed that the cap be further reduced to 0.48% from 2021 onwards.

- Move to reduce costs for the public. BNM said the recent revision and increase in interchange fee rates by operators of the major international payment card networks has caused payment card acquirers to raise the merchant fees or merchant discount rates (MDR) of about 46,300 merchants to offset the increase in cost. BNM said merchants in turn are likely to recover the increase in cost by raising the prices of goods and services, thus adversely impacting not only the cardholders but the general public at large.

- Estimated loss in revenue of RM202mil per annum between 2015 and 2020, based on current data. We estimate that the difference in the 1.2% and 1.0% interchange fees will lead to a loss in revenue of about RM202mil per annum for the industry.

- Estimated loss in revenue of RM728mil per annum post 2021. Based on the eventual cap of 0.48% and the current rate of 1.2%, the loss in revenue would be RM728mil per annum.

- CIMB and Maybank have relatively larger market share of credit cards receivables. Of the local banks, we estimate that CIMB and Maybank have the largest market share currently in terms of credit card receivables, at 16% and 15% respectively. Next on line is HLBB’s 12.2%, followed by RHB Cap at 5.8%, PBB at 4.6% and AFG at 1.7%. We think this will also closely reflect the market share of purchase transactions by credit card holders. The banks are likely to mitigate the impact of this through, perhaps, lesser reward programmes to credit card holders.

- Maintain NEUTRAL. We affirm our NEUTRAL rating on the sector, based on the latest news. 

Source: AmeSecurities