Security Safeguards on e-Payment Systems in Malaysia: Analysis on the Payment Systems Act 2003

• Author: Sonny Zulhuda - Ida Madieha Abdul Ghani Azmi
• Position: International Islamic University Malaysia
• Pages: 187-193

JICLT

Journal of International Commercial Law and Technology

Vol. 6, Issue 4 (2011)

187

Security Safeguards on e-Payment Systems in Malaysia: Analysis on the

Payment Systems Act 2003

Sonny Zulhuda & Ida Madieha Abdul Ghani Azmi

International Islamic University Malaysia

Corresponding author: sonny@iium.edu.my

Abstract. Central to the infrastructure of electronic commerce activities is the electronic

payment system. This e ncompasses not only the iss ues o f technic al sophistication but also legal

readiness. In the context of electronic commerce environment in M alaysia, this paper seeks to

highlight and examine the Malaysian legal readiness in the aspect of electronic payment system,

focusing on its Payment Systems Act 2003. The discussion is limited to the issue of electronic

security measures embodied in the law. Within its restricted scope, this paper seeks to demonstrate

how the law rec ognizes the importance of security measures in order to build confidence and trust

among the public and mainly the users of electronic payments in the cou ntry.

1. Introduction

Malaysia regards e lectronic commerce as a po werful driver for the national development and economic gro wth.

This belief has been reinforced by the setting up of national policies and e nactment of laws seeking to ensure that

processes, tools and tech nologies are put in place to facilitat e the electronic commerce. Among those laws is the

Payment Systems Act 2003 (Act 627). This piece of legislation was enacted to provide the fra mework for the

regulation and supervision of the payment systems and payment instruments in Malaysia. The ultimate goal is to

enhance t he efficienc y of payment system and to specifically provide the mandate to the banking regulator to

effectively oversee and facilitate greater develop ment of s uch system in the country. This law is expected to be

influential in facilitating the electronic commerce in Malaysia, pa rticularly its electronic banking practices.

Nevertheless, among the biggest stumbling block to this law this law needs to pass through is the fear over

security and privacy of the payment system itself. In order to do this, there is consequently a pressing need to

identify whether o r not the law has sufficiently addressed this iss ue. In partic ular, there is a need to identify the

extent to which such legal instrument recognizes and requires the necessary sec urity measures in the payment

system in Malaysia.

This paper atte mpts to answ er two main questions: first, what are, conceptually spea king, the e-security

measures required in electronic commerce system, especially the electronic payment system? Secondly, how

does the Malaysian Payment Systems Act 2003 address those security measures? This paper is purely a legal,

doctrinal and analytical study focusing mainly on the electronic commerce laws in Malaysia, in particular on the

e-payment system as required in the Payment Systems Act 2 003. This brief analysis is significantly important

due to the lack of research currently undertaken on the system securit y implication of this particular legislation.

2. E-Payment and Security

The notion of electronic security or information security is strongly linked to the value of i nformation itself. In

other words, only when a value of thing is feared to be threatened or attacked, the security of such thing is

required and prevention of related risk is therefore warranted (Schneier, 2003). The more individuals and

organisations value their assets, the bigger their concern over securit y. According to Merriam-Webster