PETALING JAYA: With digitalisation on the rise, traditional players in the money services business (MSB) must rethink their models given the low margins and high-volume demands of the trade, stakeholders say.
Suria Muhabat Sdn Bhd chief executive officer Manimakudam Karuppiah said despite traditional currency exchange holding about 80% market share, many operators were struggling due to high operating cost, slim margins and competition in the MSB sector.
“Post-Covid-19, digital and app-based platforms now hold 20% of the market, driven by younger, tech-savvy users. Over-the-counter services such as ours remain relevant, especially for older customers or those who prefer instant cash, transparency and personal interaction,” he said.
“Many of us in the MSB industry are small-scale or family-run businesses with limited funds.
“Venturing into digitalisation requires a lot of financial resources – which most players don’t have.”
He said MSB businesses were regulated by Bank Negara Malaysia under laws requiring high compliance costs like the Money Services Business Act 2011 and Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (Act 613).
He added that the industry was frequently classified as high-risk by banks, with little access to capital for digitalisation efforts.
Manimakudam said even licensing was limited to a maximum renewal period of three years, making it difficult for traditional players to commit to long-term digital investments due to the uncertainty.
He recognised that digitalisation was the future, adding that his company had implemented it in remittance operations, at a high cost.
KL Remit Exchange director Mohamed Faizal Mohamed Arif said his business had been impacted by the introduction of the multi-currency digital card.
He said it was difficult to compete with a global service with a head start and strong social media presence.
“This is a family business, and since Covid-19, the multi-currency card and digital payment methods have affected us because there are fewer tourists visiting our counters,” he said.
“We have four branches – three in Kuala Lumpur and one in Shah Alam – which have been unprofitable, and we have been covering expenses from our own pockets.
“The model is volume-driven, just like traditional money exchange. Even if their USD rate is slightly lower, like 4.24 compared to our 4.25, they still profit due to the high number of transactions.”
Despite concerns, Malaysian Association of Money Services Business president Datuk Seri Jajakhan Kader Gani said the industry remained resilient, with strong revenue reported based on recent statistics.
The shift into digitalisation was a result of tdiversified players in the MSB but they only account for 10% from the orthodox segment as cash was still preferrable.
“Based on our assessment, yes, the digital area is set for growth and reduction in orthodox area, this is something we are anticipating.
“If you have resources and deep pockets you can invest in digitalisation.”
Jajakhan said many MSB businesses were unable to adopt digitalisation due to insufficient financial support, grants and skills development programmes.
When asked if affected MSB businesses were shutting down, he said there were 250 members and only a small number had closed shop or surrendered licences due to operational reasons.
He said some traditional businesses like banks were downsizing because digitalisation had reduced the need for many physical branches.
