Ring the bells as ringgit turns 60 but digital is its future!

THE nation is not the only one that turned 60 this year. The local currency, the Malaysian ringgit, turned 60 too and it did so in style, hailed by both foreign and local analysts as the strongest major Asian currency to date.

These analysts and economists are of the view that rising business sentiment has lifted the local currency, particularly against the US dollar, though it is still trading close to the historical lows of the 1998 financial crisis.

The talk is that the ringgit is expected to continue to strengthen against the greenback, and could trade at RM4 to the dollar by the end of the year.

That will be good news since we have all paid a heavy price when the ringgit dwindled right after the oil price crash three years ago.

What is pushing the ringgit to greater highs these days are a mixture of factors ranging from local political stability to the weakening of the dollar.

Then there is the surprising gross domestic product (GDP) growth and the growth in trade, as well as exports, which have all but beaten the last quarter’s estimates.

There is also the wearing out of the 1MDB issue — which contributed largely to the beating the ringgit suffered at the hands of (mostly) foreign currency traders.

This prompted Bank Negara Malaysia to act with a series of foreign currency controls that kept the bad traders away for some time.

However, I firmly believe the ringgit will regain most of its old glamour if a few major tweaks are brought in by the regulators.

One of them is an upgrading of the ringgit into a digital currency which will both speed up the country’s march towards a cashless society as well as reducing corruption.

This will mean restricting the amount of printed currency in circulation, making it more difficult for it to be given as “suap” or “hadiah” in many sectors where cash is king.

India stack

As a matter of fact, the topmost news in finance this year is Indian Prime Minister Narendra Modi’s move to ban all but 15% of the rupee in circulation.

This has set the ball rolling for India to become (perhaps) the first cashless and the first real digital economy in the world, said Forbes Magazine.

So, should Malaysia follow the steps of New Delhi in the search of a mechanism that would make the country an almost cashless but also turn it into a digital economy?

To follow this path, Malaysia will have to adopt the “India Stack”, which is a series of secured and connected systems that allow people to store and share personal data such as addresses, bank statements, employment records, and tax filings.

All that can be shared, via Aadhaar, a biometric database that has 12-digit digital identification code, fingerprint authentication and retina scans.

Forbes has gone as far as crediting the system (India Stack) as a potential framework for a new digital society.

But wait a minute

Does Malaysia not have an identification system that is top notch?

Then why are we still using pin and pay, which is a retrograde way of making payments in this day and age — certainly when Malaysia is talking more about the arrival of its own digital age?

This is the other tweak that is needed in this decade, if you ask me, in order to raise the ringgit to the level of a digital currency, and to turn both society and the economy cashless.

That is the use of fingerprint and retina or face recognition software that will change the way things are done forever. It will be a costly exercise but I think the money is there, and the banks with their fintech and so on should be ready.

The only thing missing might be a consensus among the banking sector, the politicians and the business sectors.

If Malaysia were to embark on such an initiative, it would advance the cause for the Transformation National 50 or TN50 programme.

On Sept 8, Malay Mail ran a story on the 10 most successful local companies in the fintech arena. These companies should not rest on their laurels. Their initiatives should also include pushing the country towards a digital, cashless economy. And fintech is part of the answer.

Adopting India stack, why not? Tweak it and assimilate it to the local economy, that is what sandboxes are supposed to do.

Kazi is the business editor of Malay Mail. He can be reached at kazi@mmail.com.my.