KUALA LUMPUR (Feb 11): GHL Systems Bhd (GHL) has expanded its transaction payment acquisition (TPA) business to the Malaysian public sector with its first contract to provide an end-to-end system for cashless collection of loan repayments to the country’s largest microcredit organisation, Amanah Ikhtiar Malaysia (AIM).

GHL Malaysia chief executive officer Danny Leong told reporters after the signing ceremony of the contract today that GHL would earn “a fraction of the transaction fee” for loan repayments through GHL’s payment system using a debit card. The transaction fee will be borne by AIM.

“AIM has 350,000 borrowers currently repaying their loans on a weekly basis. So, we are looking at a potential RM1.4 billion [worth of] transactions per month being processed through this cashless infrastructure. This is huge [for GHL],” Leong added.

GHL (fundamental: 1.4; valuation: 0.3) declined to specify how much it would be charging AIM per transaction but said that GHL could charge merchants like AIM less than the usual 0.8% charged by banks, due to its “lower overheads”.

Meanwhile, Leong said GHL has already invested US$1.5 million in capital expenditure to set up the cashless payment system and to provide AIM’s 8,000 collection points with payment terminals. This e-payment infrastructure will be rolled out in the first quarter of 2015.

The contract with AIM, Leong said, is a sign that GHL’s pursuit for public sector work is starting to gain momentum.

“Traditionally, from the GHL standpoint, we deal a lot with banks, telecommunications companies, and large merchants. We are quite new to the government sector. So, this is a landmark project for us.

“We see the potential for government contracts as really bright because Bank Negara is pushing cashless transactions, whether you are in government sector or private sector, and we are in an ideal position to help to spearhead this, together with the government,” he said.

Malaysia has seen payments using debit or ATM cards increased at a compounded annual growth rate of 20% in the last three years. The country currently has 44.6 million ATM cards in circulation.

Under the central bank’s 10-year Financial Sector Blueprint, it aims to grow the use of debit cards  from eight transactions per 1,000 inhabitants to 25 transactions per thousand population by 2020.

Leong said that GHL would have a leading role to play in helping Bank Negara achieved its goals and that it is already in talks with several other government agencies to provide a cashless payment system.

“We will see more and more collection-related [businesses], whether it is fees or fines. We believe we will have a role to play to make [such transactions] cashless by using a debit card or an ATM card,” he explained.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)