Is Singapore ready to ride the cashless payWAVE?

June 28, 2017

As a nation with 149% mobile penetration rate, 186% wireless internet saturation rate, and an astonishing 96% of the population having a bank account, Singapore is well positioned to be at the forefront of payments innovations.

 

However, the reality is, Singapore lags behind countries such as Sweden, South Korea and China in cashless payments. Sweden is leading in the race and could very well become the world’s first cashless society. From church donations to road side vendors, the plethora of areas in which card payment is accepted is amazing – making it unsurprising that in 2015, only 11% of consumer transactions were paid in cash reported Euromonitor.

 

Meanwhile, T-money, Naver Pay and Kakao Pay have revolutionised the way transactions take place in South Korea as WeChat and AliPay have become the primary mode of payment in China. Using WeChat as an example, users can book taxis, make peer-to-peer transactions, order and pay for food through the single app. It is so convenient and widely adopted that those who wish to transact in cash would find it troublesome to do so.

 

Singapore’s vision to become a cashless society

 

In Singapore, the push for a cashless society by the Monetary Authority of Singapore (MAS) closely dovetails with the Singapore government’s Smart Nation initiative. The vision was discussed in a speech by MAS Managing Director, Ravi Menon at the Sim Kee Boon Institute Conference on FinTech and Financial Inclusion where he described the push for Singapore to be that of “an electronic payments society”.

 

Elaborating, he articulates this vision as a society that:

1. Spurs continuous innovation in payments technology
2. Gives consumers maximum convenience and confidence in making payments
3. Enables firms to increase productivity through payments integrated with business processes
4. Where swift, simple, and secure payments is a reality for everyone

 

Beyond the long-term benefit of a cashless society to enhance Singapore’s capacity and efficiency as a business hub, there are also significant costs associated with the widespread use of cash that can be avoided. MAS estimates that the social costs of using cash are approximately 0.5% of GDP or $2 Billion per year. These are attributed to the costs of securing cash in transit and storage, as well as cheque processing.

 

While there exists a strong reason to move towards a cashless society, both from the commercial and political spheres, cash remains a dominant payment method throughout the country.

 

Why is cash so “sticky” in Singapore?

 

A prominent explanation for this “stickiness” is that cash is still widely used for small value transactions in Singapore and preferred by micro and small merchants.

 

In particular, the prevalence of 6,100-odd hawker centres in Singapore (6,100-odd) plays a huge role in this phenomenon (for those who might not know, hawker centres are open-air complexes that house many stalls selling a wide variety of affordably priced food). As hawker centres are primarily run on cash payments, both from consumer to hawker and hawker to supplier, cash naturally became part of the everyday lives of Singaporeans.

 

This has unfortunately led to a  self-fulfilling loop; consumers hold cash for establishments that do not offer other options thereby fortifying the habit of cash use. Knowing that consumers will have cash as the backup, there is no inherent need for merchants to provide new options. The existence of such an equilibrium between merchants and consumers makes cash “sticky” and hard to transition away for Singapore.

 

Moving away from “Cash is King”

 

Despite the pervasiveness of cash, there are tremendous efforts underway to change the mindset that “Cash is King”. Such an endeavour is by no means easy as it is firmly ingrained into the daily affairs of society. Hence, to move towards a cashless society, we would need to find a solution that both consumers and merchants would find easy to adopt, fast and effortless – more importantly, it has to be a solution that is simple and intuitive enough for both digital natives and non-digital natives.

 

One enabler of future digital solutions would be the upcoming Central Addressing Scheme (CAS) that allows payment through the use of your mobile number as an identification tool. It works as a register that links a mobile number to either the user’s bank account number or a business entity’s unique registration number.

 

Using this technology, users can make inter-bank funds transfers in real time without the need to request for the recipient’s bank account number while ensuring that their transfers are fast and secure. Soon, there will be no need to memorise bank account numbers, and all you will need is a simple mobile number.

 

The creation of the CAS also present opportunity for current mobile banking solutions, one of which being Paylah!. It is a mobile wallet created by DBS that allows users to reduce their daily reliance on cash and perform inter-funds transfer between Paylah! users through the use of QR codes and request for payment from other Paylah! users.

 

Introducing CAS to applications such as Paylah! would create even more opportunities to reduce the cash transactions and enable seamless payment experience to expedite our journey towards a cashless Singapore.

 

With the efforts of numerous major players in Singapore, we are hopeful that the transition into a cashless society will be swift while also being amazingly simple that everyone can use and society can advance together, leaving no one behind.

 

And we, Team C.Lean, are extremely excited to be a part of the cashless wave with the incredible people at DBS.

#Paylah  #TeamCLean

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