SINGAPORE (June 21): Singapore is pushing ahead with the embracing of electronic payments, with plans in the pipeline to lower its dependency on cash as well as eliminate cheques.
“E-payments have significant advantages over cash and cheques. As a mode of payment, it is far more convenient and efficient,” says Minister for Education Ong Ye Kung, who is also on the board of the Monetary Authority of Singapore (MAS).
However, Ong stresses that the aim is not to be a cashless society, but to use less cash and more e-payments.
“Cash is easy and familiar to use. It is also part of our culture,” Ong says in an address to the Association of Banks in Singapore (ABS) on Wednesday.
Indeed, Piyush Gupta, the chairman of ABS and chief executive officer of DBS Group, says the “early indications are positive” for Singapore to eventually transform into a cashless society.
However, he cautions that abandoning physical cash too quickly could bring about some challenges. Already, Gupta notes that the move to cashless is seeing pushback from some segments of society, and even central banks.
“Take the case of Sweden. Only 2% of the total value of transactions consist of cash and even this is expected to decline to less than 0.5% by 2020. On the surface, Sweden is well-positioned to go completely cashless,” Gupta says.
“However, the transition to digital payments is taking place so fast that authorities worry that it will become unviable for banks to maintain the infrastructure for handling cash,” he adds. “A parliamentary review in Sweden is now working on new measures designed to stop the decline of cash and to maintain a basic cash infrastructure.”
The way Ong sees it, Singapore doesn’t need to be literally a cashless society. “But we certainly can transact with a lot less cash and we won’t need to visit the ATM so often,” he says.
As such, the Minister says Singapore should aim to bring ATM cash withdrawals down to 20% of e-payment transaction value by 2020 – down from almost 60% in 2015 and about 40% at end-2017.
At the same time, Ong says Singapore should aim to eliminate cheques and become a cheque-free society by 2025.
“These targets are doable,” Ong says. “When the level of convenience and confidence (in e-payments) crosses a critical tipping point, adoption will rise across our population within a short time and become pervasive.”
To this end, Ong announced that peer-to-peer funds transfer platform PayNow will be enhanced to extend the service to businesses.
PayNow, which was launched last year by ABS, enables instant payments between individuals using the recipient’s mobile number or Singapore NRIC/FIN.
From Aug 13, 2018, businesses, corporates and the Singapore government will be able to pay and receive funds instantaneously with the linking of the Unique Entity Number (UEN) to their Singapore bank account via the enhanced service, PayNow Corporate.
PayNow Corporate will be part of the Singapore Quick Response (SG QR) Code. This will enable retail, businesses and corporates to make instant PayNow transfers by scanning the merchant’s or individual’s QR via their bank’s mobile banking app.
“With the launch of PayNow Corporate, both businesses and retail customers can enjoy the same convenience of a simpler way to transfer funds 24/7, 365 days a year. We will continue to work with the industry to promote PayNow as a convenient and secure means to transfer funds,” says ABS director Ong-Ang Ai Boon.
According to Ong-Ang, over a million people in Singapore now use PayNow, with transfers via the service amounting to more than $900 million since its launch last year.
“For businesses too, e-payments are better than cash and cheques,” says Ong. “They help increase efficiency as you cut down the time and effort in counting cash, reconciling money in the cash register with items sold, carrying that money to the bank or encashing cheques.”
“Further, funds collected electronically will be credited directly to bank accounts, which is much safer,” he adds.
While Ong notes that Singapore’s e-payment landscape could be seen as “confusing” to some amid a multitude of e-payment options available, he says the government will not seek to stifle the competition.
“In some countries like China, one or two large players dominate the market and with one or two e-wallets you can make e-payments everywhere. Some Singaporeans wonder if such a situation is better,” Ong says. “We have deliberately taken a different approach so as to allow more competition and innovation in the payments space.”
“Having one or two players dominate the market brings short term convenience to consumers, but in the context of Singapore, there will be significant downside risk in the long term due to a lack of competition,” he adds.
According to Ong, these risks will be heightened when a dominant player wields significant market power, and owns all the transaction data and customer information.
“Over time, this can slow down the rate of innovation, and give rise to the risk of unfair pricing for customers,” Ong says. “That is why we did not try to consciously develop or promote one unified payment solution. Instead, our goal is to allow for a variety of payment solutions that are competing yet inter-operable and convenient, providing choice to consumers and encouraging innovation.”