Singapore can reduce cash use and be cheque-free by 2025: Ong Ye Kung

E-PAYMENTS are catching on in Singapore and the government is aiming to further reduce the use of cash and become cheque-free by 2025.

It is also beefing up consumer protection against e-payment risks, said Minister for Education Ong Ye Kung, who is also a board member of the Monetary Authority of Singapore.

The take-up rate of e-payments has been promising, he said at the 45th annual dinner of the Association of Banks in Singapore (ABS) on Wednesday.

"Consumers are increasingly favouring e-payments," he said.

For instance, PayNow - launched last year and sends payment using the mobile contact list - has more than 1.4 million registrations, and nearly S$900 million has been transferred via PayNow.

From August 2018, PayNow, which is now a service to consumers, will expand to include businesses and the government.

Earlier this year, MOE piloted the disbursement of Edusave Awards to students via PayNow. Shortly after recipients received their certificates on the stage, they received SMSes notifying them that the award money has been credited into their bank accounts.

Since March this year, eligible CPF members over 55 years old can also receive their lump sum withdrawals using PayNow.

Linking the NRIC to your bank account means you can receive these disbursements more quickly and conveniently via PayNow, Mr Ong said.

"For businesses and organisations, it also means no need to separately collect or maintain bank account details from individuals," he said. "Government agencies are actively exploring using PayNow for other disbursements," Mr Ong added.

More than 8 in 10 Singapore consumers have adopted e-payments and almost 3 in 5 Singapore merchants accept e-payments. On its own, the value of e-payments measured by FAST and card transactions has been growing by more than S$10 billion every year.

FAST is an interbank electronic funds transfer for customers to transfer funds from one bank to another in Singapore instantly.

The use of cash and cheques has been decreasing steadily in recent years, said Mr Ong.

Cash withdrawals at ATMs have been coming down, by more than S$300 million every year.

In 2015, ATM cash withdrawals were almost 60 per cent of e-payment transaction value measured by FAST and card payments. This came down to about 40 per cent at the end of 2017.

"Let us aim to bring this down to 20 per cent in 2020," said Mr Ong.

Singapore should aim to eliminate cheques; the volume of cheque usage is already declining, he said.

The share of cheques as a proportion of all payments using FAST, GIRO and cheques was about 28 per cent in 2017, down from 37 per cent in 2015.

"Let us aim to bring that down to 15 per cent in 2020 and become a cheque-free society by 2025. Sweden has done it. We can too."

The cost of processing cash and cheques in Singapore was about S$2 billion, or 0.5 per cent of gross domestic product in 2015, a KPMG study found. The cost includes storage, transportation, security and incineration.

To safeguard against risks, MAS will be introducing a new Payment Services Bill later this year, Mr Ong said. The Bill will boost the payments regulatory regime and strengthen safeguards against risks. It will identify all activities along the e-payment value chain, such as e-money issuance, domestic funds transfer and merchant acquisition by payment platforms, and will regulate them under a single framework. Many of these activities are currently either not regulated or lightly regulated, Mr Ong noted.

The Bill will strengthen the standards of consumer protection, anti-money laundering controls and cybersecurity related to payment activities.

"The requirements will be calibrated to be proportionate to the risks posed by each activity, hence encouraging new ideas to flourish and engendering confidence in using e-payments."

This week, payment systems giant Visa had to explain to a British parliamentary committee that is probing the matter that a massive technical glitch earlier this month had affected 5.2 million card transactions, almost half of which were in Britain.

Mr Ong said the e-payment targets are doable though he did not think their adoption will be linear.

"When the level of convenience and confidence crosses a critical tipping point, adoption will rise across our population within a short time and become pervasive.

"The aim is not to force a cashless society, but to enable everyone to enjoy the convenience and efficiency of e-payments - simple, swift, safe and seamless."

In his speech earlier, DBS CEO Piyush Gupta said there is a pushback to going cashless in some segments of society.

There is a cost to cash - yet the move to cashless is seeing pushback from segments of society and even central banks, who caution about the pace of abandoning physical cash, he said. Mr Gupta is ABS chairman.

In Sweden, only 2 per cent of the total value of transactions consist of cash and even this is expected to decline to less than 0.5 per cent by 2020.

"On the surface, Sweden is well-positioned to go completely cashless," Mr Gupta said.

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 added.

"There are also concerns about the financial exclusion of certain sections of society such as the elderly or lower-income citizens. 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," said Mr Gupta.

Closer to home, NUS was forced to scale back its plans to make the campus entirely cashless after students signed online petitions calling on the university to continue supporting cash payments, he noted.

The pushback came even as 60 per cent of current transactions in the university are cashless.