Cashless future? S'pore needs bolder, overarching plan

JULY was a good month for e-payments in Singapore. PayNow, the long-awaited, bank-agnostic fund transfer service supported by seven banks here, was launched. Stripe, the San Francisco payments tech company, said that Singapore Internet businesses can accept payments via Alipay and WeChat Pay using Stripe's software, opening China's massive consumer market to businesses here.

While these are great developments for Singapore, which aspires to become a cashless society, it is still early days. The Republic is light years behind China, a country projected to be the first in the world to go fully cashless, and where one can now pay for shao bing (an inexpensive, round baked bread topped with sesame seeds) from any nameless street stall using just his smartphone, which is most fascinating.

Just how did China - a country that has 1.379 billion people and is 9.597 million square kilometre huge - get ahead? And how is Singapore - with a 5.607 million population, a land size of only 719.1 square kilometres and good tech infrastructure - not there yet?

For starters, China has WeChat and Alipay, two major apps that let users do many things, including sending money to peers, and scanning QR codes to pay for purchases in shops. China's highly-controlled online environment means that Western apps are blocked and Chinese apps get to dominate, so when the latter introduce payment functions, these become an easy and natural way to replace cash.

Moreover, China's booming e-commerce scene only helps to further drive payments away from cash. The country is also at a tipping point, where the younger generation has never read a newspaper and, in the future, analogously never have to use cash. Essentially, consumers in China run their whole lives through their smartphones today.

In Singapore on the contrary, cash is king. And to the bewilderment of millennials here, cheque is too. Last year, 60 per cent of consumer payments were reportedly made in cash. In 2015, 30 per cent of business transactions were found to have used cheques. Clearly, cashless or mobile payments have yet to catch on.

Local developments

The Association of Banks in Singapore (ABS), when asked for reasons behind Singapore's lag in becoming a cashless society as compared to China, pointed to local developments in cashless payments instead.

This is the full response from ABS director Ong-Ang Ai Boon, which The Business Times obtained this week: "Singapore banks have traditionally provided customers with a wide range of payment options - both with cash and without, as well as with the use of cheques.

"Cashless payments through credit and debit cards have been around for many decades in Singapore and are popular with a broad range of users. Many day-to-day transactions, at the supermarket or at the MRT stations, are paid for using bank debit cards at points-of-sale. One of the recent products, the multi-currency debit card, allows customers to go cashless for foreign currency transactions.

"The Republic also has one of the highest concentrations of ATMs per square metre of physical space and bank customers do not have to go far to get cash. Cheques clearing here is also one of the most efficient in the world.

"In recent years, because of advances in technology and the widespread use of the smartphones, cashless payments through e-wallets have also been on the rise. The latest cashless method is the peer-to-peer fund transfer service called PayNow which was launched by seven ABS members. Users can just transfer money using mobile phones or their IC numbers."

What stood out from the response were terms such as "cheque", "credit and debit cards", "ATM" and "get cash". Most of these are dated, and at least one of them should soon be obsolete. Smartphones, the most important tool that powers cashless and mobile payments today, was mentioned only at the end.

To be fair, Singapore's three banks have made good progress in cashless and mobile technologies. But each bank's developments mainly serve its own customers, so the space remains fragmented. That every bank is obsessed with being the "first and only" bank to achieve something does not contribute to an all-embracing, comprehensive plan to transform Singapore into a cashless society.

"First and only"

Just last week, UOB said that it has become the "first and only bank in Singapore" to extend the use of PayNow to social messaging apps through its banking app, UOB MyKey. This is after a collaboration with one of its backed startups, PayKey.

Last month, DBS reiterated during the launch of PayNow that it was the "first bank in Singapore" to roll out QR code payments, which is through its mobile wallet, DBS PayLah!, in April.

In similar fashion, OCBC reinforced that it was "the first" here to spot the early friction of customers forgetting bank account numbers while making fund transfers, and in 2014 launched OCBC Pay Anymore, a fund transfer app that lets customers send payments using just the recipient's mobile number.

Being the first and only, while individually laudable for the banks, are ultimately meaningless standards in Singapore's drive to become a cashless society. To get there, Singapore needs a bolder, more overarching plan, and to forget cash and cheque.