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Cashless holds benefits if hurdles cleared

High fees and charges, low usage rate are some reasons businesses cite for shunning e-payment options

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A customer using Apple Pay to pay at the self checkout counter at NTUC FairPrice Xtra in NEX.

Singapore

IS Singapore, a modern metropolis and one of the world's top financial centres, really that backward when it comes to embracing cashless payments?

That is how some visitors from China feel when they find out that they have to use cash for the vast majority of everyday transactions here, Prime Minister Lee Hsien Loong said during the National Day Rally on Sunday.

Touching on the benefits of e-payments when he spoke on the topic of becoming a Smart Nation, he noted that cash has become obsolete in many major Chinese cities as more people switch to electronic modes of payment.

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Even debit and credit cards are becoming a rarity in the world's second-largest economy thanks to the widespread use of WeChat Pay or AliPay for almost all forms of payments, be it for snacks from roadside stalls, taxi rides or tipping waiters at restaurants.

With six out of every ten transactions in Singapore settled via cash or cheque, it's clear the Lion City lags behind in this regard. Mr Lee - who made a renewed push for Singapore to become a Smart Nation - said he hopes the adoption of e-payments can take off as quickly as possible.

Associate professor Chu Junhong of the National University of Singapore Business School said that Singapore lags far behind China in e-commerce, mobile payments and online shopping. "(This is) even though Singapore has a much higher per capita GDP, educational achievement, internationalisation, and cellphone penetration. There is lot of room for improvement," she said.

One local entrepreneur took to Facebook on Monday to explain why the move to go cashless may not take off here as well as it has in China.

Lim Jialiang, who runs an online business selling chocolates, listed a number of obstacles to going cashless in Singapore, among them the high charges and fees that merchants have to fork out for each transaction.

Mr Lim, who gave BT permission to reproduce his views, noted that a transaction in China would incur a 0.35 per cent charge for a debit card and 0.45 per cent for a credit card.

In Singapore, it is much higher at 2.5-3 per cent. Payment gateway Stripe charges merchants 3.4 per cent and S$0.50 per successful charge. Paypal charges 3.9 per cent per transaction.

"These are costs set by the local banks here, and online payment portals have to follow the costs or local merchants won't be getting any payouts from any purchases made," he wrote.

Mr Lim also talked about the inconvenience of going through numerous steps online when it comes to cashless payments, and the high costs for merchants to instal and maintain the devices at their shops or websites.

"When your margins are shaved by at least 3 per cent whenever a cashless option is exercised, and that makes or breaks your margin, you'll want people to make payment in cash . . . Essential regulatory steps will allow for an environment that encourages cashless payments," he said.

In his rally speech, Mr Lee pointed out that while Singapore already has e-payments, there are just too many different schemes and systems around, which complicates the situation.

He emphasised the need to simplify and integrate them into a single system such as PayNow, a scheme that seven banks in Singapore now offer their customers.

This new fund transfer option allows people to transfer money to one another using just the recipient's mobile phone number or identity card number after an account has been linked.

Desmond Tan, head of group lifestyle financing at OCBC Bank, said that many traditional small businesses, such as hawkers, have not jumped on board the e-payment bandwagon for several reasons.

These include a lack of space to place the terminals, the costs associated with payments via these terminals, the time needed to learn how to use the terminals, and that such payments require up to two days to be processed.

What's more, getting merchants who prefer cash transactions to adopt e-payments may be challenging as cash transactions may be exempt from certain taxations compared to digital payments, said Mr Tan. He outlined one way that these payment costs could be overcome. PayNow currently rides on the Fast network (via Nets) and incurs zero cost for both the customer and merchant.

Should a unified point-of-sale terminal be realised, or a universal QR code be adopted - which leverages Nets and customers' savings or current accounts - then the costs currently associated with cashless payments can be removed.

"The adoption of cashless payments requires a mindset and behavioural change among consumers and businesses. Promoting awareness and education will certainly help," said Mr Tan, adding that this also means making the effort to understand and address the underlying reasons for a reluctance to go cashless.

Sanjay Aurora, managing director (Asia-Pacific) of UK-based cyber security firm Darktrace, said that as more people move towards e-payments, there will be a greater risk of cyberthreats as a result.

"Cashless payments no doubt deliver convenience, ease of transaction and allow individuals to better keep track of spending. At the same time, we have seen a rise in text message scams called 'smishing', which can infect smartphones and result in the theft of personal information," he said.

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