Covid-19 a game changer for digital payments 

Even before the Covid-19 pandemic, there were reasons to be optimistic about Singapore’s bid to grow digital payment use, a key building block in our Smart Nation initiative.

Within Asean, Singapore residents have the highest awareness of contactless payments – we have an appreciation for the convenience it offers, going by a report last year by Visa. 

This is no surprise given our connected lifestyles, high levels of digital literacy and developed financial infrastructure. Singaporeans have access to a plethora of cashless payment options that are also increasingly interoperable, an outcome the authorities have worked closely with financial institutions to achieve.

But the same study showed that Singapore residents are also among the least interested in making contactless payments compared with residents of other Asean countries. 

The biggest factor that has held us back is simple yet often overlooked: old habits.

Singaporeans have long been used to fishing out notes and coins from their wallets to pay for their chicken rice or groceries. Before Covid-19 reached our shores, the use of cash had been falling but only at a slow pace. For example, Singaporeans withdrew S$61 billion in cash from ATMs in 2019, just 6 per cent lower than in 2014.

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Since the onset of the Covid-19 crisis, digital payment use has risen. The value of PayNow transactions by UOB customers, for example, grew 220 per cent in the first ten months of 2020 while the volume of PayNow transactions also grew 127 per cent in the same period vis-à-vis pre-Covid-19 levels. QR payment transactions meanwhile jumped 272 per cent compared with the same period last year. In contrast, physical cash deposits and withdrawals made over-the-counter at UOB branches or through ATMs fell by more than 30 per cent year-on-year between March to November 2020. 

While this gives us fresh grounds for confidence, we cannot assume that the trend will go far enough or that it will naturally persist. We must act to consolidate the gains. We should further drive the growth of digital payments in this extraordinary period of flux, given that businesses and individuals are now much more open to change than before.

Building on past work

The Singapore government has taken major steps in recent years to support digital payments. 

In 2017, it built the national real-time peer-to-peer payment platform, PayNow, to enable individuals to transfer funds between bank accounts with just the recipient’s mobile or identification card number. PayNow Corporate, which enables businesses to receive such payments, was launched a year later.

To promote digital payments at shops, the Singapore Quick Response Code (SGQR) was then rolled out, enabling merchants to display just one QR code for all payment providers, reducing confusion.

Some customers will always prefer to pay in cash. This is a reality we can accommodate by not phasing out a cash option where feasible, while stepping up our efforts to convert more individuals through public education. For example, during the pandemic, the government also hired 1,000 ambassadors to educate the public on digital tools. Their remit included teaching stallholders at hawker centres to get on digital payment platforms.

If you are a consumer, using digital payments means not having to count your notes and coins when paying or to do the math on the change you should get. It makes the tracking of purchases easier and more transparent. At a time when concerns about health and safety are paramount, digital payments also remove the need for physical contact with cash that has passed through many hands. For businesses, doing away with paper-based payments and manual processes translates into cost savings, better efficiency and an enhanced customer experience.

The use of digital payments also comes with the benefit of security. Financial institutions are guided by the Monetary Authority of Singapore on safeguarding digital payment users from losses that may arise from unauthorised or erroneous transactions. For instance, UOB’s mobile banking app, UOB Mighty, uses Mighty Insights, an artificial intelligence-powered digital service that analyses each customer’s transaction patterns and notifies them of duplicate charges, refunds or unusual transactions via “insights cards” on the app. This enables customers to track easily any unauthorised transactions and to report them to the Bank for quicker resolution. 

But even with these clear benefits, behavioural change has been a stumbling block on Singapore’s road to going cashless and contactless. 

What Covid-19 means for payments

With people performing more transactions digitally from the safety of their home, individuals who were previously not subscribed to digital payment channels are now opting in. For example, the number of UOB customers using PayNow for payments for the first time grew 64 per cent year on year in the first three quarters of 2020.

As consumers demand a reduction in unnecessary physical contact, businesses are also feeling the pressure. Offering contactless payment options to their customers may no longer be a good-to-have.

Amid such behavioural change, the measures we take now to encourage digital payments are likely to be more effective than before. Now is the time to examine ideas that have worked in other countries, as we seek further breakthroughs.

One observation in places that have made progress is the importance of “muscle memory” in the payment space. Digital payment is convenient to individuals, but the hard part is getting started on the habit. When consumers are incentivised to begin using digital payments in one setting, the “muscle memory” drives them to use such payments in other settings too. 

Google Pay, for instance, has reported that customers in Britain who began tapping their phones to pay for public transport rides an average of just twice a day saw an increase in the use of the same payment mode for other purchases – in restaurants, shopping malls and elsewhere.

Given this insight, the authorities and industry players could collectively incentivise consumers to adopt digital payments by working with merchants that are most likely to build this “muscle memory”, as that promises the largest spillover to other sectors.

Merchants that individuals interact with daily and those that are patronised by the widest cross-section of the population should be the first to be targeted. These would include supermarkets, hawker centres, food courts and transport-related merchants such as taxis, private hire cars and the public transport system.

Projects to promote cashless payments in specific sectors are, in fact, underway. In April 2019, the Land Transport Authority worked with UOB and other partners to launch SimplyGo, a convenient contactless option for commuters to pay for their bus or MRT fares using a credit or debit card. Replicating these efforts in more sectors will no doubt drive overall digital payment adoption rates among consumers. 

Other ways of nudging consumers towards using digital payment methods include offering rewards and embedding payment in the purchasing journey with minimum friction.

This may require banks, merchants and the government to work closely together – for example, to create more value for consumers to encourage behaviour change. In the case of purchasing journeys, when apps by different companies speak to one another better and operate seamlessly, customers are more likely to pay digitally through them. One example is our partnership with SP Group which enables our customers to offset their utility bills by using the reward points they earn on their UOB cards with just a tap on SP’s app. Underpinning this simpler and smarter customer experience are detailed technology processes and safeguards between both companies to keep our customers’ data safe and secure.   

In addition, expanding the free Wifi network – which is already quite extensive in Singapore – would provide a further boost. For small businesses, free Wifi reduces the cost of connecting to the digital payment infrastructure. For consumers who have limited data plans and use their smartphones more when there is Wifi access, it helps them overcome one potential pain point.

The Covid-19 crisis is a game changer in so many areas of our lives. As we grapple with the change, there is an opportunity to turn it to our advantage.

In the payment space, the crisis presents a unique moment in history when digital payments make more sense to more people than they ever have.

We must seize this moment.   

The writer is head of group personal financial services at UOB.