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World's first unified payment QR code credit positive for Singapore banks: Moody's
CREDIT ratings agency Moody’s said on Thursday that the launch of the world’s first unified payment QR code, or the Singapore Quick Response Code (SGQR), will accelerate mobile payments in the country.
The move is also credit positive for Singapore’s three largest banks – DBS, OCBC, and UOB – as a single QR code used to process mobile e-payments will encourage more consumers and merchants to adopt mobile e-payments.
“The mobile-payment schemes of the three Singapore banks have the widest market reach among the 27 mobile-payment scheme operators in Singapore. The banks will benefit from wider public acceptance and usage as the SGQR code rolls out,” said Moody’s.
The new code will consolidate multiple payment QR code platforms now used by 27 mobile-payment scheme operators in Singapore into a single common QR code label and will be rolled out over the next six months.
According to Moody's, increased adoption of e-payments systems will support the three Singapore banks’ profitability by reducing the associated costs of handling cash. It will also widen the banks’ net to capture new fee income arising from the shift to their mobile e-payment systems.
Additionally, smaller and new operators using the common-payment QR platform will be able to access a wider pool of merchants and increase their appeal to consumers, resulting in greater competition in the mobile-payment space, said Moody’s.
However, risks to banks’ profitability may arise from two scenarios: lower payment transaction volume as consumers switch from bank-issued payment cards to fintech payment channels, and lower fees as banks reduce the merchant discount rate (MDR) that they charge for card payments in response to more competitive rates offered by fintech companies.
According to Moody’s, the MDR in Singapore ranges between 2 and 5 per cent, and is higher than the rates that established fintechs such as Tencent Holdings and Ant Financial Services Group charge though their respective e-payment platforms, Wechat pay and Alipay of below 2 per cent.
“However, the mobile-payment space is still in the early stages of development in Singapore, so it will take some time for competition to escalate and test the viability of the numerous mobile payment schemes,” added Moody’s.