From Nets to PayNow - e-payments have evolved

IN the last 45 years, the banking industry has played a key role in Singapore's remarkable transformation into a global financial hub, with its contribution to the country's GDP increasing from single digit to just over 13 per cent in 2017.

In tandem with this growth, the Association of Banks in Singapore (ABS), has seen membership expand to 156 local and foreign banks, institutions and representative offices.

We have assumed greater and wider responsibilities and over the years, have fostered a collaborative and consultative culture that has enabled our members to work closely with one another and with our regulator, the Monetary Authority of Singapore (MAS).

Such an approach was most useful in the industry's continued adoption of technology to increase efficiency, improve our customer service and product offerings. It will, no doubt, facilitate the pervasive innovation that is necessary to thrive in the digital age.

In particular, in the drive towards e-payments, MAS has partnered the industry in building the infrastructure needed to support a smooth and seamless transition, in promoting Application Programming Interfaces to foster fintech innovation, and in putting in place a sound regulatory framework to support innovation without risking financial soundness.

E-wallets and QR codes may be the latest buzz, but efforts to reduce reliance on cash and cheques go back a few decades. One of the first significant moves was made in 1984, when the government launched a campaign aimed at getting billing organisations to cut down the social costs of customers paying for their utilities and other bills in cash.

Workers, particularly civil servants, were encouraged to open bank accounts for their pay to be credited through Giro. At the same time, ABS members that offered retail banking service intensified their efforts by expanding their ATM networks to give residents easy access to their money.

In June 1985, the Network for Electronic Transfers (Nets) was piloted as a debit network that eventually facilitated Singapore's ubiquitous Electronic Funds Transfer at Point-Of-Sale or EFTPOS networks.

This was a major step towards cashless transactions as it allowed shoppers to make payments at places such as supermarkets, department stores, petrol kiosks and even government offices, through their ATM cards that are linked to the cardholders' bank accounts.

In transportation, cashless payment became the norm as stored-value cards were issued to allow commuters to pay for their MRT and bus rides, and car drivers to pay for ERP charges.

While debit cards like Nets became widely used for day-to-day transactions, credit cards were also gaining traction for larger-ticket purchases and overseas spending.

As income rose, so too the number of people who were able to sign up for credit cards. Enhancements also saw credit cards moving away from magnetic stripes to chips to minimise fraud, and going contactless with "tap-and-pay" features.

These initiatives have helped Singapore establish the necessary infrastructure for the early adoption of e-payments.

Another significant breakthrough came in 2014 when the Fast and Secure Transfers system, or Fast, was launched.

Fast, which adopts the ISO20022 international standard, supports 24/7 real-time transfer of Singapore dollar funds from one bank to another almost instantaneously. It used to take up to three working days to transfer money from one banking account to another across banks via cheque or Interbank Giro.

The introduction of Fast was a timely and key infrastructure, given the fintech movement and surge in interest and innovations in e-payments.

Fast has made possible PayNow, launched in 2017, to extend the ease of e-payments in customer-to-customer transactions, using mobile or NRIC numbers instead of lengthy bank account numbers.

Nine member banks of ABS today serve 90 per cent of the customer base for PayNow. This feature and the ability to send and receive funds 24/7 almost immediately have made e-payments convenient and more closely aligned with the needs and lifestyle of consumers as Singapore gets more digitally connected.

The needs of businesses and government agencies are also not forgotten.

In August, a new PayNow Corporate service was launched. It enables businesses and government agencies to pay and receive Singapore dollar funds instantaneously by linking their Unique Entity Number (UEN) to their Singapore bank account.

The speed and convenience of PayNow Corporate is poised to benefit not just large companies, but also SMEs and startups, by streamlining the payment process to enable them to collect and make payments more efficiently. It saves the time and effort needed to count, reconcile and deposit cash.

Singapore's e-payment journey, under the guidance of MAS, has come a long way.

ABS and its members are proud to contribute to its development to date, and to its ongoing enhancement in support of Singapore's drive to be a smart financial centre and nation.

To this end, Singapore may not be a completely cashless society in the foreseeable future, and there is clearly no intention to force one for the sake of it. But it is well placed to succeed in driving down the usage of cash given the momentum and efforts put in by the Singapore government and the industry.

The future for further innovation in the e-payment space is certainly looking bright and exciting.