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Imagining a cashless Singapore in 2027
IT'S Oct 5, 2027. Retiree Jason meets up with his friends for dinner. After a S$50 meal, automatically adjusted for S$3 loyalty and S$3 senior citizen discounts, Jason pays by tapping his handphone on the stall's smart point-of-sale terminal.
His friends each receives a smart notification with a request to pay him S$12.50 for a share of the meal. After they send a selfie to validate their payments, transactions are triggered to settle the bill.
The stallholder immediately receives S$50 in his bank account. The e-invoice is filed and stored on his accounting system in the cloud and his account reflects his true cash flow. During non-peak periods, he clears outstanding payments, including wages, and the business' tax payments to the Inland Revenue Authority of Singapore using his smart point-of-sale terminal.
He focuses on running his stall while his smart point-of-sale terminal automatically replenishes food supplies based on projected consumption, volume discounts and delivery time by making purchases directly from suppliers.
The journey began in 2017, when digital payments came to the forefront of the national agenda during the National Day Rally. But the path towards becoming a cashless society was not an easy one. The Singapore government had to keep in mind two key factors: the cost of cash and the digital readiness of the economy.
Although Singapore had enjoyed high digital penetration in the late 2010s, the government was facing challenges in reducing the reliance of consumers and businesses on cash and cheques in the absence of a compelling alternative that was universal, convenient and cheap.
Operating in one of the most cash-efficient systems in the world, industry players in Singapore were also unable to find a business case for a national interoperable e-payment system, resulting in market fragmentation. Existing challenges were further compounded by institutions and business leaders who had invested in creating their own walled gardens.
At the time, emerging markets such as Thailand, Indonesia and Myanmar faced higher costs of cash and consumers lacked ready access to facilities such as ATMs and bank branches. In light of rising mobile penetration, e-payment solutions were seen as the possible solution to reach the underserved population.
Larger Asian peers such as China and South Korea already had digitally-ready markets and were rapidly transitioning to cash-light societies spearheaded by rapid innovation from fintech startups, banks, and industry players.
THREAT OF LAG
With a higher cost of cash, increasedhandphone penetration and absence of legacy systems, emerging markets managed to leapfrog developed economies. There was a real threat that Singapore, a cosmopolitan city, would be left behind.
But at the outset of 2018, unified payments solutions began to emerge when private and public sector players took best global practices and fitted them to domestic conditions.
The government sought out industry representatives to prompt the industry to move away from paper-based systems to digital platforms, and introduced a digital infrastructure that promoted interoperability, efficiency and security.
To overcome the existing market fragmentation, a single player was mandated to drive the implementation of a unified payments platform across the island. In order to enjoy the benefits of economies of scale, this player was tasked with developing a solution that would support payments needs across all sectors.
The Monetary Authority of Singapore facilitated access to the national "payment rails", introduced a regulatory framework, and outlined operating principles to streamline activities. The interoperability made room for innovation, differentiation and competition. Big institutions realised that a connected and seamless user experience across platforms was key to success.
Through the early 2020s, the financial sector adjusted from pushing products to offering experience-based solutions that improved consumer satisfaction. Consumers' and businesses' mindsets and behaviours evolved as they started adopting the e-payments experience. The successful journey to being cashless propelled Singapore towards becoming its envisioned Smart Financial Centre.
- The article was contributed by Shirish Jain, director of payments, Strategy& (the strategy consulting arm of the PwC network), and Lie Ay Wen, partner, financial services, PwC Singapore