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Bridging the last mile in digital payments

Singapore is taking a pragmatic approach towards achieving its goal of becoming a cashless society

Chia Hock Lai
Chia Hock Lai, President of the Singapore FinTech Association

Ong Pang Thye
Ong Pang Thye, Managing Partner, KPMG Singapore

Phoram Mehta
Phoram Mehta, Head of Information Security, Asia Pacific, PayPal

Themin Suwardy
Themin Suwardy, Dean, Post-Graduate Professional Programmes, SMU

Singapore has made significant strides in promoting digital payments here, but there are challenges to overcome before it realises its vision of becoming a predominantly cashless society, industry experts said.

Prime Minister Lee Hsien Loong called on Singapore to ride the e-payments wave and catch up with countries like China in his 2017 National Day Rally speech. Since then, a number of initiatives have been rolled out to help reach that goal; from the introduction of new payment apps to moves to encourage adoption.

One key piece of the puzzle feel into place this month with the launch of a single, standardised QR  (Quick Response) code for e-payments. To be rolled out progressively over the next six months, the Singapore Quick Response Code (SGQR) will be adopted by 27 payment schemes, including PayNow, Nets, GrabPay, Liquid Pay and Singtel Dash. 

Over 19,000 QR codes will be replaced with SGQR codes from this month. Currently, several QR codes can be displayed at one retailer to support various e-payment schemes, which can confuse consumers. 

At the same time, the Government said it would open the interbank payment gates to fintech firms by 2019. Allowing non-bank players to get direct access to the national Fast and Secure Transfers (FAST) transaction system is expected to lead to greater innovation and better cashless payments services for consumers.

Monetary Authority of Singapore board member and Education Minister Ong Ye Kung described these measures as perhaps the “last few jigsaw pieces we are putting in place to complete the national e-payment infrastructure".

Prior to these latest moves, industry watchers said the Government had already taken multiple steps to help grow the adoption of digital payments in Singapore. These included leveraging its ASEAN chairmanship to make growing the digital economy a priority, promoting interoperability between different payments systems, encouraging consumers to adopt digital payment methods in their daily lives, as well as driving incentives for merchants to integrate digital payments system in their businesses.

“Singapore has come a long way in its drive for digital payments and made much progress towards a cashless economy,” said Phoram Mehta, Head of Information Security, Asia Pacific, PayPal.
Encouraged by the progress on the ground, new players have joined the e-payments fray recently; such as Razer Pay that targets youth, and GrabPay, which leverages its large ride-hailing customer base. Online grocery delivery service HonestBee has also recently created its own e-wallet. 

Meanwhile, the Incumbents are not standing still. E-payments pioneer NETS introduced NETS QR to enable consumers to transact using their mobile phone through DBS Paylah!, OCBC Pay Anyone, UOB Mighty and the new NETSPay app. 

In particular, industry watchers cited PayNow as a potentially ground breaking solution that could spur the e-payments scene here.  The payments service from DBS Bank allows individual and corporate users to send money instantly with just the mobile number, NRIC or Company Unique Entity Number (UEN) of the recipient.

“PayNow Corporate is definitely a game changer. Instant remittance will shake up the b2b scene as many businesses are used to enjoying credit terms,” said Chia Hock Lai, President of the Singapore FinTech Association.

A balanced approach

Despite the recent progress, experts said that Singapore has some way to go before it catches up to global leaders in the e-payments space, such as China.

China leads the world in online and mobile payments. In 2016, mobile payments totaled US$5.5 trillion, according to iResearch Consulting Group. In comparison, the US mobile payments market was worth only about US$112 billion, according to Forrester Research.

“How Singapore ultimately stacks up against other leading markets for e-payments, will depend on the use cases for e-payments which drives it as the preferred means over traditional methods such as cash and cheques,” said Mr Ong Pang Thye, Managing Partner, KPMG Singapore.

Eschewing a growth-at-all costs approach, he said that Singapore is balancing its e-payment goals with the needs of unbanked residents, and those less willing to adopt cashless solutions.

Meanwhile, Mr Chia noted that many of the places that Singaporean residents make small purchases on a daily basis, like hawker centres, are still predominantly cash-based, giving the perception that “cashless is still not prevalent”.

Challenges ahead

According to the Singapore Payments Roadmap prepared by KPMG, Singapore’s vision for e-payments is met with several challenges, including limited governance and ownership of the infrastructure. 

These factors contribute to the lack of interoperability, inconsistent user experience, limited adoption of e-payments, and a continued reliance on paper-based instruments. On the plus side, the strengths of the current regulatory framework has helped establish an ecosystem that is safe, sound, and secure. 

“The success of e-payments in Singapore will require collaborative actions by consumers, businesses, and government organisations along with other market participants,” said Mr Ong.

Such actions include changing the regulatory and governance frameworks to provide an increased focus on consumer protection, competition, and innovation, as well as incentivising businesses and banks to adopt cashless practices.

Getting SMEs on board

Getting more SMEs onto the e-payments bandwagon could be the “last mile” before Singapore can become truly cashless, argued Themin Suwardy, Dean, Post-Graduate Professional Programmes, Singapore Management University.

“Singapore already has a plethora of electronic cards and digital wallets cards in the hands of the public, but these are not being used at the right places to displace cash. Cashless payment will not take off fully in Singapore if SMEs do not come onboard,” said Professor Suwardy. 

While SMEs know that accepting digital payments would bring about a host of benefits to their businesses, many are likely holding back because of cost concerns coupled with a rapidly evolving payment ecosystem, he added.

Mr Mehta believed that education is key to bridging this gap and driving adoption. “It is crucial that consumers and merchants understand the value of digital payment systems, and the benefits they bring. This will help address challenges faced by merchants who are less inclined to adopt digital payments due to the costs of going cashless or delayed payment settlements,” he said.

He noted that consumers and businesses must be the focal point of the innovation processes to drive the adoption of digital payments. He cited the example of ride hailing service provider Grab, which is evolving its platform to encourage the use of e-payments by working with financial institutions and digital payment providers, such as PayPal, to provide interoperability and integration.

Said Mr Mehta: “At the end of the day, collaboration, not competition, will go a long way in addressing a fractured digital payments landscape. Singapore is certainly gaining momentum in its drive for digital payments, and we believe that it is only a matter of time that the country realises its aims to be a truly cashless society.”

This article is part of a series brought to you by CPA Australia to share knowledge on topical issues relevant to business, finance and accounting.

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