How to get all parties on board the e-payment drive?
Singapore’s push towards cashless payments has been dominating headlines in recent weeks, particularly after Prime Minister Lee Hsien Loong’s National Day Rally where he spoke about how we are lagging behind countries like China.
Singapore’s push towards cashless payments has been dominating headlines in recent weeks, particularly after Prime Minister Lee Hsien Loong’s National Day Rally where he spoke about how we are lagging behind countries like China.
This past week, electronic payments company Nets made the news with its announcement that it will introduce a variety of electronic payment modes - including QR (quick response) codes, contactless phone payments, and an app storing digital versions of Nets ATM cards - at all its 100,000 acceptance points at retail stores by next year.
Net’s move is significant given its large network of merchants, established infrastructure network and more importantly, Singaporeans’ ubiquitous use of it.
But a successful rollout of its new cashless payment modes is far from guaranteed. Analysts have also noted that even if the company succeeds, it is unlikely to bring Singapore closer to a unified payment system given how competing commercial interests have led to a fragmented electronic payment landscape.
The operative word here is interoperability – meaning a single system where all e-payments can be paid, whether via a phone, credit card or an ATM card.
This raises the question: what can be done to make e-payment systems here interoperable? What role does Nets, credit card companies and the regulator - the Monetary Authority of Singapore (MAS) – have?
For a start, it is laudable that Nets has stressed that it will make its system open to others, such as accepting QR codes and electronic wallets from other parties.
It is also laying out a wide network of unified points of sales terminals which can accept varied modes of payments.
In fact, experts think that Nets could become the most important player in the e-payment eco-system.
But to do so, Nets will have to overcome some speed bumps first, by its own admission.
The biggest challenge is of course, getting merchants on board this cashless initiative – a problem that has been there from the onset. There is an untapped market of small merchants that rely predominantly on cash – 30,000 of them, mostly hawkers and heartland shops.
This is a group Nets is now targetting, but Nets CEO Jeffrey Goh has lamented that convincing even one merchant to switch to electronic payments is tough.
He said that one way to draw them might be to make the system as simple as possible on their end. As he put it, the merchants just want to see the word ‘approval’ on their point of sales terminals with the minimal hassle.
This may be easier said than done.
Technical difficulties are bound to occur given the unprecedented nature of Net’s roll-out. Even for QR code payments that are being rolled out with hawkers at the Tanjong Pagar food centre, Mr Goh has told the hawkers to expect teething problems, calling it a ‘learning journey’.
If the payments giant can overcome these issues, then its new e-payment systems stand a good chance of succeeding.
The bigger question is how this will fit into the government’s push for an interoperable cashless payment system, given how individual commercial interests are at play.
The suite of products by Nets – owned by the three local banks DBS, UOB and OCBC – for instance does not cater to credit cards, still a favourite among Singaporeans.
The banks here also have their own e-wallets and other e-payment solutions, while Visa has its own QR code and might launch it here in the future.
On top of that, ride-hailing app Grab has announced it will extend its payment platform beyond transport to allow users to pay their restaurant and shopping bills, among others. Chinese e-payment giant AliPay has also signalled its intent to enter the Singapore market.
Ultimately, what is in it for the various industry players to come together? Clearly, each has to see some concrete benefits of doing so, either in terms of them not having to go through the trouble of building a new system or getting merchants on board.
The regulator, the Monetary Authority of Singapore, has its work cut out for it. But it is arguably the only party which can push for a truly interoperable system.
Mr Michael Yeo, research manager at IDC Financial Insights, said that MAS is best placed to “remove some of the roadblocks and inter-player issues”.
“If merchants have no clarity on which one (system) they should go for, especially if it is non-interoperable, then they will hesitate from making the plunge,” he said.
“If they are faced with a number of different choices, but have some assurance that all these new payments will work with whatever choice they make, then it becomes much easier.”
MAS has already started the groundwork, with its PayNow scheme, where people can transfer funds between different banks using just mobile phone numbers, and it is mooting a common QR code system to be launched by the end of this year. It may have to do more to get the different stakeholders to work with each other, by mandating terms which it feels will be for the greater good of the financial system.
“Overall, MAS needs to articulate its vision clearly to all players in the ecosystem and show how participants can play roles in it,” said Mr Yeo, adding that it could also offer incentives to provide more room for experimentation and new products.
For now, an interoperable electronic payment network remains very much a work in progress.
ABOUT THE AUTHOR:
Tan Weizhen is a senior journalist with TODAY’s business desk.