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How Singapore’s race to go cashless can be more inclusive

Singaporeans, while technologically savvy, are apprehensive about the prospect of becoming a cashless society — a point made by Prime Minister Lee Hsien Loong at the recent National Day Rally.

Cheer's first unmanned and cashless convenience store at Nanyang Polytechnic. TODAY file photo

Cheer's first unmanned and cashless convenience store at Nanyang Polytechnic. TODAY file photo

Singaporeans, while technologically savvy, are apprehensive about the prospect of becoming a cashless society — a point made by Prime Minister Lee Hsien Loong at the recent National Day Rally.

Despite having a mobile penetration rate of 150 per cent and high credit card use, a recent survey by Paypal showed that the majority of Singaporeans still prefer to pay with cash. It is not uncommon for societies to reject unfamiliar concepts because of daunting perceived costs.

But the conversation around a cashless society must move on to whether the benefits of a cashless society outweigh the costs. If Singapore does not transform itself, it may lag behind other cities when it comes to financial technology innovations in the future.

Since the National Day Rally, the narrative around cashless payment systems has been skewed towards their disadvantages. Some groups are concerned about the exclusion of those — disproportionately the poorest, most vulnerable or elderly populations — who may not have access to bank accounts. Other critics have lamented the loss of privacy and the costs that SMEs will have to bear when setting up e-payment terminals.

But it is exactly because of the requirement of bank accounts, traceability and need for terminals that the e-payment technology is a boon. E-payments can provide greater security, enable easier identification of unlawful transactions, promote financial inclusivity and increase demand for e-payment technologies.

More importantly, becoming a cashless society is not just a cosmetic change for Singapore. Rather, it is tantamount to the nation’s ability to remain competitive. Singapore prides itself on being a financial hub that espouses the spirit of productivity, innovation and constant change. If successful in transiting to a cashless society, it will spur greater momentum for the fintech and digital industries here.

Policies can be developed to address the concerns of stakeholders. One of the most contentious issues around going cashless is the potential invasion of privacy, but discussions around this must go further.

For instance, is it sufficient that the current Singapore Personal Data Protection Act puts in measures to prevent organisations from using your data without your consent or knowledge? How does Sweden, a country with strict privacy laws, promote the use of cashless payments? These conversations are necessary if Singapore is to adopt cashless payments as a society, rather than individually.

According to Sweden’s central bank, cash payments made up only 2 per cent of total local transactions in 2015. The high adoption rate is aided by peer-to-peer mobile payment applications such as Swish, which provides Swedes with a fast and trustworthy way to transfer money. It also helped that the Swedes have always had an open attitude towards technology, being among the early adopters of personal computers and mobile phones.

The switch from cash to e-payments may not be a smooth process for everyone. There is bound to be groups, such as retirees or low-income earners, who may not have access to e-payment methods. But providing access should not be an issue for an advanced economy like Singapore.

Mobile payments systems are being used extensively in much poorer countries, such as M-Pesa in Kenya and Africa, and services such as direct carrier billing, which allow people to easily make purchases and charge to their mobile phone bill.

M-Pesa, a mobile payment system, was launched by Vodafone’s Safaricom in South Africa a decade ago to promote financial inclusion. The application now has 30 million users, and has played a big role in enabling micro businesses to participate in trade.

In Singapore, with an already impressive mobile penetration rate, mobile payment applications could be used as a tool to promote inclusivity. The payments industry has developed several applications that have reduced the complexity and barriers to entry for e-payments, and can do more to target those on the fringes of society.

Nets’ recent launches of Nets Pay and its QR code initiative at Tanjong Pagar Centre and Food Market are positive developments that enable people who do not own credit cards to make mobile payments.

The Monetary Authority of Singapore and the Info-communications Media Development Agency have also taken a step in the right direction by establishing a public-private taskforce that aims to develop a common QR code. If successful, a common QR code will address the interoperability issue that has been a common gripe among Singaporean consumers. As the taskforce looks into the implementation strategy, it would also be useful if it surveyed different groups of consumers in Singapore to ensure that the tactics deployed address their concerns over e-payments and bring about high conversion rates.

For many SMEs or informal businesses, including the likes of mom-and-pop stores or provision shops, the cost of setting up payment terminals, merchant fees and slow credit transfers deter them from making the switch. To incentivise their transition, the government could provide grants or funds, and consider introducing policies that standardise the cost of merchant fees and enhance credit process.

Changing attitudes and habits is not easy. But with constant engagement and the right policies, the process can be made easier and quicker. Without the people’s buy-in, the implementation of any cashless system will only become more burdensome than useful, and Singapore’s status as an innovative and vibrant fintech hub may be challenged.


Seha Yatim is an analyst at Access Partnership, a global technology consultancy.

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