With a tech-savvy population and a smartphone penetration rate of 150%, Singapore’s adoption of digital payments is abysmal. Cash is still king in the city-state, especially in the heartlands where credit cards are accepted only if you spend a certain sum.
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There are a few reasons for this. For one, the transaction fee imposed by credit card companies does not make business sense for small merchants, especially if most of their transactions are micropayments.
Also, having too many choices is not always a good thing. While Singapore’s fragmented digital payments space offers consumers an array of payment options from telcos, banks, smartphone makers and the likes of EZ-Link and Nets, it also makes it hard for any payment provider to gain a critical mass of users necessary for widespread adoption by merchants and consumers alike.
Both the authorities and the payments industry realise this and are planning to make it easier for individuals and businesses to send and receive money.
Following efforts in rolling out unified point-of-sale systems that accept multiple payment options, the Monetary Authority of Singapore (MAS) will establish a forum for the payments industry and businesses to come together to discuss payment strategies as well as promote inter-operable payment solutions.
At the Association of Banks in Singapore (ABS) annual dinner this week, Singapore finance minister Heng Swee Keat revealed that the MAS has invited 18 senior leaders representing banks, payment companies, industry associations and businesses to form a Payments Council under MAS’ leadership.
Meanwhile, the ABS has rallied its members to develop PayNow, a system that enables consumers to transfer funds to each other using only their recipient’s mobile phone numbers or identity card numbers.
The system will make use of Singapore’s real-time Fast payment system for which transaction volumes have increased over the years.
The Singapore government is also looking to use PayNow to make payments directly to citizens’ bank accounts using their identity card numbers, Heng revealed. “In the future, we would no longer need to update each government agency one-by-one when we change banks,” he says.
PayNow should be welcomed by consumers, especially those who use peer-to-peer e-commerce platforms like Carousell to buy and sell products. Typically, such transactions require sellers to provide their bank account numbers to buyers, who would then have to go through multiple steps to transfer the funds online or at an ATM machine.
The next step would be to get merchants onboard, though this would have to be done with minimal friction to avoid putting off merchants that would have to deal with yet another payment option.