5 April, 2019

Fintech | Singapore | Society

Why Is Singapore’s Fintech Failing To Create a Cashless Society?

Singapore's fintech failing to create a cashless society

It’s been a long journey, one with many chapters that will take time to develop into a complete story. Despite seeing our country move swiftly towards Smart Nation status, many Singaporeans are still starry-eyed by their overseas trips to other countries that seem to be miles ahead in terms of cashless payments adoption. It shouldn’t have to be that hard. Especially for a relatively small nation that is among the frontrunners when it comes to the Fintech world. We take a look at how we measure up to other nations as well as the very real reasons behind our delayed adoption thus far:

Where we stand on a global scale

Enough has been said about China and the fact that roadside stall vendors look puzzled when one offers to hand out paper notes. It’s a forgone collusion that the most populated country in the world – with the likes of WeChat and AliPay – has enough armour in its cashless payments arsenal to put many smaller and somewhat more developed nations to shame. They’ve done it fast, well and have become a benchmark to emulate – earning the title of the world’s biggest cashless marketplace.

Another (somewhat unassuming) nation that has piqued interest in the (cashless) payments space over the last decade has been Africa, with countries like Kenya, Tanzania, Uganda, Côte d’Ivoire, Egypt, Nigeria and South Africa embracing mobile payments at impressive rates. According to data gathered by consulting firm Frost & Sullivan, Mobile money transactions in sub-Saharan Africa could exceed $1.3 billion by 2019. Leading the path to a cashless society for the continent is a less-spoken-about payment platform in the form of M-Pesa, open to both individuals as well as businesses to send and receive payments. To highlight the success of the platform, almost 50% of Kenya’s GDP is processed over M-PESA, amounting to 3.6 trillion Kenyan shillings or 29 billion euros.

When one refers to the world of cashless payments, Scandinavia is more often than not seen as the region that is leading the race forward. Widely regarded as the benchmark for the developed world to follow, Sweden has leveraged its supportive legal framework and robust infrastructure to advance into a society that mistrusts cash. The cash in circulation in relation to the gross national product of the country has already reached below the 1% mark, making it the envy of many governments – in comparison, the U.K. stands at 3% and the U.S. between 5% to 7%. Singapore stood at the 10% mark as of last year.

Do we really need to play catch-up?

In terms of overall efficiency, it’s undeniable that cashless payments make life all the easier (and more hygienic) for both vendors and consumers, allowing for the tapping of one’s card or sending funds without the need for physical currency or a cheque book. Granted, life was much less fluid before PayNow. That being said, Singapore doesn’t tick many of the boxes when it comes to the reasons behind several nations going cashless.

Firstly, from a governmental perspective, counterfeit notes and ‘black money’ are not real issues in our city-state, unlike nations like India that went through demonetisation measures a couple of years ago. According to the MAS website, this is partly due to the number of varied security features that the regulator has built into Singapore notes to combat counterfeiting. Crimes such as burglaries and robberies are also relatively low here, posing no real threat to carrying and transacting with physical cash as a medium.

According to an annual survey from J.D. Power in 2018, 88% of Singaporeans still prefer to withdraw cash in ATMs. Singapore is urban for the most part, allowing easy access to cash withdrawals through these machines strategically placed throughout the nation. This is in stark contrast to countries like China and Africa where rural demographics have less access to such amenities. Although mobile phone proliferation is among the highest in the world here, consumers of the two examples given above also lack access to physical retail banking institutions, very often making virtual payments the main mode for transactions – often out of necessity rather than choice.

These factors are also further compounded by the fact that our general population is more reluctant to trust technological modes of payments over old-fashioned currency. Singapore came in 15th for future readiness in a World Digital Competitiveness Ranking by the IMD business school. Sweden, in comparison, came in 5th. Future-readiness in this instance measured how well a country is prepared to digitise based on its society’s response to and incorporation of new technologies on a daily basis, as well as how adaptive its businesses were in terms of integration of such technologies into their overall operations. This could also be partly due once again to proximity of amenities – we don’t have to travel very far to make purchases. E-commerce has more going for it in a country like Indonesia where accessibility is not as viable.

With Singapore being a global financial hub, there is also the threat to cyber security that is heightened due to the number of financial institutions based here, making us a potential target for hackers and the likes – something that is often spoken about in the media.

The above is not meant to be a list of reasons why we shouldn’t make the push to go cashless but rather plausible explanations why a country that has traditionally been a frontrunner in the tech arena has taken so long to adopt the necessary innovation. When we finally do make the shift, we can be assured that it will be a momentous and thorough one – in true Singapore style.

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Fintech | Singapore | Society

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