Singaporean banks ramp up cashless payment capabilities

Singapore banks are clearing the way for cashless transactions. But Singaporeans may not be ready for them.

by Tan Jie Ying

Transactions on mobile payment applications increased 42% annually between 2013 and 2016. Mobile payment companies, such as Dash and DBS Paylah! are competing against one another to attract more consumers to use their application for payments. Singapore banks are among these companies; they have been investing in fintech that eases cashless transactions to raise their game compared to other mobile payment companies.

The Monetary Authority of Singapore (MAS) has been beating the drum for cashless payments in Singapore to fulfil its aspirations for a Smart Financial Centre. MAS’ encouragement is another driver for Singapore banks to invest in fintech that eases cashless transactions. This brings the country a step closer to realising the goals in the government’s Smart Nation initiative.

Singapore banks are incorporating QR code payment into their mobile wallet apps

DBS Bank (DBS) and OCBC Bank have launched QR code payments as an alternative for cashless transactions at selected merchants. QR code payment “has a low barrier to entry, is easy for merchants to implement and for consumers to use,” said DBS head of consumer banking Jeremy Soo.

DBS is the first bank in the country to incorporate QR code payments in its mobile wallet app, DBS PayLah!. OCBC has followed in DBS’ footsteps to include QR code payments in OCBC Pay Anyone. With effect from 1 June, consumers can make payment via QR codes at more than 1,000 merchants.

DBS’ introduction of QR code payments is winning over hawkers; at least 200 hawker centres expressed interest in adopting DBS PayLah! QR codes last month. Many of these hawkers were unwilling to accept cashless payments. Hawkers cite the convenience of QR code payments for their interest to adopt this payment method. This is remarkable considering cash transactions constitute 90% of consumer payments in hawker centres and wet markets.

Singapore banks are incubating fintech start-ups that ease cashless payments

Singapore banks are incubating or accelerating fintech start-ups in Singapore. As FinLab Managing Director Felix Tan explained, incubators help start-ups to procure “resources and capital to endure the typical two-to-three-year sales cycle for selling solutions to financial institutions.” Accelerators and incubators also provide start-ups with opportunities to liaise with potential partners and investors.

Name of accelerator/incubator

Type of assistance given to fintech start-ups

Notable start-ups involved in cashless transaction fintech

DBS’ HotSpot Pre-Accelerator

·      S$25,000 (US$18,057) cash upon start of programme

·      Direct guidance from DBS executives, experienced entrepreneurs and partner accelerators

·      Pitching opportunities on Pitch Day and Demo Day

·      Start-ups do not have to relinquish equity

·      Toucan allows users to shop on credit without a credit card

·      Inncee assesses and coverts e-commerce data into actionable information aht can boost online earnings

The Open Vault Accelerator (partnership between OCBC and incubation firm NEST)

·      Guidance from OCBC Mentors, NEST expertise

·      OCBC’s Data Sandbox allows start-ups to test their new models in a safe environment

The FinLab (joint venture between UOB and SGInnovate)

·      S$400,000 in software credits

·      S$7,000 in complimentary office space

·      S$30,000 in seed money in return for 6% equity

·      Card-Up allows users to initiate credit card payment even when the recipient does not accept cards

Source: Fintech Singapore, DBS Bank Ltd, Channel News Asia, Banking Technology

OCBC is the trailblazer for incorporating fintech into customer service

OCBC is venturing into using fintech to improving its customer service. This expedites customer service and complements the immediacy of cashless payments.

It was the first bank in Singapore last year to introduce voice biometrics and speech recognition in its contact centre to improve customer experience. This makes the verification process quicker, simpler and safer.

“I don’t need to remember answers to questions like what my last transaction was or my mother’s maiden name,” said Randy Valentius Kamajaya.

In March, OCBC launched the robo-adviser service for its investors. This helps investors to keep track of and administer their investments without a relationship manager.

“With this initiative, we will bring simple, fuss-free and high-quality advice and investing in our time-starved customers,” said Aditya Gupta, Head of E-Business for Singapore at OCBC Bank.

Cost remains an issue for Singapore banks

At the end of the day, banks are concerned about cost because “we are a profit-making organisation,” said Janet Young, Managing Director and Head of Group Channels and Digitalisation at UOB.

The introduction of fintech into the banking sector is creating jobs in the banking sector to fill up tech vacancies. This is an optimistic sign for Singaporeans concerned about jobs being taken away by increased automation.

But Singapore banks have to contend with the greater cost of hiring technical professionals. This is because hiring a technical specialist to oversee fintech operations is costlier than employing a customer service representative. As banks use fintech more expansively to conduct their operations, they will have to hire more technical specialists than customer service representatives. This means they will incur greater costs from employment.

The Singapore government sees no need to resolve this problem. This is because the fintech sector increased the number of jobs available by 35%, quarter-on-quarter. This means that there is a “relatively stable employment market, with financial institutions continuing to release jobs”, said Richie Holliday, chief operations officer of Morgan McKinley Asia Pacific.

Reliance on cash is a limiting factor to a cashless Singapore

Singapore banks’ efforts to boost cashless payment capabilities are in vain because there is still heavy reliance on cash for payment. Cash transactions took up 60% of consumer transactions, according to a 2016 report by KPMG.

While Singapore had a relatively good start in terms of percentage of cash transactions in 2010, it witnessed meagre growth in cashless transactions over the next five years.

Source: McKinsey

China’s growth in cashless transactions pronounces Singapore’s weak demand for cashless payment methods. Today, only 4% of Singaporeans use cashless payment methods. In contrast, 40% of Chinese consumers today make cashless transactions. This is impressive considering China got off to a bad start in 2010.

Singapore’s small market is a key reason for feeble growth in cashless payments.

“If you launch a platform which is unique to Singapore, you’re talking about a maximum market size of 5 to 6 million. So that’s not much… compared to other markets where you can expect a minimum number of people joining that platform, and it can easily scale up. Even if 1 per cent of Indonesia’s population joins a platform – that’s 2.5 million people,” said Ajay Sunder, Vice President, ICT – Telecoms, Asia Pacific, Frost & Sullivan.

Singapore’s ageing population also obstructs the smooth transition to a cashless society. “Many elderly residents are not tech savvy and prefer to use cash,” said The Association of Banks in Singapore (ABS) Director Ong-Ang Ai Boon. This explains why wet markets and hawker centres are still greenfield sites when it comes to cashless payment methods. The median age of current hawkers is 59 years old.

Despite these structural limitations, all is not lost. Singapore’s ageing population shows that those who are not tech savvy are harder to persuade to consider contactless payment methods. Many tech-savvy consumers were unwilling to consider cashless payments “because they do not trust the technology,” according to a 2015 report by RFi Group. The recent spate of cyber-attacks also gave sceptical technophiles another reason to doubt the security of online transactions.

But improving the security of cashless payments is much easier compared to reorienting the elderly’s mindset. This means Singapore banks must win over sceptical technophiles.

Affirming the safety of cashless transactions is therefore necessary. ABS announced it was working to improve Fast and Secure Transfers Scheme (FAST) so that users could use proxies to make transfers by this year. This is the first step to win over sceptical technophiles. Or Singapore banks are simply beating their heads against the wall in future undertakings.