Singapore’s Cashless Society Part 2
In my earlier Medium post, I posted a short overview of the cashless payment system in Singapore. Once again, the latest National Day Rally 2017 (thank god he did not faint again…!) emphasised on *embracing technology* as one of its key points in our nation’s vision to become a Smart Nation.
On the cashless front, PM Lee has reiterated that he wishes for a unified POS terminal to answer cashless payment woes such as the lack of support for certain payment mode or outlets accepting only their preferred payment mode such as NETS. From a customer perspective, this seems to be a great initiative to allow us to use any payment modes that we wish to use. However, for a business merchant perspective, their greatest worry will be the operating costs of a new unified POS machine and transaction fees incurred.
The idea of a unified POS terminal is great. However who will develop and maintain it? Which payment services should be included in it? Should it be NFC-based? Should it be contactless based? Should it be QR-code based? If we were to include all solutions, this will translate to higher costs to troubleshoot and securing each individual methods. However the operator will surely enjoy the economics of scale and monopolistic market.
In his rally speech, PM Lee cited Lim Swee Say’s experience in China where they transact via their mobile phones app WeChat and Alipay. However, there are QR-code scams where fraudsters replace legitimate merchant’s codes with their copies to embed virus to steal personal information and transfer monies away. Although this is a legitimate concern, the key solution is to educate merchants to protect their QR-code to prevent such crime from happening. One suggestion I had for PayLah! or any QR-code payment apps is to introduce a “verified user” badge to ensure the authenticity or even release the last 4 digits of the merchant’s mobile phone number to ensure its validity.
The netizens reaction to QR-code based payment seems to be fairly downturn as they appreciate their favoured mode of payments. It seems that our move towards Smart Nation will be replacing our existing physical cards with reliance on mobile phone. Thus payment modes such as the existing Paywave or VisaPay or Flashpay or CEPAS will be outdated in the future. And stored value payment should really be discarded, it only serves to cause inconvenience for users and only help to increased liquidity for the company.
The web community seems to prefer mobile phone payments, such as Apple Pay or Android Pay rather than QR-code based payments. If so, then its NFC mode of payment should be implemented in the unified POS. My further research on both mode of payments suggest that no merchant fees are charged at the moment. As opposed to charging merchants, both companies are charging cards issuers instead, for its role as “token-assurance provider”. In this essence, as both Apple and Android requires NFC and fingerprint verification, it will reduce fraudulent transactions, thus helping banks to reduce operating costs in dealing with chargebacks.
However the requirement for NFC-based terminals will increase the costs and this may not be favourable for small merchants such as shophouses business or hawkers. In addition, users who do not use phones produced by Apple or Samsung will also be severely limited. There is also an assumption that all phones will be equipped with NFC, how about phones without? In particular, low end budget models of Xiaomi does not come with NFC. There is a need to push mobile phones manufacturers to start including NFC chips.
On the other hand, QR-code based payment is relatively low-cost and only requires a mobile phone as the “POS unit”. My personal take is to have two staggered mode of payments — low cost QR-code payment to be used for small transactions in markets or hawkers and NFC-based payment for larger transactions.
It is incredible to see how China has a huge influence in this cashless mode of payment too. Right after the NDR speech, Alipay or CCpay will also enter the Singapore market to allow China tourists to make payments without the need for cash. However, BAU, merchants will be charged transaction or administrative costs.
Another concern that some critics point out will be be how the lower-income and old can adopt to this new change. These concerns are legitimate but not hard to solve. For elderly who have bank accounts, they are not subjected to the daily minimum balance scheme. This can also be extended to low-income individuals. In fact, by going digital, it can help improve the efficiency and security of social funds to be disburse carefully. Imagine someone using social funds to invest, then that surely should strip his or her need for such funds. The reactions on how the policy is “bad” is not warranted for, but more of a resistive approach to new changes. Back in the past when Singapore was a manufacturing society, the seniors managed to undergo the transition to a knowledge-based economy, I believe we will have to do that too.
All-in-all, a new unified POS terminal will definitely have to support the existing card technologies, NFC-enabled and able to generate QR-codes images on its terminal. This will be the “ideal” unified POS that we will experience, at least, in its pioneer stage. Towards the future, it may disregard the existing card operations, and we shall see a Singapore that will have both QR-code payment and also NFC-based payment that are powered by mobile phones. And the best company to do this is NETS, which is backed by our local 3 banks. It is amazing to see how NETS is fairing so badly in mode of payments. Its FLASHPAY did not take off as intended, but instead got outwitted by Visa or Masters instead. With the call for unified ATM infrastructure, it further makes more sense to have the major banks to transfer some of its cost savings from reduced ATMs to NETS to subsidise merchant’s costs of maintaining a POS.
