Electronic payments (e-payments) are a convenient alternative to the use of cash and cheque as payment modes. Not only do they offer consumers like you and I a swift and efficient way to pay, they also help businesses enhance productivity. Cash and cheques cost the economy is at 0.52% of GDP.
E-payments have been around for decades. Since the introduction of GIRO in 1984, other transaction types such as FAST and e-wallets for mobile phones have emerged. With the active governmental push for e-payments across retail, amongst consumers, and across industries, it may be helpful for investors to look at the progress and roadmap of e-payments. Not only are they likely to affect the business operations of your existing current pool of investments, they can also affect your day to day life.
After surveying Singapore and the world’s stakeholders in payment systems, Singapore laid out the e-payments roadmap for 2020 and beyond. It aims to make payments faster, simpler, safer, and more accessible.
Singapore’s Smart Nation Vision aims to secure the country’s position as the financial center of Asia. Given that payment flows amongst individuals and businesses are substantial, Improvements to e-payment systems are crucial for Singapore as a trading hub, trade finance centre, and gateway for investments in Asia. Such improvements are not limited to a mere transition from paper-based instruments such as cash and cheque to electronic platforms, but also improvements to infrastructure that promote interoperability, efficiency and security. This way, the nation can work towards a ubiquitous user experience that cuts across market segments and demographics.
To achieve this, innovation needs to be fostered by catalysing collaborations amongst stakeholders. The co-creation of quality, efficient and interoperable solutions that are sustainable and globally accepted is needed to push Singapore to the forefront.
The move towards a cashless society is not something new for Singapore. The country has had plans for a cashless society since some time back with the introduction of solutions such as the SGQR, FAST, Unified Point of Sale and PayNow, to list a few.
The Singapore Quick Response Code (SGQR) was launched by the Singapore government to allow merchants to accept mobile payments. Marketed as the world’s first common QR code specifications for e-payments, the SGQR facilitates the creation of a single multi-tenanted QR for each merchant, supported by a central infrastructure that benefits banks and other industry players within the payment ecosystem in Singapore.
Fast and Secure Transfers (FAST) was launched in 2014 in Singapore’s banking industry. It allows bank users to transfer SDG funds almost immediately, 24/7, amongst 24 participating banks islandwide. Compared to cheques which take up to two business days to process, and eGIRO which takes up to three business days, FAST is a much more efficient system.
- Unified Point of Sale
Today, debit and credit cards are not uncommon in Singapore. However, not all cards are accepted everywhere. Many point-of-sale terminals also clutter cashiers’ counters which can be confusing. The Association of Banks in Singapore (ABS) has developed a Unified Point of Sale (UPOS) that can accept all major card brands, including contactless or smartphone-embedded ones. As of 2018, over 11, 000 units have been deployed at convenience stores, large supermarket chains, and other retailers.
In 2017, PayNow was rolled out to allow peer to peer (P2P) transfers between customers of participating banks through mobile numbers or personal identification numbers. Since then, the platform has garnered been over 3 million registrations and more than 1.1 billion monthly transaction value. Central Provident Fund (CPF) and the Ministry of Education (MOE) have piloted the use of PayNow in March 2018 to disburse CPF lump sum and Edusave award monies. NSMen can also receive their IPPT awards via PayNow on the same day as opposed to two weeks after completing their IPPT.
In 2018, PayNow Corporate was introduced to allow corporates, businesses, government agencies, associations and societies to pay and receive funds immediately through a Unique Entity Number. There is no need to know the bank and account number of the other entity when transferring funds. The PayNow QR code will also be integrated with SGQR.
Collaborations amongst stakeholders
When discussing about the payments landscape, it is difficult to ignore fintech’s contributions. Banks were one of the first stakeholders to jump on fintech as a tool for efficiency, sometimes using innovation labs to achieve their goals.
UOB’s The FinLab and OCBC’s The Open Vault are just two examples of platforms backed by banks that serve to accelerate innovation and digital transformation with the help of strong mentor network and expertise. Accelerator and incubator programmes also aid in the collaboration amongst financial institutions and fintech start ups, particularly in the infancy stage by providing resources to kickstart the process.
2016, in particular, was a watershed year as key drivers were set in motion. There was the launch of the world’s largest fintech co-working space 80RR FinTech Hub, as well as the Singapore FinTech Association as a non-profit platform to facilitate collaborations amongst ecosystem participants. The Singapore FinTech Festival also placed Singapore in the spotlight on the world stage as Asia’s leading fintech capital.
The value of cashless transactions in Singapore have grown by 7.2 per cent a year from 2012 to 2016. This can be a testament to the demand of having an open, accessible, and interoperable e-payments infrastructure.
Do You Know?
Escrow accounts are safeguard measures to protect the interest of parties involved in a transaction. An escrow account is a third party entity that is not directly involved in the transaction or contract. It keeps documents, funds, and the likes before a transaction gets finalised. This means that if an agreement was to fall through, the funds will be returned back to the original owner. In the case of P2P lending, investors’ money are protected through the use of an escrow account. Funding Societies was the first P2P lending platform in Singapore to introduce this safer and more secure practice in Singapore.