Dreams of a cashless society

The paradox of cash

Whether it’s brick and mortar shops or online retailers, the one unifier has to be payments. Simply put, if you want to be in business, you need to be paid. And in most cases, to pay others too. As much as the means of doing business has changed, so to have the means of settling transactions, thanks in part to the insurgence of new technologies.

Physical cash in terms of notes and coins and credit/debit cards are still widely used, but we’re starting to see the rise of virtual wallets and payments via mobile. Major credit card operators like Visa and Mastercard have implemented a tap to pay system for their credit cards as well as app versions for mobile phones, so there clearly is a push to move consumers away from cash. But why so?

The biggest problem with cash, is that it costs money to handle. Anthony Seow, Head of Cards & Unsecured Loans at DBS Bank says that relying on cash and cheque means time is wasted reconciling, tracking, handling and securing cash. Retailers have to spend precious resources handling these issues, while banks too, have to invest in ensuring that sufficient automated tellers (and physical bank branches with staff) are available across the country or risk dealing with aggrieved customers seeking easy access to their own funds.

He quotes a KPMG report by MAS that estimates the cash in circulation in Singapore to be 8.8% of GDP, compared to 4.4% in Australia and 2.12% in Sweden. 12.7 cheques per person were written in Singapore in 2014, compared to 7.1 in Australia. This brings the estimated social cost of cash and cheques to about 0.5% of GDP, or a staggering two billion SGD per year - not a small cost indeed.

For individuals, our reliance on physical cash when we travel means you will invariably incur fees when making currency exchanges to the local currency, or when paying by credit card. While taking out cash from the equation won’t completely eliminate that cost (unless the world starts operating on a single unified currency standard), it certainly should bring them down significantly as less middlemen come into play.

And that’s not even factoring the time spent physically searching for a money changer or waiting in queue. Plus, you’ll no longer have to deal with loose change you can’t use after you get back as every transaction will be deducted to the cent electronically.

One of the understated disadvantages of dealing with physical cash is that there’s also opportunity cost in terms of gathering data about the customer. Jeremy Tan, CEO of LiquidGroup also makes a good point when he says that e-payments would provide transaction data that would allow merchants and service providers to better understand their customers as everything is recorded in real-time. Contrast this to the difficulties a small street-side vendor would face trying to keep track of his customer habits when all he has to go by is his ledger at the end of the day and his own memory, and it’s easy to see his point.

One last point we’d make with the small business owner in mind, is that reducing the amount of cash he has to keep in store would almost certainly reduce worries about security. Hard to rob a place, when there isn’t actually any money in it.

Are we ready for cashlessness?

The concept of paying via the Internet and electronic gadgets predate the smartphone. We’ve had ]Amazon and PayPal since 1994 and 1998, while contactless NFC cards like EZ-Link and NETS FlashPay (in Singapore) existed since 2000 and 2009 respectively. It’s not hard to believe Visa’s Consumer Payment Attitudes survey, which stated that 78% of Singaporeans would instead prefer electronic payments as opposed to cash. That said, it’s still an uphill task tto satisfy cashless evangelists. OOoi Huey Tyng, Visa Country Manager for Singapore and Brunei, said, “Singapore is a developed market where more than 60% of all transactions are made electronically. However, this means that around 40% of payments in Singapore are still transacted using cash and cheques, presenting a significant opportunity for cash displacement. Certain segments in Singapore, such as hawker centers, food courts, and wet markets, are heavily cash-based. Hence, it is important for the industry to work closely together to introduce new digital solutions to convert cash in these segments so that Singapore can become truly cashless.” When we rst looked into mobile payment options back in the HWM July 2016’s issue, our coverage excluded new alternatives, such as Qpay by Qoo10, which uses QR codes to facilitate o_ine shopping without swiping a credit card. E-wallets like GrabPay haven’t been idle as well, with their expansion into Indonesia in September 2017. By partnering with an Indonesian online-too_ine e-commerce platform called Kudo, Indonesian residents can use GrabPay across 400,000 authorized agents in 500 towns and cities across Indonesia. E-payment is more than just Samsung, Android, and Apple Pay these days.