Hurdles On The Way To Cashless

Policy considerations to review when preparing for a cashless society.

1. Protecting payment systems from cyberattacks

When all of DBS Bank’s online services and ATMs shut down for about seven hours in 2013, business across the island slowed considerably. A cyberattack could be even more devastating, especially if it hits more than one bank and payment networks such as NETS or Visa.

While measures such as backup systems have been put in place to prevent a recurrence of bank outages and cyberattacks, and the likelihood of payment networks being disrupted may be low, commerce in a cashless society would be severely impacted if any of the networks stopped working. For Singapore to go cashless, the Public Service will have to ensure cybersecurity and that businesses can continue operating when consumers don’t have any cash.

2. Serving the “underbanked”

If society were to truly go cashless, everyone would have to be on some form of electronic system. The Public Service would have to work with banks and other partners to reach out to the “underbanked”, or people who are not adequately served by banks. About 4% of Singaporeans have no bank accounts, according to the World Bank.

The Public Service will need to figure out how people with very little money can receive money, such as government subsidies, or make payments electronically without paying fees for bank accounts. Singapore is also investing in, and supporting financial technology start-ups to create payment platforms that do not require users to have an existing bank account.

3. Changing habits

Given the long-standing habits of many consumers and businesses to use cash, the Public Service and businesses will need to sell cashless payments as a more attractive and safe alternative. One way is to educate and emphasise convenience. The Public Service may have to work with marketing agencies as well as banks to develop promotions to encourage electronic payments. Visa, for example, has a “So Simple” advertising campaign where a sprightly silver-haired “Uncle Sim” shows how easy it is to use Visa payWave contactless payments.

In Singapore, Mr Menon said that it costs as much as S$1.50 to process each cheque, and the cost is “just as real in the transportation, collection, delivery and protection [of cash]”.

Another hurdle is convincing those concerned about the security of their personal information. As Wharton Professor Shawndra Hill said: “Privacy concerns over banks’ or retailers’ ability to obtain purchase or personal information is one of the main reasons that consumers are resistant to going cashless.”

4. Helping people make the transition

Public officers will need to make sure the change towards cashless happens seamlessly, and yet prepare to face grumbles from some groups along the way. One potential model is Sweden, where some banks do not even accept cash anymore. Still, there has been resistance from retirees and those living in rural areas with less stable Internet connectivity. Consumers who still use cash started having to travel into larger towns to do their cash transactions, so the government decided that the Swedish Post and Telecom Authority or county administrative boards had to provide basic payment services, such as cash withdrawals.

In Singapore too, seniors may still prefer cash, and not just for everyday use. While apps like DBS PayLah! let younger people enjoy the novelty of giving e-angbaos, or even play mahjong without cash, older folk likely value the tradition of giving physical red packets. There is a need to ensure that no one is left out in the transition to cashless forms of payment.

The next step

Shifting people to electronic payments means public officers may need to change policies as well as practices for accepting payments.

Some ministries and agencies are already making more payments cashless and using payments analytics. The Housing & Development Board and hospitals are promoting online payments, for instance, and the Urban Redevelopment Authority is moving to electronic payment of all processing fees.

The private sector here has also made inroads with incentives such as making it cheaper to go cashless. Bus fares paid with ez-link cards are lower than when paid with coins, while food court chain Kopitiam offers a 10% discount if diners use its stored value loyalty card to purchase food and drinks.

To make cashless happen faster in Singapore, public officers could also take a leaf out of other countries’ books.

The Indian government, for instance, is considering offering tax benefits for those using more electronic transactions, making electronic payment mandatory for high-value transactions, lowering fees for electronic payments, and charging for high-value cash transactions.

In Thailand, the government has said that every merchant in the country must install and use a payment terminal by 2019. It is also working with banks to start a PromptPay e-payment service in November, with users’ accounts linked to their national identity or mobile phone numbers. The system is estimated to save up to 70 billion Thai baht (S$2.7 billion) a year.

With many countries aiming to become cashless in the next decade, will tip jars, piggy banks and small cash payments at wet markets disappear? Or will the humble coin and dollar note still prevail, as they have for the past centuries? For the sake of petrol attendants, bellboys and service staff worldwide, we sure hope there’ll be an app for that.

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