Cashless is king, but will Singapore bow to it?

CATALYSED by advances in fintech, the oft-repeated adage 'cash is king' may no longer hold true in a couple of years. With a cashless movement taking root in many economies around the world, cash is rapidly being displaced in many of the world's largest economies.

There have always been significant costs associated with the handling of cash, not least the painstaking effort and time taken to count and store cash, and the transaction costs levied by financial institutions. In today's highly globalised world, money can change hands numerous times during a single transaction, resulting in lengthy processing times for consumers. Consumers are also constrained by a bank's opening hours, with conventional banking requiring users to be physically present to initiate any transaction.

The cashless revolution will change all of this, dismantling the monopoly of the banks by offering enhanced speed, convenience, efficiency and lower costs.

One only has to look to Sweden for a glimpse into a cashless future. In 2015, the Swedish central bank reported that cash transactions made up less than 2 per cent of the value of all Swedish bank payments and that barely 20 per cent of retail transactions were settled in cash.

While credit cards have popularised the cashless concept, mobile payment apps are shaping up to be a key enabler of cashless societies. Swish, a mobile banking app facilitating person-to-person payments, has been adopted by close to half the Swedish population. Merchants have naturally followed suit, adopting apps that enable businesses to accept card payments via mobile.

Mobile apps are also useful in extending financial inclusiveness, offering banking services to people without access to a traditional bank account. M-Pesa, a unique mobile banking service from Kenya, associates users' money with a SIM card rather than bank account. This lowers the barrier to entry.

The prevalence of mobile devices has been key in the rapid adoption of cashless solutions. In the East, mobile apps such as WeChat or Alipay are systematically dismantling the role of cash in China. A study pegged the volume of mobile payments transacted in China for 2016 at a staggering US$5.5 trillion. Speaking at the RISE Conference in Hong Kong in July, Jing Ulrich, vice-chairman of Asia-Pacific at JPMorgan Chase, heaped praised on Chinese firms such as Tencent and Alipay for their ability to scale, possessing capabilities far surpassing established players. For instance, Visa has a maximum capacity of processing 25,000 payments per second, compared to Alipay which is able to process twice as many payments in the same time.

Conditions around the world are favourable for the growth of a cashless society. Social and Hootsuite's Digital in 2017 Global Overview report found more than half of the world's population owned a smartphone and had access to the Internet. With growth continuing to accelerate every year, even in emerging economies, statistics suggest that we're really only witnessing the beginning of a global phenomenon.

Technology has enabled an endless number of innovative solutions that drive the cashless movement, generally categorised into three distinct service types - B2C payments between retailers and their customers; remittances services; and social person-to-person services primarily used to split bills or to conveniently send money between friends and acquaintances.


While most social payment systems are built on platforms that restrict service to specific regions, the globalised nature of the world is leading to increasing demand for cross-border payment capabilities. New entrants such as Smart Transfer aims to bridge this gap, enabling international payments for a range of currencies, with overseas transactions taking a mere few minutes and costing a fraction of traditional bank fees.

But there are also factors impeding the widespread adoption of cashless solutions. The cashless movement may be a victim of its own success, having spawned numerous competing services that do not offer interoperability between each other. The complexity and inconvenience involved in having to utilise different apps, each for a specific purpose, may serve as a form of discouragement among consumers.

Another hurdle involves changing the mindset of consumers. Despite having one of the world's highest smartphone penetration rates, a PayPal study found that 90 per cent of Singaporeans showed a preference for cash. Findings indicate that negative consumer sentiment was due to a lack of interoperability between payment systems and easy access to cash as a result of the widespread availability of ATMs.

Adoption on the B2C front would also be dependent on the participation of retailers. Countries such as Singapore have found that mandatory transaction fees, a by-product of digital payments, have discouraged retailers from adopting cashless solutions due to the impact on their margins.

The successful establishment of a cashless society should not be the onus of any single party but the result of a joint effort between businesses and regulators. A proper regulatory framework streamlines efforts in the market, preventing duplication of assets and simplifies services for consumers, encouraging a higher take-up rate.

The Monetary Authority of Singapore is working to establish a regulatory infrastructure to standardise digital payment, and efforts to simplify and integrate electronic payment systems are underway, with a national QR code system in the works.

Like it or not, a cashless revolution is taking place now, and it's here to stay.

  • The writer is co-founder and CEO of Smart Transfer