Cashless is the new king for S-E Asia

Adoption of digital payments in the region is expected to cross US$1 trillion by 2025, accounting for almost one in every two dollars spent.

THE days of pulling out dollar notes and coins to pay may be numbered. The cashless trend is picking up quickly in South-east Asia as more people are swiping or tapping away on their mobile phones to make payments.

According to Google, Temasek and Bain, the adoption of digital payments in South-east Asia has finally reached the inflection point. It is expected to cross US$1 trillion by 2025, accounting for almost one in every two dollars spent in the region.

We are encouraged to see digital payments becoming the new norm in South-east Asia. In fact, Vietnam seems to be at the forefront of getting its citizens to move towards a cashless future. A PwC survey found that the percentage of consumers using mobile payment services in Vietnam jumped from 37 per cent in 2018 to 61 per cent this year, the biggest spike among the six South-east Asian countries that were part of the survey.

The other South-east Asian country that has more people going cashless is Thailand, with 67 per cent of consumers already using mobile payments. This is followed by Indonesia (47 per cent), Singapore (46 per cent), the Philippines (45 per cent) and Malaysia (40 per cent).

The strong growth could be attributed to the concerted push by government and enterprises in the last two years to scale up cashless adoption. Singapore, for instance, launched the Smart Nation initiative in 2014 to create tech-enabled solutions across government, industry and society. Singapore also launched targeted programmes to promote cashless payments, including peer-to-peer service PayNow in 2017 and SGQR in 2018, which is the world's first common QR code specifications for e-payments which facilitates a single multi-tenanted QR for merchants.

Cashless businesses drive stronger economies

Why are governments going all in to unleash this new wave of financial technology innovation, encouraging people to ditch their bills and coins and transact with their mobile phones instead?

First, cash is expensive and troublesome. The cost of processing cash and cheques in Singapore was around S$2 billion - or 0.5 per cent of gross domestic product - in 2015. Visa estimated that the city-state is expected to gain S$8.9 billion as the direct benefits from going fully cashless, in addition to catalytic impacts which will materialise in productivity gains and GDP growth.

Second, going cashless makes for better business - particularly for micro-entrepreneurs and the SMEs which comprise between 89 per cent and 99 per cent of all establishments and employ between 52 per cent and 97 per cent of the total workforce in the 10 Asean member-states.

What does going cashless mean to an individual? Eric Goh runs a Japanese fusion restaurant in Singapore called Unagi versus Salmon. In January this year, Eric joined GrabFood, and in April, he took a credit line for purchase financing through GrabFinance so that he could pay his suppliers on time. In a little more than six months, Unagi versus Salmon achieved around 20-30 per cent revenue increase which Eric attributes to productivity gains brought about by digital payments and automation in the procurement process which he implemented through our loan.

Eric's example shows that traditional brick-and-mortar businesses, such as food and beverage outlets, can ride the wave of cashless to achieve growth. For many SMEs, mobile-based financial services provide their first point of access for any lending and financial management solutions.

The next phase in Asean's cashless journey

Cashless has become the new norm, and our entrepreneurs and businesses have already benefited from it. Do we have more room for growth? I believe there is, and we have the potential to achieve three important goals.

First, we should strive to become fully cashless. Asean is a region with strong Internet and mobile connectivity. From Singapore to Vietnam, mobile saturation is consistently high. South-east Asians are the most engaged Internet users, and they spend more than four hours on their smartphones, double the time of US and UK users. This means we have a pool of active and engaged users who are familiar with digital processes and are ready to go cashless.

Second, we could leverage the benefits of mobile-based financial applications to increase banking penetration, which remains low in the region. Only 47 per cent of people in South-east Asia have a bank account, with particularly acute gaps in the Philippines, where 77 per cent of the population is unbanked. Mobile banking could be an enabling agent to drive Asean towards the vision of widespread financial literacy and empowerment.

Third, fragmentation poses a hurdle for our region and we should address this. If we step out of singular markets and look at cross-border transactions, such as in the cases of remittances and e-commerce, the Asean payment landscape is generally fragmented. Grab launched the Singapore-Philippines corridor last month, and the service is still in the process of ramping up. South-east Asians could truly benefit from an interoperable platform and a lot of work lies ahead of us.

Towards the sweet spot

We are now at an important moment where our actions will trigger the pivot towards becoming fully cashless in the near future. I believe opportunities will spring from two approaches.

First, we believe that building a truly open ecosystem benefits everyone. We champion regulations that lower barriers to cashless for consumers and entrepreneurs. Grab has been a part of the Monetary Authority of Singapore's Payments Council from the beginning. We have actively championed SGQR to simplify transactions for consumers and merchants and we have seen demand for cashless payments pick up as a result of these government initiatives. For example, GrabPay today accounts for about 25 per cent of total transaction volume flowing through SGQR at hawker centres, a figure that increased two times over the past three months.

The open ecosystem extends beyond a single market. For example, GrabPay could now be used for online checkout in Singapore, Malaysia and the Philippines. This means that we are taking GrabPay beyond the Grab app to allow more online partners and merchants to tap into our Asean-wide consumer base, and our online payment acceptance is via open application programming interface. Our partnership with traditional incumbents including UOB to offer rebates on spending across Grab's platform - including transport, food delivery and GrabPay - has proven to be a success among millennials.

Second, we believe that emerging technology-enabled solutions will revolutionise the process of financial services. For example, next-generation technologies like automated instant loan approvals and voice-enabled activation are highly intuitive and will significantly lower the barriers of financial access for many. Grab has offered loans of up to S$100,000 to companies, and the loan application process takes two minutes and can be done online. We are also investing in artificial intelligence to beef up our capabilities, using data and insights to best serve our customers' needs.

Cashless is a journey, and we look forward to the next milestone. We are the most popular mobile wallet in South-east Asia, and we have helped over 1.7 million micro-entrepreneurs open their first bank accounts through Grab, but we aspire towards helping more. We want the people in South-east Asia to buy goods and services online and offline, at home and anywhere that suits them. We want them to access financial services no matter how they earn, or how much they earn. We want them to have one Asean wallet - to pay and take out loans easily, to send money easily and to be insured easily.

This is our simple goal. We are excited about a future where cashless and fintech are not only the norm, but for everyone.

  • The writer is GrabPay managing director for Malaysia, Singapore and the Philippines