E-wallets: Raising the bar beyond stored-value function


WITH competition, comes innovation.

That's the dictum Minister Ong Ye Kung hopes will grip the e-payments market when non-banks join the scrum. The Education Minister, who is also board member of the Monetary Authority of Singapore (MAS), announced this week that Singapore's interbank payment infrastructure FAST will be extended to non-bank players such as fintech firms and e-payment apps by 2019.

Industry players The Business Times spoke to share Mr Ong's view - that Singapore's cashless transformation will shift into higher gear as banks and non-banks compete for both e-payment transactions and user data.

They said the move would enable a new wave of innovative firms to develop novel e-payment solutions on top of a common, national platform - and in so doing, accelerate the adoption of e-payments here.

But there could be potential hurdles, if the experience of countries that have opened their national payment infrastructure to fintech firms is anything to go by.

In Australia for example, a new and similar payments platform was launched a year ago but it has not amassed any new members due to the difficulties in joining, said Lukas May, head of banking at money transfer service TransferWise. He added that a recent report by Australia's Productivity Commission recommended that the platform's entry barriers be reduced.

The real test will therefore be in how the non-bank FAST access works in practice, he told BT. "It will be crucial for Singapore to ensure that the costs of joining - both technical and financial - are as low as possible, or this valuable initiative will not achieve its intended aims."

TransferWise is a member of the Direct FAST industry working group, which MAS has formed to develop the business and technical requirements for non-banks to connect directly to FAST. Also in the working group are MAS, banks, and non-banks including Grab, Razer, Liquid Group and MatchMove, all of which have created e-wallets of their own.

Then there is the problem of too many such wallets. Aaron Chew, head of digital and mobile for group retail at UOB, when asked if e-wallets are in excess here, said: "It can be confusing to have too many ways to pay. The competition will be about data; e-wallets will compete for data. All companies want to understand their customers better, and they do that through transactions."

But diversity could be a good thing, said others. Jeremy Tan, chief of e-payments firm Liquid Group, said that every e-wallet will develop its own niche services, while Cheng Li, chief technology officer at Ant Financial (which owns e-wallet AliPay), said that diversity signals financial inclusion, which grants individuals and businesses equal access to financial services.

Despite the opening of FAST to non-banks, banks say they are supportive of the initiative.

Anthony Seow, head of cards and unsecured loans at DBS, told BT that all stakeholders have a role to play in helping Singapore become less cash-reliant: "Stakeholders should fully leverage the foundation of interoperable payment being built here."

Pranav Seth, head of e-business, business transformation and the fintech and innovation group at OCBC Bank, said the bank believes that the new non-bank players will help accelerate Singapore's e-payment drive.

One of the first features that banks and non-banks are expected to work on is the two-way flow between e-wallets and bank accounts.

Louis Liu, chief of mobile payment aggregator FOMO Pay, said: "Prior to this, users could hardly withdraw the credits topped up in their e-wallets. Like what they do with an EZ-Link card, users could only use up the credits, top up their e-wallets again, and the cycle continues."

With non-bank FAST access, users will have the ability to move unused funds out of a non-bank e-wallet into a bank account. This means that users will no longer "fear having their money orphaned in proprietary e-wallets", said Lee Li Meng, chief strategy officer at Razer. The gaming and payments company will launch its e-wallet, Razer Pay, in Singapore next year.

Users will also enjoy instant, real-time access to their funds regardless of which service provider they use, said Liquid Group's Mr Tan. "This is critical as it allows users to adopt different services provided by e-wallets with peace of mind that they can always access those funds from banking channels via a simple transfer."

The competition for users will only intensify. Banks and non-banks will compete to offer best-in-class solutions to encourage their users to keep money in their e-wallets and spend it within their ecosystems, said Ashley Koh, a senior vice-president at mobile wallet solutions firm MatchMove Pay.

"True innovation only occurs when we allow money to both move into and out of e-wallets easily," she told BT.

One result is that e-wallets will take on a larger role. FOMO Pay's Mr Liu said that these wallets would evolve from "just a stored value facility" to "another bank account with lower limits", benefitting the underbanked and small merchants.

"Overall, this will drive more innovation and competition for every stakeholder in the market," said Mr Liu.

GrabPay is the e-wallet to watch, going by market sentiment. It was launched in 2016 by Grab, South-east Asia's most valuable startup and a ridehailing platform that reportedly facilitates over 3.5 million transactions daily. GrabPay enables peer-to-peer fund transfer and in-store payment, and has onboarded thousands of merchants within the short span of one year.

Gary Wong, head of GrabPay Singapore, said: "Grab is excited to work with MAS and other industry leaders to deliver a solution that will benefit everyone. This is a significant milestone in Singapore's Smart Nation agenda and we believe that this will bring us a step closer to a unified e-payment system."