Towards a cashless society

In the December 2017 Red Book statistic report by the Bank for International Settlements, it was noted that “the number of cashless transactions seems to have at least doubled over the last 10 years across all countries”.

Countries like Singapore, Australia, and the Netherlands lead the way with over 400 cashless transactions a year per person – more than double from 10 years ago – while China has gone from single digits to nearly 30 in five years.

On the other end of the spectrum, cash usage, defined as the ratio between currency and gross domestic product, remains high in some economies.

Hong Kong, for example, went from 10 per cent before the Global Financial Crisis in 2008 to 15 per cent, while Japan leads all advanced economies at around 17 per cent.

Viewed in this context, Ant Financial’s US$184.5 million investment for a 45 per cent stake in Telenor Microfinance Bank to develop mobile payments and digital financial services in Pakistan makes one wonder: Are e-payments really the way of the future? Will ‘cashless’ ever become a reality?

Robert Kauffman, professor of Information Systems and Associate Dean (Faculty) at Singapore Management University, said: "When I think of ‘cashless’, I think of a centrally technology-assisted payment system where we don’t have to worry about the mechanisms of transacting because you could do it with a card, plastic, or a mobile phone, and there are various mechanisms to support that.

“The fact that there are multiple providers of services like that complicates things because you aren’t quite sure of which one to adopt. But if they adopt something...there will be a time when all of these come together. The weaker will get bought out or fail, the stronger start dominating, and cashless will rule the economy,” he added.

Mr Kauffman made those remarks at a recent panel discussion on a cashless society for Channel NewsAsia’s Perspectives programme.

Pointing to the Red Book statistics, Barclays’ Chief Asia-Pacific Economist David Fernandez expects “an aggressive change towards e-payment systems" though cash will still have its place.

Mr Fernandez expects difficulty in reaching “a very large number who are unbanked”.

Brad Jones, CEO of Wave Money, a mobile financial services provider operating in Myanmar, described how the Myanmarese still prefer to convert digital currency to physical cash despite the proliferation of smartphones – about 80 per cent of mobile devices are smartphones – and the associated ease of digital payment.

“What we are doing in Myanmar is laying down the tracks and distribution network and giving customers the opportunity to have a bank account that allows them to do the things they need to do,” Mr Jones said, referring to financial services made available through a mobile device.

“One of the things about the Myanmarese market is that it leapfrogged generations in terms of cellphone ownership. Once you have that infrastructure of smartphone usage and the ability to provide a compelling case to customers to use digitised cash, be it to pay taxes or receive payments, customers are less likely to take the cash in digital form and cash out.”

China is the poster child for a cashless society.

Mobile payment platforms such as AliPay and WeChat Pay facilitate the Chinese trend of paying with smartphones, where “I can handle day-to-day living without using cash in China”, according to Zhang Dayong, general manager, Glocal Business at Ant Financial, Alipay’s parent company.

“A cashless society…is not a target. That is the natural result because the technology development is changing the lifestyle of the whole society. Even for offline payments, we use QR payment to facilitate the very small and micro businesses. They can get the money (with) a simple sticker. They have a very low cost…and merchants accumulate data.

“So for a cashless society...we have to think what is the value that we have created for the users and merchants? I think I have to say that technology development gives us a better life,” Mr Zhang said.


Mobile payments in China are built on the ease of use, made possible by sorting out smaller, disparate payment networks that stop other advanced economies from emulating Chinese success.

Would the endgame be an international mobile payment platform or system that could replicate what VISA or MasterCard does?

“I think one of the challenges, really, is clearing and settlement,” Mr Jones said.

“When you look at a market like Myanmar, where clearing and settlement is actually quite an evolving area, how do you actually start to connect Wave Money internationally to other providers? How do I use my Wave Money account in Thailand and Cambodia?

“For many years, you’ve had…VISA and Mastercard. I think what we’re seeing with the emergence of alternative payment systems is that it’s being challenged. What happens in the next five to 10 years in Asean in particular is going to be very interesting because of the role of other companies and how that interoperability starts to occur,” he added.

But, as blockchain technology matures and cryptocurrency gains acceptance, could things such as Bitcoin and Ethereum represent the cashless future?

Mr Kauffman said: “(It’s about making sure) that the value in one person’s account can go to another person’s account. It doesn’t have to be in cash but in some kind of a form that is recognisable by all of the other parties in an economy. Banks typically have been the ones that provide that service.”

Mr Jones agrees, adding that “the challenge really is in developing markets”.

“Even if you have a Bitcoin system sitting on blockchain, customers still need to put money into the system. There still needs to be a conversion from fiat currency to bitcoin. There has to be a way generally to take the money out because the acceptance of Bitcoin is still that low that the consumer is unable to use the cryptocurrency much.”

Robert Kauffman, David Fernandez, Brad Jones and Zhang Dayong were part of a discussion panel, “Building a More Inclusive Society” for the SMU-Channel NewsAsia programme Perspectives that was recorded at the Singapore Management University School of Law.

This article was first published on Perspectives@SMU on April 30, 2018.