Why going digital-only is not a win-win solution

Benefits of going totally cashless won't outweigh the cost of society leaving economically vulnerable people behind

DIGITAL transformation has hit countries around the globe. The Lion City is one of the world's top hotbeds for technology and innovation today. In fact, Singapore accounted for a quarter of the nearly US$6 billion in capital invested in South-east Asia's technology firms during the first half of this year. Specifically, fintech investments were found to have nearly quadrupled from a year ago to US$453 million in the first half of 2019, making Singapore the third-largest fintech market by funds in the Asia-Pacific.

With a huge potential such as this, fintechs need to realise the importance of connecting the digital and physical worlds, rather than disconnecting them from each other.

Home to a cumulative 650 million people, banking penetration remains low in South-east Asia, with only 47 per cent of the population having a bank account. This is higher in the Philippines (77 per cent), Vietnam (65 per cent) and Indonesia (52 per cent). In this context, pushing too hard and too fast towards a cashless economy is simply bad for business. If a company refuses to take cash, that leaves a lot of the world's money on the table.

The international rise of cashless commerce threatens to marginalise too many consumers in emerging-market countries because people may not have bank accounts and merchants may not have access to reliable electronic payment technology. For financial institutions, technology is not a "one-size-fits-all" approach. Rather, it is a tool to provide customers with flexibility and choice in managing their money. An all-digital approach is a recipe for failure because the benefits of going completely cashless will not outweigh the cost of society leaving economically vulnerable people behind.

Moving consumers up the financial value chain

The international rise of cashless transactions threatens to sideline many customers and small businesses, particularly in markets where both merchant and customers may not have access to reliable technology for such transactions. While mobile phones have become a key enabler by giving the unbanked and underbanked opportunities to access financial resources, the world is still a long way from having a completely cashless economy that functions for everyone.

The key for financial institutions is to own their responsibility in delivering what customers want, however they want it, wherever they want it, and to help them manage their money in the way that best suits them. This is how we can move consumers up the financial value chain and take a step towards greater financial inclusion for all, regardless of how banked the consumer might be.

Omnipresence is key to driving success with customers

Despite the increasing availability of alternative payment methods like mobile transfers and QR codes, many still prefer cash. The demand for cash continues to increase globally and it remains the most widely used payment method across the world, including Europe, North America and Asia.

Despite Singapore's national push for cashless payments as part of the government's Smart Nation initiative, a number of sectors and demographics remain hesitant to adopt mobile payment alternatives. According to a report by S&P, cash and cheques still account for roughly 40 per cent of payments in Singapore because of the country's ageing demographics.

This can also be observed in Japan, one of the most technologically advanced nations in the world, where four out of five purchases are still made with cash.

Technology has the power to reshape economies, underlining the importance to be more inclusive - by building bridges that connect people who are digitally advanced with those in the world who are not yet online.

Striking a balance to provide flexibility, choice

An all-digital business approach does have its benefits but even for the most sophisticated companies, it has its limitations. Amazon PayCode is a prime example of how a business has been successfully able to get around this, and instead link the digital and physical worlds of money worldwide. Amazon PayCode is a new payment option that enables you to shop online and pay in cash. By not sticking with a digital-only strategy, it is able to serve millions of potential new customers in underserved regions who want greater access to their product.

Customers' needs are constantly evolving, and their preferences are fluid. If one person prefers to pay for coffee in cash, that should be an option. Conversely, if someone wants to buy the same cup of coffee using QR payment, the option should also be available.

The best way to serve customers' ever-changing needs is collaboration between companies to provide services and solutions both online and offline, giving customers a choice rather than limiting them to cash-only or digital-only transaction options.

The global economy and the global spectrum of customer needs and accessible technologies are too varied to take one approach. If businesses can strike a balance in catering to customers' needs and wants, they will be able to better navigate the complex and ever-evolving fintech landscape, both now and in the future.

  • The writer is senior vice-president & general manager, Global Money Transfer, at Asia-Pacific Western Union