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Saturday, April 01, 2023
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What makes Asia so exciting as a fintech territory is that there is ‘no stagnant water’ when it comes to digital adoption, says Milind Sanghavi, Head of Digital Payments for OCBC, Singapore

With its AI-enabled robots, self-driving vehicles, high-tech household systems, drone-enabled police force, and other hi-tech gadgets, Singapore has been the unofficial technology capital of Asia for quite some time.

Singapore aims not just to be a smart society, but a cashless one and, given its small size, theoretically that would seem effortlessly achievable.

And yet, a 2018 study by the International Institute for Management Development (IMD) that measured how well global economies were prepared to digitise, based partly on how each society responds to and incorporates new technologies, ranked Singapore 15th in the world – a shocking contrast to its current position as the most competitive economy, second only to the US.

The IMD study wasn’t purely concerned with digital payments, but its conclusions chime with banks’ experience of driving cash out of the Singaporean – and wider South East Asian – monetary system. So, why the apparent contradiction?

At just 720 sq kilometres and with 5.5 million residents, it might be argued that Singapore’s bijou size means there’s less incentive to move to cashless transactions – even online sales here are usually cash on delivery. More likely, Singapore is a victim of its own fintech success: there are just too many choices when it comes to digital payments, not helped by a lack of standardisation, which confuses and inconveniences customers. Although three out of five merchants now accept digital payments, they don’t all accept the same options, which for customers translates to carrying multiple cards or ewallets. Add to this the cost that merchants incur to go digital, which sometimes amounts to three per cent of the transaction, and you can’t blame them for asking ‘why pay more, when to use cash is free and convenient?’.

Milind Sanghavi, head of digital payments for OCBC Bank in Singapore, confronts these questions daily as the bank works to smooth the path to their universal adoption by identifying problems and coming up with solutions, often involving other actors in the payments network.

Sanghavi primarily blames legacy structures for failing to keep pace with the digital promise –  ‘the fact that merchants [who accept digital payments] don’t see their money for three days worries them’. But while real-time remains elusive in some areas, standardisation has already demonstrated it’s a prize worth achieving.

The core of all standardisation and instant payments in Singapore and the wider ASEAN region lies in QR code technology, believes Sanghavi.

“We believe QR is a great way to enable consumer choice and to create more payment methods for merchants. The specific advantage that QR brings is that
it lowers the cost,” he says.

In September 2018, the Singapore Payments Council helped launch the SGQR, a common standard for QR code payments that will work across all schemes, ewallets and banks in the market. Developed by an industry taskforce, the initiative was co-led by the Monetary Authority of Singapore (MAS) and Info-communications Media Development Authority. For consumers the new standard means that any QR code-based service they choose should be able to be used at any merchant, simplifying the purchasing experience and thus boosting electronic and mobile payments.

On the back of that, OCBC’s mobile Pay Anyone app has seen QR transactions increase by an astonishing 450 per cent. The Pay Anyone app can create and send personalised QR codes to other OCBC Pay Anyone users via social networking apps or email when requesting payment. Alternatively, the payer can instantly scan a QR code displayed on the payee’s phone to complete payment. It allows customers to send or receive money instantly by using a National Registration Identity Card (NRIC) or mobile number, through a mobile wallet application, without sharing bank details. Corporate PayNow offers merchants instant settlement, supported by a QR code.

“Rather than going to a merchant and seeing 16 stickers, SGQR means there’ll be only one,” explains Sanghavi. “It makes the consumer’s business much easier, it makes the merchant’s business much easier.”

A common QR code-based service, acceptable across all providers, has proved that a simplified digital payment experience will result in significant adoption. And the same could hold true beyond Singapore.

QR could enable growth even in crossborder transactions, healing some of the troubled epayment areas, where merchant acceptance infrastructure barely exists. Sanghavi cites the Alipay and WeChat Pay experience as evidence that QR has the potential to make such an impact.

“Cross-border has historically been a large pain point, especially in this region, where merchant acceptance infrastructure hasn’t existed at this scale,” says Sanghavi. “QR enables a large growth in that.

“Singapore is working with all of the other countries to figure out a way to do real-time payments that are cross-border but there are a few things that need to be ironed out. What happens from a foreign exchange rate standpoint, for example, and how do you clear and settle funds, across borders, and then make sure that the consumer is still protected?

“When you look at the long-tail merchant – a small market in Indonesia, or a small store in the Philippines – they’re very worried about digital and the perceived cost that comes with digital,” says Sanghavi.

There is a strong push from the Singaporean Prime Minister to digitise and from ASEAN ministers and central banksto facilitate frictionless, real-time payment methods throughout the region. Singapore’s payments system got a shot in the arm when NETS, an electronic payment service provider, and Southeast Asia’s first unified digital payment platform, was launched in November 2017. This centralised epayment platform was supposed to standardise digital payments and encourage cashless payments for more than 12,000 small and medium business owners across Singapore.

The NETS app allows users to store up to 10 plastic cards digitally and make payments with a tap on their mobile phones or by scanning a QR code. Together, prominent banks in Singapore – OCBC, United Overseas Bank (UOB), DBS and POSB – enable more than 11 million of their customers to pay digitally through the NETS app. Citibank, and Standard Chartered, too, have recently joined.

OCBC is also encouraging more people to go digital by rewarding first adopters with an early payment of their SG Bonus from the Government (a way of sharing the fruits of Singapore’s digital development with Singaporeans, worth $300 for the least well off).

“From OCBC’s perspective, we believe that real-time payments are going to be the future, with instant settlement built in,” says Sanghavi.

“We’re very focussed on how to drive digital by solving specific merchant or consumer pain points across the ecosystem. We have constantly chosen
to evolve… in terms of how we move to cashless in Singapore, which we are leaders of in terms of our market share.” Apart from solving real-life problems for consumers, the focus should also be on making digital payments fun, he adds.

While users might not go so far as to call it fun, contactless is certainly making big gains in Singapore, with banks, retailers, transport systems, and universities embracing the technology. Banks have been at the forefront, with DBS, UOB, OCBC, Citibank, and Standard Chartered all offering contactless cards.

The move towards contactless has been further boosted by trials, which have so far involved more than 100,000 passengers taking more than 26 million trips on public transport using Mastercard contactless credit or debit cards on buses or the city state’s MRT system. Another VISA trial with NETS, including OCBC and other cards, is currently underway.

Singapore has come a long way in the past couple of years, from low digital adoption to an increasingly trustworthy atmosphere of instant payments riding on QR, a technology that doesn’t need much sophistication on the part of the user.

Sanghavi is optimistic. “The beauty of Asia is that there is no stagnant water when it comes to digital adoption, not only in terms of payments, but also digital commerce,” he says. “So if you genuinely adopt a system, then it grows together, and everybody wins. The question is, how do we make it better, smoother, faster for our consumer? What is the incentive for them to no longer carry cash in their wallet?”

This article was published in The Fintech Finance Magazine: Issue #12, Page 28 & 29.

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