Aside from that consumer preference for cash, in Singapore it is also almost impossible to buy lunch at the popular hawker centres - where many Singaporeans eat on a daily basis - unless you have cash. So consumers use cash habitually and it will therefore linger on for longer.
Cash displacement lies in providing consumers with opportunity - to make all of their low value purchases with anything but cash, to use cash on a less regular basis.
Of course this also means lifting merchant acceptance of non-cash payment methods.
This acceptance issue is again evident in New Zealand, which stands apart from most other countries in terms of its lower reliance on cash. More than half of all Kiwis prefer to use cash for low value purchases, a statistic which owes a lot to the low interchange fee environment in New Zealand.
The vast majority of NZ merchants will accept card payments for almost any amount of money. On a day-to-day basis you simply don’t need cash in New Zealand. The problem is in most countries acquirers (the banks which offer payments processing and hardware) struggle to make the business case for acceptance with large volumes of merchants.
Singapore vs New Zealand paradox
Singapore presents an interesting paradox. It’s a market in which the mass transit system is geared up for contactless travel cards, where the industry is collaborating on a mobile payments solution, where 81 per cent of consumers have a smartphone, yet where 90 per cent of consumers prefer to use cash for low value payments.
As we look to the future across Asia-Pacific, the majority of payments industry participants agree we are moving to a mobile world in which payments are made from our smartphones.
In order to achieve success for mobile payments – measured by the displacement of payment methods other than existing electronic payments – there is a battle to be fought on several fronts. Singapore has shown us that it is not enough to build a mobile payments solution and then to put smartphones into the hands of the population.
The evolutionary battle must be fought on dual fronts to achieve success
- Merchants: Consumers require the opportunity to use new payment mechanisms so the industry must overcome the inertia around acceptance on the part of merchants.
- Consumers: Industry participants must educate consumers and raise awareness of new alternatives for low-value payments, create interest, familiarity and ultimately trust.
How then will this perennial chicken and egg conundrum, so common in the payments system, be overcome?
- RFi will delve into this “how” at RFi’s Australian Payments Innovation Forum and Great Debate on 18th September 2014, in Sydney. Bringing together a select group of payments experts, this half day forum will cover ‘2005 – 2016: Shaping Payment Choice’ as well as ‘The Great Payments Debate – Consumers Vs Payment Market Participants: Who will dictate the payments market evolution?’ BlueNotes Managing Editor Andrew Cornell will moderate what promises to be a lively debate.
Alan Shields - Managing Director – RFi Advisory
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
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