Singapore is high-tech in everything but cash

Conventional wisdom tells us the battle to replace cash will be won or lost on public transport. At RFi we believed getting consumers to use non-cash methods for their daily commute would ingrain the habit of electronic payment - and thus set up a market for a broader payments evolution.

We were wrong. The fact is the conditions for this to be true – a population concentrated in one area using a single mass transit option – exist in very few countries, most notably Singapore and Hong Kong. In other countries, mass transit tends to be localised in significant cities and therefore precludes most of the population from usage.

More profoundly, Asia-Pacific consumers are addicted to cash. On average for the eight Asian markets we canvassed in our most recent survey of 22,000 banking customers across 11 markets in total (assessing the full spectrum of payments mechanisms, from traditional cash and cheque to the emerging contactless and mobile), 86 per cent of consumers use cash on a regular basis.

Low value not transport is the key to replacing cash

We now believe the actual battle ground for cash will occur in low-value payments – newspapers, drinks, takeaway meals etc. Across Asia-Pacific, 80 per cent of consumers say they actually prefer to use cash over other payment options when it comes to low-value purchases.

This addiction is true in every country we studied but is particularly marked in Indonesia and Singapore where almost 90 per cent of consumers say cash is their most preferred option for low value payments.

Cash is king if you like - cholesterol if you don’t, clogging up the arteries of payment. 

Cash – King and Cholesterol

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Where is payments innovation and collaboration most advanced?

Our survey found perceptions of which countries are evolving fastest differ greatly.

There is the hugely successful uptake of contactless credit and debit card payments in Australia, coupled with the planned rollout of real time payments via the New Payments Platform orchestrated by the Reserve Bank and the overlay services this will facilitate.

We also have industry collaboration on mobile payments in Singapore and New Zealand via the Infocomm Development Authority and the Trusted Services Manager (TSM) run by Paymark IDA and TSM respectively.

And it’s not just the traditional payments market participants that are innovating and evolving.

PayPal has had a great deal of success around the world in entrenching itself firmly in the payments landscape with an average of one in five consumers using it regularly across the eight Asia-Pacific countries.

Meanwhile in China, Alipay now boasts over 300 million user accounts and processed 2.8 billion transactions in 2013 – this compares with 365 million credit cardholders and 3.3 billion credit card transactions in China last year.

Consumer preference and opportunity

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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

  1. Merchants: Consumers require the opportunity to use new payment mechanisms so the industry must overcome the inertia around acceptance on the part of merchants.
  2. 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. 

Photographer: joyfull /

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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