Cash-less in Singapore and key takeaway for Developing economies

"Are you sure you want to do this" Richa asked.

I must confess I was not, but decided to go for it and thus started this journey from Mumbai to Singapore and back without single penny cash. Yes, that’s right Just a credit, debit and travel prepaid card.

Transit (Home to Airport): Ordered OLA and paid using the OLA money wallet, funding same using the credit card. On multiple usages till date, I have seen no resistance from cab driver in getting payment in his OLA wallet, clearly reflecting the seamless settlement cycle. Stating Uber-OLA has revolutionalised personal transit, is frankly now an understatement. They are going deeper everyday by creating options like

1. Sharing,
2. Low cost variants like micro competing with Auto.
3. Shuttle service from important business districts and
4. Expanding to small towns like Tirupati. 

As they continue this path, a clear possibility that in next 2-year period (Atleast in Top 10 cities of India) we will be able to have a cash less journey via all modes of personal transport.

Arrival in Singapore (Airport to Hotel): Almost all taxi operators accept card based payments (NETS Based e-payments and Cards, however 10 % administrative charge on credit and charge card is a bit of dampener on way to cashless). This meant it was again seamless, the telecom connectivity is great across the island nation so didn’t have much issue (except once at Marina Bay Sands) in paying for it, by using card. This reflected a clear contrast to India wherein the consumer has clearly moved one form factor ahead by going mobile and personally I found payment by prefunded mobile OLA wallet a better option. Dash Pay (promoted by Singtel and Standard Chartered) (mobile wallet) is an option available in some cabs and works in same fashion as person to merchant payment in wallet environment.

Search for Desi food and Mass Transit: Being desi to core I searched for nearby Indian restaurant and decided to visit Murugan Idly in Little India. Walked from Orchard road to Dhoby Ghaut only to realize that I cannot buy a Ez-link MTR (Railway) contactless card using International debit/credit/travel cards. I need to pay either in cash or via NETS or via domestically issued cards with separate NETS wallet. As the resolve to continue cash-less was strong, decided to go back and took a cab to little India. Later I realized that I can buy a Ezlink contactless card from 7-Eleven stores and other points via specific card schemes. Resulting in seamless payment experience across cabs, restaurants, Metro and Bus.

In India I would love to see such contact less cards with wide acceptance across all transit platforms (Metro, Local, Monorail, Bus, Taxi, Auto). The solution however will require significant investment in creating NFC (No current solution that requires queue busting is as good as NFC) infrastructure. Transit solution discussion by regulator is a step in right direction. Creating a sub wallet with-in your existing prepaid/debit card account is a better way to do rather than issuing separate cards. A sub wallet (Essentially funds that can be used only at specific MCC) reduces the risk of primary account getting compromised.

Struggle at Restaurant: On arrival at Little India I realized that not all restaurants accept card and smaller ones normally accept cash or NETS only and some restaurants accept cards only above $ S 10… Therefore, had to change my preference from Murugan Idly to Sarvana Bhawan (Too much of a compromise for a foodie :-) … however anything to remain cashless).

Complete opposite of this was coffee at Starbucks wherein they had almost 6 different type of terminals for all type of payment options.

So while first option was restrictive the second demanded significant hardware investment that no small business can do.

In India we need a solution that does away with the need of having expensive hardware and provides for a way to keep BAU cost low. Open loop QR code based solution for smart phones and MID number based solution for feature phone (USSD or STK driven) can help in rapidly expanding the merchant ecosystem. The recent initiatives (Details to be announced) by the central govt. like

• Withdrawal of surcharge, service charge, convenience fees on cards and digital payments
• Payments above a threshold by cards/digital means
• Rationalisation of telecom service charges for digital financial transactions
• Differentiated framework for some key transaction segments

Are all steps in right direction.

What I would further like to see is

• Some tax incentive for consumers to pay digitally and outlets to accept digitally.
• A pool creation for consumer awareness of QR and Feature phone based merchant payments.
• Mandating all govt. department retail consumer P2G payments using cashless means.
• Credit as a tool of expansion once transaction flow is established.

This in totality will help in creating an ecosystem of cashless acceptance.

Return to hotel: On way back I realized that not all taxi operators accept card and though number of Taxi aggregator apps exist the concept of mobile wallet payment is almost non-existent. So after trying 2-3 taxi’s decided to walk a distance of approx. 2.5 km back to hotel (I love walking and have once walked 18 km from my home in Mumbai to International airport), walking is the best way to feel the vibrancy and pulse of a city. Faced similar challenge on way back from NUS business school to Orchard road.

I had to walk extra mile (atleast 2 times I thought have I taken right decision by not carrying cash…) to continue with this experiment but as a consumer I shouldn’t be doing that.

What I felt as a consumer

I felt strong sense of helplessness as the medium I had opted for was not ubiquitous. So had to ask beforehand every time I boarded a cab, entered a restaurant regarding card acceptance. It was therefore not a convenient option to take. Also many cab drivers shared that customer don’t use cards on cabs as thesurcharge is high.

Though from a Singapore Citizen perspective I can say for sure that S/he has all the ecosystem elements in place for a cashless society and Kudos to the regulator and Industry participants who have made it possible.

Met with a few interesting Fintech Players who intend to develop various use cases like

1. B2B Payments.
2. Expense Management and Reimbursement Solutions for SME
3. Social Analytics based active buyer support platforms
4. Bill Split, Kids Wallet Control and other B2C solutions

Singapore based Fintech’s are uniquely placed due to Singapore being Regional HUB and large investor community. However, as the number of consumer’s is limited and it’s a near perfect environment scaling a B2C solution to other Asian environments is not easy and therefore focusing on B2B might be a better way forward.

Benefits of Cashless to Indian Society

For a country of our size the benefits of going cashless are shared umpteen number of times, however even at the cost of sounding repetitive below are clear advantages of heading towards less-cash and eventually to cash-less.

1. Underground/Black Economy: Varied estimates suggest the size of black economy to be 75 % to almost equal to current GDP ($ 2.2 Trillion). Just think of the tax revenue and productive usage this money generated can be submitted. If even 25 % ($550 B) of this is brought to the tax net it has potential (Purely on account of blended tax income of $ 75-80 B) to bring millions above the poverty line. To me getting rid of black economy will be the manifestation of Swatch Bharat Abhiyan.
2. Cost of Cash: With 76.5 B pieces in circulation the operational cost of managing this cash is $ 3.5 B. However, even bigger is the loss on account of dead cash lying in wallets rather than in an income generating instruments. It further places the disproportionate burden on poor due to lack of places to keep and save it securely for future.
3. Leakage in Govt. Subsidy and Welfare Schemes: As per Economic Survey released last week, govt. provides approx. Rs. 3.7 lakh cr in subsidy via various programs like fertilizer, food, kerosene, diesel etc. And the survey further builds that it doesn’t go in large percentage terms to the right beneficiaries, just think of leakage savings if all of this goes directly to the Aadhaar linked bank account. Almost similar amount goes in the name of schemes like NREGA, NRHM, NSAP, NRLM and other center and state run schemes.
4. Cost of Liquidity Management: Corporates spend large amount in managing cash in their value chain, if a large portion this goes digital it has obvious liquidity management benefits.

Takeaways

1. Long way to go: Considering friction exists in affluent and evolved market like Singapore we in India have a long way to go and for Bharat it’s even longer. But considering the speed of technology adoption the journey will get covered faster. Also whatever alternative emerges it should be ubiquitous and cost of alternative option shouldn’t be more then perceived benefit it brings to both parties.
2. Creating segmented solutions: It is important to build segment specific use cases like transit, small business payments, P2P payments and then over the period of time making it Omnibus.
3. Regular and faster settlement: When you are competing with force like cash wherein full and final settlement is immediate the competing product should be in a position to offer similar experience.

1. Extremely difficult to break a habit and build consumer behavior: As cards are intra-woven in the way Singaporeans pay, they don’t find mobile based solutions to offer any significant advantage. So QR or wallet based solutions are almost non-existent. Therefore, we in India will require significant patience, investment and resource commitment to build digital payment use case, with industry coming together in supporting initiatives towards development of acceptance network.
2. City by City: Critical mass to start with will come from Top cities like Mumbai, NCR, Bangalore, Hyderabad, Pune. Building ecosystem in these key cities will be a great test case for way forward. Though they are nowhere close to what Singapore/Hong Kong has in terms of acceptance but they are the closest that we have.

As I write this on my way back home I am ready to take plunge in next experiment ...

Whatsapp moment: Concorde Hotel Singapore provides a great device called “Handy” which you can carry during your stay to surf, use google maps, to make domestic and international calls completely free of cost. Therefore, this also became first journey wherein I have not used my home telecom network to make or receive calls. I firmly believe over the period of time everything will ride on Data and that will be the only revenue stream left with Telco (Except for those like Vodafone who have built smart financial services on top of telco bandwidth and distribution).

About Author: Curious is first word that describes me the most, the second being Persistence with it. Love to talk therefore I share my understanding of Banking via guest lectures whenever time permits. Believer in the fact that theory should be tested, so did this experiment. Got a job therefore whatever is written above is just a reflection of my mind and doesn’t reflect organizations opinion.