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To make Singapore Truly Cashless, Lower the Cost for Merchants

There is a recent trend that I find it unsettling in Singapore.

The government comes out with some initiative or direction and then the media just spends the next month talking about it.

It is as if it is some kind of brainwashing session.

This started with the drive to have more engineers. Then it was on STEM and entrepreneurship.

Now its on the move to cashless.

The prime minister of Singapore tweeted out that there are too many e-payment system.

That is correct.

And that it is costly for businesses.

That is also correct but it may not be the way we think.

Too Much Focus on Mobile and QR Codes

In the aftermath of this, I observed that there are many news in the media about innovative payment offering.

The first is that all the banks come together to offer what I see as a progression of FAST Transfer in small amounts with PayNow

The similarities is that they are based around what was successful in China, which is QR codes.

Make use of your phone’s camera to scan a QR code. In this way, it is convenient as you do not have to type anything.

The QR code is more or less a url that contains the id of the item you wish to purchase, which allows you to retrieve more information such as the cost of the item.

QR codes is not a recent innovation. Its been around long ago.

It is just that not many implemented it.

And it makes sense in China because you do not have URL that is in Chinese (which is the default language of communication in China)

What I find discomforting is that these operators, especially NETs have the longest time to attempt to integrate QR codes, yet they didn’t.

They must either come to a conclusion it is not feasible or are just plain lazy to innovate.

And so suddenly they decide to move ahead.

Part of the reason that they might find unfeasible is that they might need the retailers to change their payment systems, or get new payment systems again.

That will be more cost to the retailers but how would that translate to the top line or bottom line?

We are already a Cashless Society

What was lost in this narrative is that we are not resistant to be a cash less society.

We are already a predominately one.

If you look at our expenses:

  1. We use GIRO to automatically pay for services and cost from our Banks to the service providers
  2. We use credit cards from VISA, MASTERCARD, Amercian Express which acts as the intermediaries for the banks to pay for many goods and services
  3. We use our EZLink and Cash Card to pay for our Transport Services

How much cash do we use? Not much nowadays.

Respected Tech Thought Leader Benedict Evans of Andreessen Horowitz said that there is this push towards mobile rather than pushing towards cash less. To be fair, a large part of the world is still transacting in cash.

If you ask me, life is pretty great without cash nowadays because while I do not pay with my phone, I see myself practicing cash less payment with my VISA Paywave.

I can just bring one more extra card out with my phone and I am considered cash less.

However, there are places where I still have to use cash. And this is where we are different from China.

But honestly, its as if the prime minister is making us look bad. If he look across, not many countries have implemented what China have implemented, and they have some advantage that other countries do not have.

Why can’t we be totally cash less in Singapore?

It is Too Costly for the Retailers

One of the biggest determinants I feel, that is not mentioned a lot, is how costly is it for the retailers per transaction to use cash less payment systems.

For most of us, we are consumers, and we do not differentiate the costs. When a handbag cost $600, we pay the price tag.

But to transact using cash less systems such as Nets, VISA, Mastercard there are costs.

When we ran BIGScribe and use Paypal and their competitors for payments, we observe first hand the cost that we are subjected to.

A business owner put it out in summary:

Value Penguin have a good summary of the processing fees for different credit card systems:

The big retailers can justify something like this because they can differentiate their products and having cash less payment is part of the image they need to upkeep. They can charge these costs into the cost of their products and services.

If we talk about the last frontier, the wet markets, and the hawkers, many are selling similar products such as vegetables and perishable items not to mention food stuff.

They have to keep the cost down.

What differentiates them from those offered by NTUC, Giant and Sheng Siong is : Price.

Not too long ago, my co-worker introduced me to this place called Foodie Market Place where she says the meat is cheaper. It has become her regular place to stock up meat.

I was thinking if the meat there is cheap, I could buy them in bulk and charge to my credit card to earn points.

I realize they do not offer credit card payment options.

From what I can tell their business is doing quite well, so why can’t they implement it?

I spoke to one person and they say the cost is too much. Perhaps that is one of the reason the meat is price competitive.

The person did say they are implementing QR codes for Nets. To me, that is already cash less with payment by the Nets card.

They implemented NETS, because the cost is not as exorbitant.

If you board a Taxi in the past before Uber or Grab came in, if you pay by NETS, you are charge $0.30 more. If you pay by credit cards, its like 3%  10% more.

The credit card is already a cash less medium and to increase the adoption the cost have to come down.

There is Less Incentive to Transact with Digital Wallet versus Credit Cards

One of the reason these PayLah, PayAnyone has not caught on to be a good medium is that, they are no different from doing a traditional fund transfer.

And I gain no incentive to transact with them.

There is greater incentive to pay using credit cards because you earn points, cash back or miles.

The general idea is that you spend $40,000/yr.

If you earn 2-4% on that total amount, you earn a rough equivalent of $800 to $1600.

Now in reality you can’t earn from credit or debit cards for every dollar you spent but there is still some incentive to charge to these cards.

And that means we use these digital wallet less.

For more usage and adoption of these digital wallets, you need to tie some incentives. This can be savings rate boost for usage of these wallet, perhaps tax incentives for usage of these wallet.

Or it could be an interest on these digital wallet.

One recent implementation that may work well is that of DBS’s Be your own boss and Save as you earn plan.

This is a flaw implementation in that they credit an annualized 2% interest into your DBS Paylah wallet. This might provide you with an incentive to spend, thus making use of that digital wallet.

Until you realize you can transfer money out from the digital wallet to your bank account.

These initiatives will find it hard to gain more traction if they pale in comparison to the credit cards.

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Saturday 16th of September 2017

It is important to not blindly follow the news but to develop your personal opinion when it comes to investment decisions. You bear the risk and the rewards of the decisions you make.

Reducing cash and transiting to electronic payments does not improve small companies if they are not significantly large enough. The cost benefit is not sufficient as they have to pay a cut of their revenue to the e-payment providers. It will not beneficent to the individual businesses if everyone is using it.

It only improve larger retail companies (with many outlets) that are dependent on many branches for cash management processes. The government is touting this because moving towards manual cash processing can reduces costs by the government (1%GDP).

Good post! Enjoyed it.


Saturday 16th of September 2017

Hi SGStockOtaku, thanks for relating to the bottomline. I think if we save more places where human beings are required, this may be what they are looking for.


Wednesday 13th of September 2017

Btw, Taxis charge an exorbitant 10.70% fee (cuz of of GST) for credit/debit card payment (yes Comfort that's you!), as opposed to 30c for NETS, NETS Flashpay and Ez-Link payments.


Thursday 14th of September 2017

Hi Euphorius, that was my mistake. Sorry about it


Wednesday 13th of September 2017

There no need to reinvent the wheel. Forcing everyone to use the phone is like asking the poor to be alienated.

China is not the first country to go "cashless".

Go to Netherlands and shop at their market where they sell fish, vegetables. All of the locals uses their form of cashless payment via their bank card. By the way, it's a roadside stall, not a shop house.

The important thing is the MAS is willing to take the lead - to act - not to talk.


Thursday 14th of September 2017

I think MAS has a lot of ideas how to implement things. ITs whether they actually get the stake holders to execute. Word from the ground


Wednesday 13th of September 2017

I also feel that the companies (Nets, Ez-link & credit card) do not want to work together to implement a uniform cashless payment. The main reason is to earn commission from locking in the customers.

In London, the ONLY cashless payment mode is called "contactless". Visa and MasterCard issue cards that has the "contactless" chip.

With the "contactless" card, you can make payment at merchant and use it for taking public transport. There is no myriad of systems such as Nets, visa paywave or MasterCard contactless.

I used to go out in London with just one card. There isn't a need for multiple cards.

You can even pay for public transport using the NFC card in iPhone.

As long as Singapore adopts a uniform cashless platform and charges a low commision, cashless payment will take off. But which company would be willing to give up the opportunity to "lock in" customers.

There isn't a need to reinvent the wheel with QR code etc


Thursday 14th of September 2017

The thing we need is for more firms to implement a Stripe like API so that we can create more seamless business. Not a different way of scanning and verifying!


Wednesday 13th of September 2017


The 3% or so that credit card companies, aka the banks, charge for each transaction is simply too much.

I used to run a retail business and we would charge the customer 3% for the use of a credit card. A lot of customers are simply not prepared to pay so much, and would instead pay by cash. That "little" 3% on a sale netting 20% is a huge 15% of profits gone.

Or Air Asia, if I use my credit card they charge me a 2.8% fee, but payment through internet banking costs 0.3%. As a retail investor trying to nudge up my XIRR, that 2.8% charge is way too heavy.

And you did not even touch on the extortionate interest rates.

I am also against a cashless society because I like the lack of traceablity that cash provides. I do not want to be financially profiled by companies, it is already bad enough to be "click-profiled" on the internet. Also for some transactions I do not want to have a permanent record kept by anybody.

I am sure that governments and the taxman would just love to be able to have automated sieving of all incomings and outgoings to look for "anomalies". Once all financial transactions are stored on computers we will lose a big chunk of freedom.

I will be paying by cash as long as I can.


Thursday 14th of September 2017

Hi bob, yes its something that only when you run your own business, you will see. There are benefits of cash less such as less hassle when paying the taxi (a big upgrade)

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