Singapore’s true way to a cashless society

These days many countries are talking about the importance of innovations in the financial sector. Many of those are claiming that they will soon become the first to go completely cashless. They may be saying so, but what if they don’t really know how to do it?

I saw a similar surge 3-4 years ago over fintech in the United States – a large number of projects, a lot of discussions, and the customers who are ready for innovation. The US fintech market is all about products and technologies, while the Asian market is about execution. The US and Europe created fintech for hispsters and geeks, while there is a huge number of unbanked people in Asia. Local banks – DBS, OCBC, UOB, CIMB, Mandiri – have a very strong position in the region and high quality service. Mobile operators are also joining – leading entrepreneur points to accessibility to funding and stable regulatory environment. Another advantage of Singapore is that the city originally positioned itself as the “lab”: here you can create something outstanding, test the idea with local partners and clients.

The Monetary Authority of Singapore (MAS) has committed S$225 million (USD$166.48 million) over the next five years to growing the fintech segment of the startup ecosystem in Singapore. MAS’s managing director, Ravi Menon, revealed (“A Smart Financial Centre” on 29 Jun 2015) that this was a part of the Financial Sector Technology & Innovation (FSTI) scheme during a speech at the Global Technology Law Conference. Financial backing through FSTI is intended to drive a fintech ecosystem, in addition to building the technology skills among the country’s workforce, he said. He also noted the growth of digital payment systems in emerging markets, opportunity to provide innovations-without-approvals for banks and fintech-startups, and possible value of bitcoins and blockchain. MAS creates FinTech & Innovation Group. The new group in the Monetary Authority of Singapore will be responsible for regulatory policies and development strategies to facilitate the use of tech to better manage risks, enhance efficiency and strengthen competitiveness. Mr. Sopnendu Mohanty will head the group as Chief FinTech Officer. Besides, as far as I understand, the government is now interested in a local success story, which would “loudly” go to an IPO here on the stock market.

What about the fintech vision for Singapore?

Denmark is on track to become the world’s first cashless nation, with its government pushing to free some stores, restaurants and petrol stations from accepting cash payments. The proposal to scrap cash transactions is part of a package of cost-saving measures being introduced ahead of the Danish election in September. It is understood the government is hoping to get rid of the option to pay by cash by as early as 2016.

In the Philippines, the government, USAID, and private banks have launched an initiative to create a single electronic payments platform for all transactions in the country. The initiative is part of a bilateral agreement between the Philippine and US governments. Dubbed the e-peso, the platform is envisioned to be a B2B, B2C, and C2C system for e-payments. The up to USD$25 million five-year project has been awarded to a company called Chemonics. The overarching goal, really, is simple: to eliminate, if not substantially reduce, the use of cash in financial transactions; turning the Philippines into a “cash-lite” economy within 20 years.

The Indian government published proposals to encourage greater take-up of electronic payments in a country where cash still rules. It suggested a range of measures, including tax benefits to merchants if at least half of their transactions are handled electronically. Consumers could also receive income tax rebates if a certain proportion of their spend is cashless. Another idea is for government itself to drop certain surcharges it levies for making card payments. Among the objectives are improving financial inclusion, reducing the risks for individuals of carrying cash, cutting the cost of managing cash in the economy, as well as making tax avoidance harder. Electronic payments include cards, mobile wallets, mobile apps, net banking, or other similar means.

The question is not what will be the number of actions taken on enhancement of fintech startups work, but what will be the final global goal – “the big game” – for Singapore? What it can really do is not becoming the first to announce that it will become the first cashless society, but actually becoming one faster than others. We have to create such type of fintech-ecosystem of Singapore that could solve the problem of independent toothbrush-services (like in US or UK) – and provide them (and end-users) synergy from their first days.

Retail fintech opportunities

When famous designer and visionary John Maeda landed in Silicon Valley in 2013 to take on a new role as a partner at Kleiner Perkins Caufield and Byers, he didn’t have a car – or even a place to stay. But instead of meeting with CEOs or consultants, he decided to discover Silicon Valley via the sharing economy services. “People said, ‘Oh, you must be learning so much in Silicon Valley from all the CEOs,’ ” he said. “And I’m like, ‘No, I’m learning through Airbnb hosts and Uber drivers.’” “It’s so easy to stay within our biases. But what inspires creativity is exposing yourself to what might make you feel uncomfortable or different.” Of course Singapore is one of the most developed places on Earth – also in terms of the financial sector size and the level of financial services. A huge amount of multiple slide presentations made by different sorts of consultants would prove that with a large number of graphics and diagrams. However, as “a client of Singapore”, at a hawker centre or in a cab, I often hear: “Of course I could accept the card, but do you have any cash?” I also see very long queues at DBS ATMs on a salary day. These facts demonstrate that Singapore is still a very much cash-oriented society.

Here are the fintech directions that may be helpful for the further enhancement of the quality of life of the “smart nation”:

• Food and shopping – two passions of the Singaporeans. These two directions may become drivers of the consumers’ behaviour change. According to MAS’s managing director, Ravi Menon:

First, payments at stores and restaurants. This is almost a Uniquely Singapore phenomenon: many of our stores and restaurants have multiple Points-of-Sale (‘POS’) at their payment counters; this not only clutters valuable real estate but also makes life difficult for customers and merchants. As more stores and restaurants introduce self-checkout facilities to improve productivity, we need a unified POS – a single terminal, preferably mobile – that will: allow merchants to enhance efficiency by simplifying front-to-back integration; and enhance the shopping or dining experience of customers.

• Financial literacy and inclusion (especially for kids and youth). Many times in conversations with locals I heard that young people face the problem of “dept ratio” more and more often: due to the high availability of loans they spend more than they earn. PFM-services  like MoneyDesktop, mobile banks like Moven, “social online banks” like Fidor, and gamification services like SmartyPig or MyWithBoard habituate the users (especially the young ones) to not only analyse their expenses, but also to plan their medium- and long- term goals. Singaporean all-family bank HomePay is a great example of how you can engage children with the world of finance through their parents and make it in a very gentle and educational way. Wage services like ZenPayroll motivate users not to withdraw salary from an ATM right after it was transferred, but to use cards and online applications as often as possible. There’s still no mobile-first banks for Y-Generation like Simple (sold to BBVA) or Rocketbank (one of TOP100 hottest startups according to Wired) in Singapore (and entire Asia). Both banks are part of our portfolio.
• Big data, IoT, O2O. I think it would be very much useful to study more cases of great thinking like Angela Ahrendts demonstrated at Burberry (and now implementing it at Apple). This is a fantastic example of how to be not only online, but how to combine offline and online experience (the similar use cases are based on Square Stand at Blue Bottle Coffee). This is very close to tablet-based cash-registers, mPOS, card-not-present payments etc. (f.e. Poynt or Shopify POS). How to integrate different devices and different sorts of data, which could be useful not only for fintech, but also for transportation/healthcare/advertising/security systems in Singapore (like Starbucks WiFi, Shopster, Navigine, TIDE)? Apple has launched a number of pilots based on BLE technology (iBeacon) in some of the Macy’s stores, and there were similar projects ran in the stores that partnered with PayPal. This is possible due the BLE technology and complex interaction between smartphones with installed mobile wallets linked to banking cards and application-based tablet cash registers. Such services as Lenddo (honoured as a 2014 Technology Pioneer by the World Economic Forum) allow to analyse a huge amount of information about the users – not only their credit history, but also the data coming from their mobile operators, social networks, messengers and smartphone manufacturers. This analysis not only helps to understand customers better, and decrease their banking risk rates, but it’s also extremely helpful in many other areas, such as KYC-procedures for state services, eCommerce, people recruitment and others.

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