Cashless cannot be the face for Singapore smart nation success

Increased emphasis on building a cashless society to reflect country's success as a smart nation is misplaced, when the importance of getting the fundamentals right is overlooked.
Written by Eileen Yu, Senior Contributing Editor

Singapore has intensified its push for a cashless society, touting it as a vital step towards becoming a smart nation, but this emphasis is misplaced when it overlooks the need to first get the fundamentals right.

During a speech last month, the nation's prime minister Lee Hsien Loong noted that Singapore still lagged behind others in some areas, despite its advantages as a well-connected society. Specifically, he said, the country had fallen behind in e-payment adoption compared to China, where cash had become almost obsolete in major Chinese cities.

In fact, Lee pointed to how Chinese visitors would remark how "backward" Singapore was for still using cash as a payment mode.

His comments had sparked much discussion about the state of Singapore as as an aspiring smart nation and being cashless, it seemed, had become the face of the country's success in becoming one.

However, the question is why and whether it should be, to put it in business speak, a key performance indicator.

Singapore first unveiled its smart nation ambition in 2014 and, three years later, there had been growing questions about how successful the various initiatives actually were and the lack of concrete case studies.

Hundreds of data sensors, for example, had been deployed and touted to facilitate pilots involving urban mobility, sustainability, and enhancing situational awareness. Data from common outdoor areas such as bus stops and parks also were to be collected and analysed to provide insights and support more responsive and "anticipatory" services for Singapore citizens.

Little, though, had come out from such initiatives that benefitted the wider citizen population. Most, presumably, functioned in the backend and improved efficiencies for government agencies, such as trials that involved video-sensing automated systems to detect people smoking in prohibited areas and illegal parking. Others such as smart toilets and video analytics helped a handful of commercial organisations, including Sentosa Development Corporation.

A cashless society then would seem to be the perfect "killer app" because of its highly visual application and wide impact on the general population. Almost everyone would have to buy or sell on a daily basis.

So, with Lee as its master campaigner, the government outlined plans to further drive the adoption of digital payments. These included the introduction of an integrated POS terminal and a peer-to-peer funds transfer service, PayNow, to enable users to pay and receive money using their mobile numbers, which were linked to their bank accounts.

Not just about the tech

However, several merchants and industry observers had highlighted that the most crucial piece of the puzzle remained unresolved. Most retailers, especially smaller ones, chose to transact with cash to avoid paying hefty transaction fees imposed by credit card companies and banks.

Just last week, I paid several hundreds of dollars in cash for a new phone to avoid forking out an additional 3 percent surcharge if I paid by credit card.

Little had been said about how or whether the government would help resolve this.

In Australia, a new ruling came into effect this month banning all local businesses from making consumers pay excessive surcharges for using EFTPOS--the equivalent of NETS in Singapore--and credit cards. The mandate also required businesses looking to set a flat surcharge across all payment methods to do so at the level of the lowest cost, rather than the average of the different surcharges.

Laws in the EU also prohibited banks and card companies from charging retailers more than a 0.3 percent surcharge for processing credit card payments. And from January next year, all surcharges for purchases made by cards would be banned across the region.

In contrast, movie-goers in Singapore would have to pay an additional $1.50 "convenience fee" for purchasing their tickets online or via mobile. And I would have paid an additional $24 for my new phone if I had used my credit card.

Cash transactions often had been described as more costly to process, with digital payments delivering more efficiencies for businesses and banks. But until this "fact" translated to actual savings for consumers and businesses made to support it, it would remain a myth and cash still would be king.

More importantly, being cashless shouldn't be the symbol of Singapore's success as a smart nation. It still is about getting the fundamentals right. The government itself had championed this: "Citizens are, ultimately, at the heart of our smart nation vision, not technology."

That's a belief "digital society" poster child, Estonia, actually aims to put in practice. In her speech at the Gallen Symposium in May, Estonian President Kersti Kaljulaid said: "There is no enforcement to go digital, but as it is simple, cheap, and available, everybody has done so by now. It has to be simple, cheap, and work every time. It cannot be too innovative, untried, and tested.

"For a society as a whole, high rates of technological penetration even when the technology itself is no cutting-edge, may pay off better than having something truly innovative in the hands of a few select people," Kaljulaid said. "The lives of millions have been transformed by cheap cars or washing machines, not by deployments to the moon. It is important to keep that in mind when digitalising societies."

Enforcement would not work in any effort to go digital, so removing cash as an option at sales counters and ticket kiosks would only leave customers frustrated and resentful. And just as a successful move towards a cashless society would give the government a visible proof point for its smart nation initiative, failure would be just as spectacular.

Going back to what matters

In touting its smart nation vision, the Singapore government stressed the need to support more responsive and "anticipatory" services for citizens. Simply rolling out integrated POS terminals and peer-to-peer funds transfer services would not achieve those objectives, especially if consumers saw no changes in how much more it would cost them to go cashless.

The government over the past three decades had done a great job digitising its own services by focusing on actual pain-points citizens experienced transacting with its ministries and agencies. Its e-government initiative had provided access to hundreds of services online, including filing income taxes, renewing passports, checking of balances in the national retirement fund, and registering new businesses.

Users did not have to pay an additional cost for the online convenience and the government focused on streamlining and simplifying processes, offering faster access to information.

Its smart nation journey needs to put citizens back in centrestage. Going cashless should be a spillover effect of this focal point, if it indeed eventually proves to bring true benefits to users.

Bringing the focus back on citizens also would put more emphasis on improving essential services such as public transport and healthcare. The government then can turn to technology to better enable it to make these services more accessible and reliable.

After all, what would visitors from China think if Singapore's train system broke down on a weekly basis?

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