We are hearing a lot about how the COVID-19 pandemic is accelerating the shift to digital payment trends. And, truth be told, the evidence is clear on this; for example, Worldpay from FIS’ recent global survey, Generation Pay, found that almost half in Singapore are now using digital wallets or cashless payments and 74 per cent of respondents find contactless payments are making their lives easier.
These trends have led to a number of think-pieces about the looming inevitability of a cashless society. However, there are still significant obstacles on the course to a cash-free payments landscape in Singapore, making the prospect still decades away.
With more than half of the population making some change to their payment methods amidst the pandemic, the cashless future that the fintech industry has been building towards seems more of a reality than ever.
However, the fact of the matter is that significant challenges remain, and I’ve highlighted below three reasons why we won’t be a completely cashless society anytime soon.
Implications for the underbanked
One of the most important issues when we consider a cashless society is that going cashless impacts people differently based on their access to financial services.
Going cashless wouldn’t just inconvenience those who still prefer cash, it could alienate groups like the underbanked or the elderly who rely heavily on cash and are otherwise unable to make transactions.
A report by Bain & Company found that two in five adults in Singapore are underbanked or unbanked. This means they do not have a bank account, or they may have limited access to mainstream banking services like credit cards or loans.
While we could see widespread adoption to cash-free transactions sooner than expected, to abandon cash completely is still unfeasible without disenfranchising a segment of our population. The government has ramped up efforts in recent months to encourage digitalisation, and there are new initiatives to help seniors go cashless.
However, businesses can also address the challenge by providing flexible payment methods that include both cash and digital payments.
Also Read: JazzyPay raises US$500K from Cocoon Capital to help businesses adopt cashless payments amid COVID-19
Existing infrastructure
Another problem is that there’s a lot of infrastructure in place to make cash work, and those things will take time to phase out. Consider ATMs: there are still thousands of ATMs in Singapore, and in recent years part of the over-the-counter consumer transactions have been migrated to next-generation ATMs.
Serving as “mini branches”, these ATMs can help fulfil common functions such as cash deposits, or account and card related requests without customers having to wait in line at a branch. Even as people move away from cash, it will still be quite sometime away before ATMs become obsolete.
On the other end of the spectrum is the technology required for contactless to work, which offers a faster, more frictionless payment experience that’s more convenient compared to cash payments. For example, contactless cards were first introduced in the early 2000s, but have only recently become a norm for newly issued cards in Singapore.
According to Visa, mobile contactless payments grew by 12 per cent in Singapore in 2019. Contactless card payments continue to be the most popular option, with 84 per cent of Singapore respondents using this mode of payment.
Additionally, 32 per cent of Singapore respondents to the Worldpay from FIS’ Generation Pay study said that they are yet to receive a contactless-enabled credit or debit card by their bank.
Cash is still king
We should also be careful not to overestimate the stickiness of behavioural change in the pandemic, and the inevitability of a cashless society. In fact, 71 per cent of respondents to the Generation Pay research in Singapore are still using cash, and 76 per cent said they feel more comfortable using the payment methods they have always used such as cash, check, and/or credit and debit cards. Cash management is also a concern as more than half agree that not using cash makes it easier to lose control of spending.
Also Read: Fave raises funding from Pine Labs to expand cashless payment solutions to SMEs
And consider the many instances where we rely upon cash, such as when we give red or green packets during festive seasons such as Chinese New Year and Hari Raya. Or when we are buying groceries at a wet market. Eliminating cash poses logistical hurdles and ultimately requires behavioural and mindset shifts, none of which have reached a critical mass.
As of today, there are no truly cashless societies, though it should be noted that China is well on its way to becoming one. The longer the pandemic lasts, the closer we will get to a cashless society, but with these hurdles, the old adage rings true in Singapore: cash really is still king, even if consumers are making unprecedented changes to their spending habits.
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