Singapore plans to reduce the role of cash and checks in its economy by encouraging banks to switch to digital payments, according to the head of the country’s central bank.
Speaking at a Finntech (financial technology) conference Ravi Menon, managing director of the Monetary Authority of Singapore (MAS) referred to things pointed out in a KPMG report, ’Consumer payments in Singapore are unique among highly developed economies’, including that cash in circulation in Singapore is 8.8% of GDP, compared to 4.4% in Australia and 2.12% in Sweden. Also, in Sweden, the total number of cheques issued is so small that it is effectively zero on a per person basis.
“The economic cost of this heavy reliance on cash and cheques is not trivial,” said the central bank head in his speech. “Our studies, conducted together with KPMG, estimate that the social costs for cash and cheques is around 0.5% of GDP, or about S$2 billion per year.
A good part of these costs can be attributed to the cost of securing cash, both in transit and in storage, and processing cheques.
“Singapore has embarked on a journey to become a Smart Nation. We want to embrace innovation and harness technology so as to increase the productivity of our businesses and enhance the welfare of our citizens,” said the MAS MD. “The financial services sector is well placed to play a leading role in the Smart Nation project. MAS has been partnering the financial industry to create a Smart Financial Centre, where innovation is pervasive and FinTech is used widely.”
“Our vision is to make Singapore an electronic payments society. A society that: spurs continuous innovation in payments technology; gives consumers maximum convenience and confidence in making payments; enables firms to increase productivity through payments integrated with business processes; and where swift, simple, and secure payments is a reality for everyone.”
Aside engaging KPMG Advisory to study Singapore’s payments landscape MAS has been working closely with the financial industry and other government agencies to drive electronic payments.
MAS elaborated on the four key strategies to create an e-payments society.
“First, we will streamline our regulatory framework for payments; strengthen consumer protection; and make regulation more targeted based on the specific payment activities that businesses undertake.”
“Second key strategy: we will put in place an inclusive governance framework that brings together different stakeholders to guide the development of Singapore’s payments landscape in a coherent way.”
The third strategy for an e-payments society is a payment infrastructure that is inter-operable, that will enable swift, simple, and secure electronic payments for everyone.
“We’re starting from a good position. To quote the KPMG report on Singapore’s payment landscape, ’the underlying infrastructure is world-class’. And Singapore has one of the highest smartphone penetration rates in the world and wireless Internet access is pervasive. Yet, our payments preferences remain largely paper-based: cash and cheques.”
Payment of bills in Singapore needs to be made less cumbersome, continued Mr Menon.
“The future should be one where we can securely and seamlessly pay our bills online, without having to: fill in our card details for the umpteenth time; or fill out lengthy paper-based GIRO forms to authorise standing payment instructions which take weeks to be approved.
MAS is working with the banks and the payments industry to create seamless bill payments and collections.
The fourth strategy is to help businesses to digitise their processes and integrate them with electronic payments solutions, so as to maximise productivity and efficiency gains.