Singapore payment system is not backwards

This is the post that got it all started


PM lee tweet that Singapore is really much backwards compared to countries like China

From the pic we see that a merchant has multiple payment system to accept multiple cards. In short, our payment system is in a little mess. 

 This is not really the case and here’s why

1) Unifed Payment already Exist – payment system that accept nets, visa, amex, mastercard, jcb, union pay. In fact Nets has it (see here) . You just need 1 terminal to accept all that mention – the only thing that probably dont work are pay pass and pay wave system.

2) I could really live without my wallet. 90% of the stores i visit has NFC terminals where i use my android pay/apple pay. The only exception when i need cash is when yalkult aunty comes knocking on the door or when i visit coffee shops / hawkers .

3) SLOW IS GOOD.  I really dont mind innovation being fast, but when it comes to money/financial innovation going slow might be actually a good thing.  Here’s why:

  • Look at what happen to lehmen brothers – i guess a little too much financial innovation
  • With money laundering on the rise along with the price of bit coins, we might really want to go slower. Who knows you just might be funding terrorist.
  • Money is a basic structural of any economy, its like the pillars and foundation of a building. You dont really want to rush this or everything might just come crushing down.

 So then why do merchants have so many terminals?

  • Fees Fees and Fees  no merchants in the right mind will have so many terminals. The only reason to do it is fees. E.g A Ocbc bank terminals will incur less fees when customer use a ocbc card, while a UOB terminal would incur less fees for a UOB card
  • Bank tie ups and promotion Credit card and Credit card promotion goes hand in hand. Especially for restaurant and retail shops that have specific target customers who uses a certain bank credit card.
  • Legacy Equipment – many of these terminals could have been there for ages. Long before unified systems came about, did the banks or nets do something about it?

 What would really drive a cashless system for smaller merchants?

  • Fees Fees and Fees. Nets takes a revenue cut of 1%, visa and master takes about 3-4%. This is the reason why small merchants especially those will low margins will never use a cashless system. Fees period. Cut the fees and you would see a bandwagon of small merchants coming at you. 1% of revenue is alot of money for smaller merchants especially our own mum and pop store at hawker centers.  Let me give you an example. A cup of coffee sells for $1 dollars, the cost of coffee might just be 20 cents, rental takes another 30 cents, and salary for works 20. The coffee uncle takes home 30 cents for every cup of coffee he sells.  Assume he sells 10000 cups of coffee a month with a revenue of 10K and a net profit of $3k. Now he has to 3% to visa, thats $300 -or 10% of his net profit. Why would he want to do that, he would rather collect coins and deposit them in banks.

QR code – the step backwards

Seriously, QR Codes when NFC should be the future. I mean really when open an app and scan a generate code when all you need is a tap your phone or a card? To add on, the tap should be allow to be use on mrt, car parks erp, etc. (to be fair some credit cards already have these functions). I happen to be on panel when i was still in banking where the concept of using qr codes as payment method was toss into deep sea about 5 years ago. I wonder if some of them are still on that board, what will they be thinking now.

QR code works in China, because majority of the users uses smart phones without NFC functions and their QR payment function is in build in wechat where 90% of the population is already using wechat for communication purpose. Looking at Singapore where almost half the population uses an iPhone or Samsung  or potentially a phone with NFC (okie i got no facts nor data here), using QR code is really a move backwards.

To use QR code in a complete new app requires mass adoption is indeed a steep slope to climb.

Moving Forward

I really doubt there is a one size fit all approach to payment system. Yes it is fragmented, we have ez link vs nets flash pay, banks vs banks, visa vs mastercard, jcb, unionpay, amex. To have a one size fit all approach is a backwards approach where competition are limited and merchants at the mercy of payment networks.