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Singapore looks to innovations in cashless payments
The Monetary Authority of Singapore (MAS) has articulated its strategies to promote electronic payments in Singapore with a vision to create an e-payments society.
Chito Santiago 26 Aug 2016
The Monetary Authority of Singapore (MAS) has articulated its strategies to promote electronic payments in Singapore with a vision to create an e-payments society. In collaboration with KPMG Advisory, it published a Singapore Payments Roadmap, in which more than 2,500 stakeholders in Singapore’s payment ecosystem and across the world were surveyed to understand the current state of payments, focusing on how consumers and businesses make payments.
“We want to embrace innovation and harness technology so as to increase the productivity of our businesses and enhance the welfare of our citizens,” says MAS managing director Ravi Menon as he laid down the roadmap in a keynote address at the Sim Kee Boon Institute conference on fintech and financial inclusion on August 19.
He notes that while there has been quite a bit of payments innovation in Singapore, “our payments experience needs to be as good as the best we see globally”. The rest of the world has not been standing still, he points out, adding that China, for instance, has been a hotbed for payments innovation.
To create an e-payments society, Menon says the MAS is adopting four key strategies: steamlined regulation, inclusive governance, interoperable infrastructure and pervasive digitization.
“We will streamline our regulatory framework for payments, strengthen consumer protection and make regulation more targeted based on the specific payment activities that business undertake,” he adds.
Among other things, this will involve the streamlining of the Money Changing and Remittance Businesses Act and the Payment Systems (Oversight) Act to create a single piece of legislation governing both traditional and innovative payment companies.
It will also involve enhancing the provisions for consumer protection and strengthening of cyber security requirements, as well as make regulation modular and activity-based.
This new framework, according to Menon, will mean that providers of payment services will require only one licence to conduct multiple payment activities and that the users of payment services – consumers or businesses – can take more comfort that their financial information is safe from the threat of cyber-attacks and theft.
For the second strategy, the MAS 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. Specifically, Menon says, the MAS is considering the formation of a broad-based Payment Council that will include senior representation from both providers and users of payments systems.
The council will help to align payment initiatives with national strategies and public interest. Specifically, this means to develop common payment infrastructure, promote open access and inter-operability in payments solutions, enhance the quality of payments systems through the adoption of relevant standards and best practices, and make electronic payments accessible to all.
The third strategy for an e-payments society is a payment infrastructure which is inter-operable that will enable swift, simple and secure electronic payments for everyone, says Menon.
He says Singapore is starting from a good position, citing its world class underlying infrastructure and having one of the highest smartphone penetration rates in the world and pervasive wireless internet access.
Yet, he notes that Singapore’s payments preferences remain largely paper-based, with the use of cash for daily payments among the consumers high and the use of cheques among the businesses relatively high.
Cash circulation in Singapore is 8.8% of GDP, compared with 4.4% in Australia and 2.12% in Sweden. “The economic cost of this heavy reliance on cash and cheques is not trivial,” says Menon. “Our studies, conducted together with KPMG, estimate that the social costs of cash and cheques is around 0.5% of GDP, or about S$2 billion per year.”
Menon also notes that FAST, a real-time interbank fund transfer system launched in 2014, is grossly under-utilized. One key barrier, he points out, is that making a payment through the system requires one to know the bank account number of the person he/she is sending the money.
To address this, the Association of Banks in Singapore is developing a central addressing scheme, which will allow payments to be made through FAST using only a recipient’s mobile number or NRIC (National Registration Identity Card) number or unique entity number.
A second key barrier to using FAST is cost. “The SMEs have told us that some banks can charge up to S$10 for fund transfers using FAST,” says Menon. “But they offer free cheque payments every month!”
The fourth strategy is to help businesses to digitize their processes and integrate them with electronic payments solutions in order to maximize productivity and efficiency gains.

    

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