The Street TImes
Cashless payments are growing in Asia with consumers lured by an increasing array of services, from smartphone payment apps such as e-wallets to stored value cards and cheap online interbank transfers. Many like the convenience and safety of not having to carry cash. But the growth is not universal, and, in some countries, cash remains king because of fears of identity theft as well as the lack of infrastructure and lack of knowledge of the digital world.
Insurance agent Zhang Tong goes out for lunch every day without a dollar on her.
She pays for her noodles by scanning a QR code with her phone, which is also how she gets a shared bicycle to go to the supermarket.
There, a cashier scans a personalised barcode that Ms Zhang whips up, also on her phone, and she walks out with two packets of cherries and a tray of organic eggs.
"Honestly, these days I leave home with my wallet only out of habit," said the 32-year-old. "I used to take at least one bank card with me in case the phone didn't work, but I realised that was unnecessary."
Ms Zhang fits in among the 70 per cent who said in a poll by Beiqing newspaper earlier this month that they would be comfortable leaving home without any cash.
But this is no surprise to many in China: The mainland is today the world's largest - and fastest-growing - market for proximity mobile payments. China had 469 million mobile payment users last year, a 30 per cent increase compared to 2015, and representing two-thirds of all mobile phone users in the country, according to state-backed China Internet Network Information Centre.
Long a cash-first society that lagged behind most developed countries in card payments, China's slow adoption of plastic together with the spectacular growth in smartphone adoption in the past few years created a perfect storm for e-wallet providers such as Alipay and Wechat Pay to enter the fray.
Last year in particular can be seen as the inflection point where Chinese consumers flocked to pay by phone, leaving the wallet in the bag. While online payments grew from 12 trillion yuan (S$2.4 trillion) to 19 trillion yuan last year, mobile payments soared from the same base to 38.6 trillion yuan, a jump of more than 200 per cent, said Beijing-based BigData Research.
China's embrace of fintech has put even Singapore to shame: 40 per cent of Chinese consumers are today using new payment methods compared to just 4 per cent in Singapore, said a November report by Ernst & Young and
Apart from an under-banked population, major reasons for the meteoric growth in cashless payments are a friendly regulatory environment and government restrictions on foreign entrants, which have allowed home-grown firms to flourish, said analysts.
"Currently, the big winners in this flurry of activities are domestic players, both the dominant technology players and more progressive incumbents," noted the Ernst & Young report.
But high-profile hacking incidents, such as last February's breach of more than 20 million accounts on e-commerce site Taobao - a sister company of Alipay - have ledthe authorities to review laws regulating online and mobile payments.
Rising concern over money laundering and fraud has also led to more and stricter regulations by China's central bank.
Going forward, e-wallet providers will be expected to invest more heavily in security technologies, such as biometrics and facial recognition, and provide greater assurance that they will protect customer data, said Mrs Zheng Ying, an analyst with Internet consultant IResearch.
But regardless of safeguards, for consumers like Ms Zhang the fact that her phone is now her wallet means the consequences of losing her phone are far greater than before, and the inconvenience as well.
"I find myself checking every few minutes whether I still have my phone, because I've become so reliant on it I can't imagine what I'd do if it's lost," she said.
Additional reporting by Carol Feng INDIA
Retired Indian diplomat Zikrur Rahman is most comfortable using cash.
But more than three months ago, he was forced to apply for a debit card and get an e-wallet account after Prime Minister Narendra Modi last November abruptly pulled 500- and 1,000-rupee (S$21.40) banknotes from circulation, leading to a nationwide shortage of cash.
The Reserve Bank of India printed new 500- and 2,000-rupee notes, but it was not fast enough and amid the chaos of long queues outside banks, Mr Rahman, like millions of other Indians, was pushed into adopting digital payment methods.
"I find it convenient to use (e-wallet) Paytm to pay for my prepaid mobile phone and other small amounts. But otherwise I have gone back to using cash. I don't use the debit card because they take transaction costs. I find it easier to go to the bank and withdraw money," Mr Rahman told The Sunday Times.
Since coming to power in 2014, Mr Modi has brought greater focus on pushing India's towards a digital economy. He has embraced initiatives like Aadhaar - the biometric identification system - and promised to connect 250,000 villages to the Internet. But it was demonetisation that has given the biggest push to a digital India.
"Demonetisation has given a one-time push to digital but there is more distance to cover," said Mr Madhur Singhal, partner, Bain & Company.
To sustain the momentum, the government needed to offer education and incentives to change people's behaviour, he said.
Months after demonetisation, Indians continue to be wooed by different payment methods.
A government-backed payment method called Bharat QR Code, where people can pay using a smartphone app to scan a machine-readable code, was launched last month. Another app called BHIM that allows bank account transfers has attracted 16 million subscribers within two months of its launch in December.
Private firms have continued to launch services.
Telecom firm Airtel launched mobile phone banking services, while Paytm, the largest among half a dozen e-wallets, is launching banking services that allow users to open savings accounts and use their phone to deposit and withdraw cash.
"Demonetisation has been a great trigger point for digital transactions... There is a lot of pull from the market, " Mr Kiran Vasireddy, senior vice-president at Paytm told The Sunday Times. Paytm, which has 200 million e-wallets, went from two and a half million transactions a day before November to about 8 million now.
But persuading Indians to give up cash remains tough.
In rural areas, banking infrastructure remains poor and internet facilities meagre. Financial illiteracy is a key problem, said experts.
"Eighty-five per cent of retail payment transactions in India still happen through cash," said Mr Naveen Surya, chairman of the Payments Council of India, adding that many Indians had no knowledge of digital transactions.
"For the first-time digital users, we need to educate them in a way that they don't get confused."
With cash coming back into the system, many have switched back.
Vegetable vendor Manoj Shah, 28, said most customers bought vegetables through Paytm at the height of demonetisation.
"Now only two madams still buy using Paytm. Everyone else has gone back to using cash," he noted while delivering vegetables to households in South Delhi. SOUTH KOREA
When restaurant manager Sam Park, 31, splits bills with friends, he simply "tosses" them the money using a money-transfer mobile app.
Nayer Pay is his preferred mobile payment system for online shopping and a credit card for everything else.
"I don't use a lot of cash these days, maybe only when I go to a traditional market," he told The Sunday Times.
"A friend told me about Toss last year. It's an easy way to send money, and I just used it last week to split a restaurant bill with four friends."
Cash is no longer king in South Korea, as more people switch to using credit cards, digital wallets and mobile apps to make payments and, sometimes, just swiping their mobile phones - think Samsung Pay, which is pre-installed on newer models of Samsung smartphones.
Only about 20 per cent of all payments in South Korea are made with cash - among the lowest in the world - according to the Bank of Korea, which is pushing for Asia's fourth largest economy to go cashless by 2020.
South Korea's financial technology (fintech) industry is also blooming after the government's move to ease financial regulations early in 2015 prompted Internet giants like Naver and Kakao to invest more in mobile payment systems that have become widely popular.
Naver Pay has more than 16 million subscribers, while Kakao Pay has 14 million.
Both are expanding their offering of online financial services, with Kakao announcing last month that it secured US$200 million (S$280 million) in funding from a subsidiary of China's e-commerce giant Alibaba.
Toss - similar to America's Venmo - is also a huge success. The app, which simplifies the tedious process of sending money online from 5 passwords and 37 clicks to 1 password and 3 clicks, has been downloaded more than 6 million times and has handled more than US$3 billion in transactions since its launch in 2015.
In a sign of better things to come, the app's developer Viva Republica announced on March 8 that is has received US$48 million in funding from its American counterpart PayPal and other firms. JAPAN
For all its tech savvy, Japan still prefers cash to cashless payments.
And, it is not for the lack of options. Mobile wallets debuted as early as 2004, while Apple Pay and Android Pay services are both available.
More prevalent is the mobile tap-to-pay technology developed by Sony, known as FeliCa, embedded in the Suica and Pasmo rail passes that are similar to ez-link in Singapore.
They are stored-value cards that can also be used in taxis and convenience stores.
But, latest available data from the Japan Consumer Credit Association shows that cashless payments only accounted for 17 per cent of the country's overall retail consumption in 2014.
This is lower than South Korea's 85 per cent, Singapore's 56 per cent and India's 35 per cent.
And, according to Bank of Japan data, the value of digital e-money transactions stood at 4.6 trillion yen (S$57 billion) in 2015, a fraction of the 49.8 trillion yen in credit-card payments.
Separately, a survey by insurer Meiji Yasuda last August indicated that cash was still the preferred payment method for as many as 70 per cent of Japanese across all age groups.
Experts have noted that Japan's jitters over going cashless stem from decades of economic stagnation, leading to a fear of overspending and incurring debts.
And then, there are concerns over virtual security in a country where people feel safer carrying around wads of cash, given the low crime rate.
Sales manager Keisuke Okui, 35, told The Sunday Times that he is an Apple Pay convert, after the technology was introduced in Japan with the launch of the iPhone 7 last year.
He lauds the benefits of going cashless: "I no longer need to carry my wallet, being able to do most of my payments by phone, so it is really convenient for me."
But, he observes his friends favouring banknotes, even for big-ticket items.
He said: "Even if they go to restaurants, the bill could be 100,000 yen and they will still pay by cash.
"Japan is still quite conservative, and there is a mindset that with credit cards people may spend more than what they actually have." SINGAPORE
Cashless payment options are not as popular here compared with those in regional neighbours such as China, Korea and Hong Kong, despite having an equally advanced payment infrastructure.
"This is a less-than-satisfactory position in which there is a greater desire to see it move faster, with efforts being put in by banks, the Monetary Authority of Singapore and the Government," said Mr Chia Tek Yew, head of financial services advisory at KPMG in Singapore.
A slew of measures were introduced in Parliament recently to streamline and simplify the various options for e-payments.
The Smart Nation Programme Office is setting up a Central Addressing Scheme by the middle of this year, which will allow users to transfer funds to another party using a mobile phone without having to enter his bank account number. Part of a $90 million fund to modernise hawker centres has also been set aside to install cashless payment systems to open up e-payments there.
Separately, Nets is upgrading its terminals to accept payment from all banks and payment networks, and through cards or mobile wallets.
Ironically, analysts cite the confusing number of e-payment options here, along with the ease of getting cash, as reasons why going cashless has stalled.
The options here are plentiful: Apple Pay, Android Pay, Dash, DBS Paylah, ez-link, Nets, Liquid Pay and Samsung Pay, besides store-specific cards, credit and debit cards. But the variety means having to carry cards for different purposes, or downloading different apps.
"For example, using mobile payments now means having to juggle an additional device to complete a transaction that involves payment method, loyalty or rewards, receipts and, in some instances, identification," said Ms Quah Mei Lee, market research firm Frost & Sullivan's Asia-Pacific industry principal of digital transformation.
Another gripe - cashless transactions require minimum spending of $10 to $20. A survey by auditing firm KPMG last year showed that cash made up 60 per cent of all consumer payments here in 2015, with the next largest share being credit card payments at 14 per cent.
"Easy access to ATMs and cheques makes it easy for consumers to take out cash," said Mr Chia. Merchants also prefer cash, not wanting to invest in technology or pay commissions for e-transactions.
Ms Quah said the Government can offer tax benefits to firms which adopt technology. PHILIPPINES
In the Philippines, cash is still king.
Just one in 10 Filipinos transacts online via bank accounts, although half the nation's population of 102 million are already using the Internet. Out of 2.5 billion bank payments worth US$74 billion (S$104 billion) each month, only 1 per cent, or about US$740 million, are electronic and most payments involve small amounts.
A boom in mobile phone use, though, could soon change things.
The Philippines is the fastest- growing smartphone market in South-east Asia. There are currently 40 million Filipinos with smartphones and that number is forecast to hit 90 million by 2021.
Using Apple, Android and Facebook apps, and "digital wallets", mobile phone users can open credit and debit accounts that they can use to transact online, without needing a bank account or even an Internet access; just the SIM card is needed.
Voyager Innovations, a unit of telco Smart Communications, currently has over 11 million customers using its smartphone apps to pay for Internet and in-store purchases, transfer money and even secure loans. It declined to give exact growth figures, saying only that they were in the "triple digits".
Smartphone apps have proved appealing because they free up people from having to use bank accounts to make payments or indeed even having a bank account. THAILAND
A cheap electronic interbank transfer system for depositors launched in January is part of the Thai government's digital payment masterplan to cut transaction costs and increase transparency.
Called PromptPay, it allows transfers of sums less than 5,000 baht (S$200) to accounts of other banks for free, as opposed to the 25 baht fee usually levied by banks.
Thailand's three mobile phone service providers also offer e-wallets. For example, True Money is an electronic payment system linked to mobile service provider True Move. In October, True Money also launched a remittance service that allows Myanmar migrant workers in Thailand to make real-time transfers of their earnings home.
The rollout of PromptPay's peer-to-peer transfer system is expected to change the dynamics of Thailand's e-payment landscape, says Mr Punnamas Vichitkulwongsa, who heads the Thailand e-Payment Association.
"PromptPay creates a level playing field for (non-bank e-wallet providers). Banks will be more aggressive and step up their offerings to end users," he told The Sunday Times. INDONESIA
More people in South-east Asia's largest economy are turning to e- wallets, especially with the prevalence of smartphone apps and other e-commerce platforms.
This is natural for a country where a projected 103.5 million people will own a smartphone this year, according to Hamburg-based online statistics firm Statisca.
Retail e-commerce sales in Indonesia totalled US$5.65 billion (S$7.9 billion) last year, up from US$4.61 billion in 2015, said Statisca. It is expected to reach US$10.34 billion in 2019.
This has been a godsend for local fintech firms. Today, Indonesia has about 150 fintech firms, compared to less than 50 three years ago, according to Bank Indonesia.
This has led the central bank to ensure that innovations meet regulatory requirements, such as consumer protection. But this process should not impede the innovation itself, said Mr Junanto Herdiawan, the acting head for fintech at Bank Indonesia.
"To do that, we will do what MAS did, which is to introduce a fintech regulatory sandbox," he said, referring to the Monetary Authority of Singapore.
The sandbox allows for trials by start-ups and large financial companies by limiting the scale and reach of the experiment, he added. MALAYSIA
Efforts are being made to promote a cashless economy in Malaysia. For example, by the end of this year, drivers will no longer be able to use cash to pay tolls on any of the nation's 31 highways. Banks are also encouraging the use of debit cards for shopping.
Malaysia's e-commerce is growing at 9 per cent a year, with last year's revenue at US$894 million (S$1.25 billion) - a fraction of all transactions, and cash is still dominant.
Many everyday items, such as meals at a coffeeshop, are still paid in cash.
"The obstacles now are business readiness and investment in e-wallet readers," said Mr Chan Kok Loong, head of iPay 88, an online payment systems provider used by vendors selling goods and services.
He said that while the central bank wants more payment card terminals and readers to be deployed, the cost is too high for businesses.
"At the same time there is no single e-wallet that is prominent in Malaysia," he added.
Three-quarters of Malaysians are concerned about mobile payments due to security issues, a survey by Nielsen found. Mobile payments are likely to increase if security features are enhanced and incentives are given, Nielsen said.
Hong Kongers are spoilt for choice when it comes to cashless payments. Whether it is paying for groceries, a cup of coffee or a meal in a restaurant, most places provide payment options using the Octopus card, mobile e-wallets and credit cards.
The Octopus card is very popular, with China Daily Asia reporting last September that users chalked up daily spending of HK$173 million (S$31.3 million).
Last year, the Hong Kong government approved stored-value licences for 13 e-wallet providers. They include PayPal, Optal, UniCard, Alipay Wallet, Tap&Go by PCCW's HKT and Tencent's WeChat Pay.
Following the launch of Apple Pay last July, Android Pay introduced its touchless payment system at more than 5,000 locations in the city.
A report by research firm Statista estimated the total value of digital transactions in Hong Kong will reach US$13.85 billion (S$19.45 billion) this year.
With an annual growth rate of 16 per cent, it is expected to hit US$25.1 billion in 2021.
Last year, the value of total retail sales was HK$436.6 billion.
This article was licensed through Dow Jones Direct.
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