The payment landscape in Southeast Asia has evolved tremendously, with the introduction of new technology to drive cashless behaviour among the region’s consumers. Increasingly, they are embracing cashless and contactless payment options, according to a recent Consumer Payments Attitude survey conducted by Visa.
The amount of cash that consumers in this region typically carry in their wallets has also reduced over the past year. Based on the report, more than half of respondents from six Southeast Asian countries have more payment cards in their wallets today than they did to five years ago. Consumers are also starting to envision cashless societies as a likely development in the countries where they live.
Singapore, for example, has become a market deemed successful in driving its cashless agenda. The Singapore government has been proactively pushing for a cashless society, with the introduction in late 2014 of the Smart Nation initiative. The launch last November of the Singapore Fintech Festival and of LATTICE80 – proclaimed as “an ecosystem for fintech start-ups to collaborate, connect and create” and the world’s largest financial technology hub – has also prompted companies and start-ups to establish their presence in Singapore, helping the country to be seen as the regional fintech hub to promote innovations.
The country currently leads the region in usage of electronic payments. Several factors have led to Singapore’s consumers embracing cashless payment options, including initiatives from the government; the introduction of contactless and mobile innovation from payment networks; active support from financial institutions developing new cashless products; and an increasing number of acceptance points across the island.
Furthermore, consumers are spoilt with a wealth of cashless payment options including credit and debit cards, and various mobile wallet platforms launched in the country last year. Online shopping is also optimised with easy and secure payment options; these include Visa Checkout, which allows consumers to make payment and confirm shipping details online, using a single sign-on and token services, which allows payments to be processed without exposing actual account details. Token services work by replacing sensitive account information such as the 16-digit account number with a unique digital identifier called a token
Based on these developments in the local payment landscape, Singapore is on the right path to following Australia’s lead in becoming virtually cashless within the next 10 years.
Slower corporate progress
Although consumers are moving towards the cashless agenda, there is still much to be done for the region’s corporates and small to medium enterprises (SMEs), which are still heavily reliant on cash and cheques. Based on a report conducted by the market research and business intelligence specialist RFi Group, only one in three businesses hold a credit or charge card with their primary domestic business bank. For particular expense categories, such as office supplies, computer equipment and software, at least 35% of these expenses are being transacted in cheques and close to 20% still in cash.
For many corporates and SMEs, the use of non-automated transactions such as cheques leads to a lack of efficiency. According to a cash visibility study conducted by Visa, corporates across Asia Pacific typically take an average of 14.2 hours to prepare each payment run internally and banks then take 10.9 hours to process it. Singapore corporates typically take an average of 9.1 hours for each payment run, which in turn takes place every 3.5 days on average.
Further aggravating this inefficiency is the amount of time taken to access and receive funds. More than 30% of corporates in Singapore reported that they take up to three days to access received funds and the turnaround time for invoice generation to receiving payments takes an average of 50 days.
The optimal solution to cash flow management and visibility problems is to implement higher levels of automation for payments. Corporates need to start introducing more cashless solutions within their companies. Most corporates fully appreciate the benefits of enhanced cash flow capabilities and improved cash balance availability derived from electronic payments. Among the findings of the Cash Visibility Study, corporates indicated that they are willing to pay almost 20% more compared to their current payment methods so that they can receive payments sooner.
A couple of banks in Singapore, such as United Overseas Bank and Citi, have worked to jump on the bandwagon and introduced electronic payments to their commercial clients. Citi recently launched RenePay, a cloud-based procurement platform for corporates to benefit from extensive cost savings and increased efficiency by using this fully automated business-to-business (B2B) e-procurement platform.
Embracing the benefits of cashless for corporates
There are considerable rewards for those banks that provide corporates with electronic payments solutions to speed up payment processes, replace cheque usage, and improve cash visibility and working capital through the effective utilisation of existing credit lines.
Visa envisions that electronic payments will continue to grow in Singapore and across the region as the move continues towards becoming cashless societies. Based on these trends, corporates and banks must also accelerate their adoption of electronic payments which is currently being led by consumers. In doing so, corporates will benefit from increased efficiencies, transparency and visibility; all supporting long-term growth.
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