More than 10,000 years ago, cattle were bartered for cowry shells and copper for gold and silver. Today, we trade wads of printed paper for goods and services and exchange taps and swipes in pursuit of faster, more convenient lives. While the ‘money makes the world go around’ adage still holds true, the modes by which we facilitate commerce are in flux and rapidly evolving – faster than we have ever seen.
Thanks to big strides in technology and constant investment into innovation, today’s notes and coins are fast antiquating in the presence of credit cards, digital wallets and biometrics. Not only have our technological advancements redefined the payments experience through added security and seamlessness, it’s also helping shape smarter, more inclusive societies and harnessing opportunities for economic growth.
As such, the promise of digital currency is one of a richer tomorrow. Asia Pacific, a region marked by varying levels of economic and technological maturity, is a prime lens to view the varied impact of going cashless on diverse countries. For developed economies such as Australia and Singapore, a cashless society helps to reduce friction in the overall economy and encourages consumer spending. In emerging markets such as China, Indonesia and India, the adoption of digital payments provides a critical bridge that connects the economically marginalised to fiscal progress.
These are just a few of the benefits to be reaped from a cashless society. To ensure that the fruit of such labour is sustained and enjoyed by everyone, it must take precedence as a national, corporate and cultural imperative. These goals are massive undertakings and can only be realised through consistent innovation and close collaboration across industries, sectors and geographies.
What does the promise of technology entail?
Innovation and technological advances are bringing exciting opportunities for inclusive growth to the forefront. In fact, every digital device has the potential to be a commercial device. Mobile wallets and QR (Quick Response) codes are among the tools that are connecting consumers to fast, convenient and secure payment solutions, empowering them to lead more rewarding lives.
Take Qkr! With Masterpass as an example. It’s a payment platform that enables consumers to order and pay for goods and services seamlessly via their smartphone without having to wait in line or for a restaurant server. Already live in Australia, it enables parents to pre-order and make school-related payments for their children on any connected device.
In India, Mastercard recently partnered with the National Payments Corporation of India (NPCI) and Visa to develop Bharat QR, the world’s first interoperable QR code acceptance solution. The tool provides consumers with a secure unified platform that spans different payment networks, eliminating the need to use multiple codes when making payments with any merchant.
However, innovation cannot be a privilege reserved only for those within the formal financial system. If we simply digitise without extending access to the economically marginalised, we risk having the Internet of Everything without the Inclusion of Everyone.
Thankfully, a silver lining has appeared in the form of the humble cellphone. According to GSMA Intelligence report ‘The Mobile Economy: Asia Pacific 2016’ today more than 62% of consumers are subscribed to mobile services, compared to the 27% of who have a formal bank account. For the latter demographic, the mobile phone is a vital lifeline. Mobile wallets are especially critical in developing markets such as Indonesia, whose cash-dependent economy often subjects fund transfers to great risk and instability.
Last August, Lusi, a resident of Bekasi, Indonesia, her husband and three children were among 800 households across West Java severely affected by the annual drought season. They could barely get by on his single income from repairing air conditioners. Through the Mastercard Send platform, Lusi received two cash transfers of US$67 via her phone’s SIM card from the American Red Cross, and used them to buy water, diapers, baby formula and school uniforms. As her greatest hope is for her children to be educated, the grants enabled her to save for school fees.
Lusi’s story is a window into how technology can offset cultural or socio-economic barriers that prevent access to aid or financial services, and help set marginalised families on the path to economic progress. This isn’t the only available avenue. Electronic money accounts and reloadable payment cards can help payments or grants be made safely and efficiently.
In 2012, Mastercard partnered with the South African Social Security Agency (SASSA) to enable biometric security features on 10m debit cards carrying government funds. The SASSA card, carried by more than a third of South Africa’s adult population, helped the government save US$375m in administrative costs. Since the program’s launch, 850,000 illegal fraudulent grants have been rejected, saving the government more than US$300m.
Closer to home, the Indian government recently launched Aadhar, a 12-digit unique identification number to citizens based on their biometric information. Under this scheme, individuals can use their Aadhar cards to receive their pensions. The Indian government has also announced plans to enable citizens to debit funds through their Aadhar cards.
Besides empowering inclusion, cashless technology is also transforming the way we do business, from ‘mom-and-pop’ enterprises to multinational corporations (MNCs). While the concept of cashless commerce might seem oxymoronic, the possibilities are far from paradoxical.
Imagine living in Bangkok, and purchasing a pair of shoes from an online store in Singapore, or living in Australia and hiring a graphic designer in Bangladesh to help design your website. Payment tools such as bKash’s international remittance systems enable fast, secure transactions for both merchants and consumers alike. Due to their interoperability, seamless electronic payment systems are also vital in helping small and medium enterprises reach more customers and develop a truly global presence.
Not only are cashless technologies advancing commerce, it’s also encouraging it. As part of its commitment to help small to medium enterprises (SMEs) transition towards a digital economy, the Singapore government recently announced plans to broaden access to SME grants through the Business Grants Portal, an online site that consolidates and organises many different grants available by various agencies.
As opposed to cash’s opacity, electronic payments systems record all transactions, strengthening transparency and accountability across sectors and borders. In a world where 85% of retail transactions are made with cash, businesses are stymied by such an unstable tool. Furthermore, theft contributes to nearly half of small business failures in the first year.
In Shanghai, Mastercard partnered with COMMIN and internet service ValuePay last year to launch the Cross-Border Commodities Financial Services Platform. An integrated, digital platform connecting banks, bonded warehouses, traders and customers, the platform offers greater transparency of the entire trade process and secures transactions, helping stakeholders save time and costs.
What does this mean for Asia Pacific’s economy?
On a wider-scale, the adoption of innovative cashless payments can accelerate economic growth by eliminating negative externalities including tax evasion and underestimation of a market’s gross domestic product (GDP), enabling more resources to be channeled to inclusion initiatives. According to research from the McKinsey Global Institute, the adoption of digital finance can add 6% or US$3.7 trillion to the global economy by 2025.
Neither inclusive growth nor electronic payment development can be accomplished by working alone. Growth, innovation and collaboration feed and build upon each other. Innovations such as Qkr, Bharat QR, or the Cross-Border Commodities Financial Services Platform have one vital thing in common: they were created by and succeed through establishing strong partnerships. Government involvement is crucial to implementing adequate infrastructure and developing behavior-changing policies.
A case in point: in India prime minister Narendra Modi’s highly controversial demonetisation policies were crucial to breaking traditional barriers preventing citizens from adopting cashless solutions, such as unfamiliarity with electronic payments and anxiety over fraud and network security. The move jolted India’s digital payments landscape awake, highlighting its tremendous potential for economic growth and inclusion.
In the first week of Modi’s announcement, overall credit and debit card transactions leapt by 70.5%, according to the Reserve Bank of India (RBI). If successful, the move towards demonetisation could help reduce cash penetration in India by 15% in 18 months, a process that would normally take at least five years.
India isn’t the only country to go down the path of demonetization. In 2014, Singapore tightened its anti-money laundering (AML) laws by removing its $10,000 note from circulation. Inspired by India and Singapore, Australia recently announced plans to tackle tax evaders by culling its $100 currency notes.
This continuous advent of new innovations and solutions, underpinned by strong partnerships, has opened up a world of possibilities that previous generations could only dream of, be it in commerce or technology, and continues to do so.
However, the rewards of a cashless society can only be truly experienced if they are shared by all. As we progress further into the digital age, the question of innovation is not of how, or why, but for whom. As Winnie Byanyima, director of Oxfam, remarked, “What is growth for, if not to help ordinary people thrive?”
In the world of payment processing, treasurers and finance managers have benefited significantly from faster, more secure systems that have allowed for leaner and more progressive business processes. However, the waves of regulations in financial markets have led to tighter and stricter procedures.
SWIFT gpi is tipped to become the universal cross-border payment standard, writes Paula Roels, Deutsche Bank.
The payments landscape for corporates hasn’t gotten much clearer over the last decade, but global multi-banking continues to grow. Twenty-three per cent of corporates reportedly originate payments with 11 or more banks, and more than 24% operate within each of the major world regions.
Announcements by some of the country’s top politicians and regulators have spawned interest from international players.