Everywhere you turn you would hear the conversation about Asia going cashless, specially developed markets like Singapore. Frankly, I’m getting a bit tired hearing about this, because it isn’t the first time.
Cashless societies and countries have been the dreams of sci-fi writers for years and also the financial institutions like Visa and Mastercard. If there is anyone who is going to make bank as more people use cashless options, it is the financial institutions that control the platform or network that manages all the financial transactions in the world. Its trillions of dollars being electronically sent over a network more secure than anything you can imagine.
However, we’re starting the conversation again as new players are entering a market. But honestly the market is so crowded, no one knows who’s in the lead and who is doing anything worthwhile following up on.
Why isn’t it new?
A few years we went through a huge influx of news with the launch of PayPass and PayWave, Mastercard’s and Visa’s NFC-based payment option with your credit card. Loved it and still do, but this was a year-long drive to push payment in the region.
Singapore led the charge again, but markets like Thailand and Malaysia also had their time in the spotlight with the conversation ongoing about the benefits, pitfalls, and fears of a cashless society.
This was in 2013, so we’ve been down the road before. Even before that, we had the launch of online commerce portals and so much more.
So are we going through cycles, where we push ahead the notion of cashless, get excited about the prospect and then ultimately go about our day until the next big ‘innovation’?
The truth is…
We don’t know what will work. As consumers, planners, governments and so on, we don’t know what will work. There have been thousands of case studies, plans, and products, but consumers have always determined which succeed and which do not. Right now, there isn’t a clear winner.
Also, we aren’t fighting a technology battle. Don’t let anyone fool you about that.
The underlying technology for most cashless systems has been in place for decades. Blockchain and the capability of the technology are the only new things to enter the market, except you and I, the consumer, the buyer and the payer, will never see at work.
What we are fighting about is the upper layer that encompasses eWallets – think Go-Kek, GrabPay, and the countless other parties, QR codes and a host of other ‘solutions’ that merely via for consumer adoption.
[image courtesy of Grab.com]
Here’s where it gets interesting though.
The winner of the consolation prize will the company with the widest distribution, while the real winner will be financial institutions, which will gladly take the small percentage off the top of every transaction. The question that no one has fully answered is will the people be the ultimate winners.
Are we making payments more secure, quicker, faster and easier? Does the upfront cost of setting up a physical payment gateway, help small businesses in Asia, who have razor-thin margins and exist on a month-on-month basis?
We are aggressively pushing the notion of the future without fully understanding whether it is a future we really want to live in.
Can it work though?
Ultimately, I am a believer in a cashless society and think it will work. What I do see happening is the inevitable disruption within all industries caused by retailer reluctance to bear the cost of cashless payment infrastructure. The stragglers will be left behind as the consumers move over to convenience and wider distribution.
What needs to happen is the following:
- Governments need to jump on the bandwagon 100%, which includes merchant discounts or rebates
- Mass adoption by government or government-linked merchants, phasing out cash
- Public transport phasing out cash, which Singapore is already doing
- Country-wide distribution of cashless terminals
- Standardise cashless payment options across multiple vendors and providers – eliminating the market share grab in terms of real estate and focusing competition on consumer adoption only
All this needs to happen before we can even think about a truly cashless society.
What would a cashless society look like?
It wouldn’t be much different from current society, except maybe there aren’t so many queues at the cashier.
Fraud either becomes harder or much easier, depending on how quick we adopt the technologies available in the market.
The physical retail stores start to evolve from points of purchase to experiential locations. This will differentiate them from online stores and create a need for consumers to need a physical retail space.
New industry verticals around eCommerce will flourish, while we will sadly witness the death of a million stores and smaller industries.
We are at the cusp of a new era in payments. That is without a doubt.
However, the mass hysteria around the tech industry when it comes to cashless is likely to be premature, driven more by excitement rather than practicality.
There will be a societal and economic shift to cashless, but that is about a decade or more away. Right now, we’ll continue to see slow adoption, but it will be incremental and have little or no effect on the mass retail market.
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