Singapore is one of the biggest global financial centres in Asia, and it is only increasing its foothold in the industry with every passing day. Starting from modern innovations to advanced technological boost, the state bank and private banks in Singapore are revolutionising the banking system. Be it personal loans or cash deposits, Singaporean banks never let you down when it comes to money management.
Why go cashless?
Recently, it has started implementing cashless payment systems across the country for easing the payment process for its users. According to a recent study by the Maybank Kim Eng Research, this step could help local banks earn almost 9 percent profit over a period of two years.
An analyst at the research facility, Ng Li Hiang believes that adopting the method of cashless payment, which could also be done online, would lead to increased credit card usage. When more people use credit cards to pay their bills, the banks will experience an increase in revenue.
According to her, 40 to 70 percent of the current expenditure must become cashless if banks are looking to profit from it. Singapore needs to encourage its residents to trust and use credit cards for money transfers instead of using actual cash. The maximum of banks’ card fees arises from merchant discount rates and net interchange fees. If you are new to this, let us explain.
A merchant discount rate is paid by a merchant to a bank when he or she avails debit and credit card services. The interchange fees are a kind of transaction fees paid when a customer uses a credit or debit card to carry out purchases.
She noted that if 40 to 70 percent of the total expenditure changed to cashless payments rather than paper cash, it would mean that there would be almost a hundred billion worth of transactions opting for plastic over paper.
If the profit percent is estimated to be 1.2 percent, then the 3-9% increase in the profits of local lenders is a given. However, Ms Ng pointed out that her study was based on some assumptions that might turn out differently in real life.
What is the urgency?
Singapore is lagging behind major countries when it comes to the cashless feature. The big banks like DBS Bank, POSB and OCBC Bank have constructed thousands of ATM-s in the country which means that anybody can access cash very easily. When making transactions with cash, customers do not have to pay a “convenience fee.” Credit cards, on the other hand, have chargeable rates. Even Singapore’s oldest cashless network, Nets, delays payments and is not prompt enough. For businesses, that poses a major hindrance in daily activities.
Encouraging the use of cashless payment systems is an effort on Singapore’s part to make its people more comfortable with technology so they can appreciate its benefits. It also hopes to increase productivity and security. Going smart is the only way Singapore can establish a stronger foothold in the global financial market. As a smart nation, Singapore will be able to accomplish more in a shorter period.