Challenges SMEs face in going cashless

Cost of adopting e-payments among reasons cash is still preferred by many smaller firms

Merchants say adopting e-payments can be costly, especially for small players, and cashless payments are not yet a part of everyday life here.
Merchants say adopting e-payments can be costly, especially for small players, and cashless payments are not yet a part of everyday life here. ST PHOTO: NG SOR LUAN
Over the past few months, DBS has been encouraging hawker stalls, wet-market vendors and neighbourhood stores to adopt its PayLah QR codes.
Over the past few months, DBS has been encouraging hawker stalls, wet-market vendors and neighbourhood stores to adopt its PayLah QR codes. PHOTO: DBS

Singapore is making a concerted push to go cashless, but for many small and medium-sized enterprises (SMEs), cash is still king.

Merchants told The Straits Times that adopting e-payments can be costly especially for small players and pointed out that, unlike in other countries, cashless payments have not yet become a part of everyday life here.

The use of e-payments is growing in Singapore, but with the variety of e-payment solutions available, interoperability has become an issue as the systems do not "talk" to one another. This has slowed down the pace of cashless adoption.

In fact, cash remains the primary method for conducting transactions in Singapore, according to a recent study by online payments service provider PayPal. Ninety per cent of the 500 consumers surveyed - compared with the regional average of 88 per cent - still prefer cash as their primary mode of payment.


For merchants, fees charged by credit card companies are a major drawback to adopting cashless payments.

A transaction fee of about 3 per cent is imposed on merchants for accepting Visa and Mastercard payments. Similar fees apply when they accept mobile wallets such as Apple Pay, Android Pay and Samsung Pay - which are layered on the existing credit card infrastructure.

Singapore's most extensive e-payment network, Nets - run by DBS Bank, OCBC Bank and United Overseas Bank - charges merchants a transaction fee of about 1 per cent - and is gaining some traction in the e-front push with a unified point-of-sale terminal. But SMEs - which make up 99 per cent of the businesses in Singapore - are still hesitant.

Mr Lim Jialiang, owner of chocolatier Demochoco that operates online and also has products in some bricks-and-mortar retail stores, points out that credit cards are ubiquitous in Europe and Scandinavian countries as credit card fees are reined in, he said. The European Union, for instance, introduced a rule in December 2015 where merchants cannot be charged more than 0.3 per cent for accepting credit cards, and 0.2 per cent for debit cards.

Even at a large retail chain like Courts Singapore, the cost of accepting cashless payments at its 14 outlets is now about three times higher than the cost of accepting cash, its Singapore chief executive, Mr Ben Tan, previously said.

Mr Mark Lim, who co-owns fashion business Memories, which has seven outlets in neighbourhoods here, said accepting credit cards does not make sense as the company's prices do not justify the costs. His shops sell clothes mostly ranging from $12 to $15, and accessories that can be just a few dollars. "I don't mind using Nets as the fee is less than 1 per cent and it's convenient," he added.

SMEs' cost hurdle

On the other hand, he will accept cashless payments, including credit cards, at his upcoming 4,400 sq ft lifestyle store in Jurong East called Ilahui, targeted at young people.

There are moves being made to remove the cost hurdle for SMEs.

Four government agencies - the National Environment Agency, Housing Board, Monetary Authority of Singapore and the Smart Nation and Digital Government Office - have put out a Request for Information (RFI) to crowdsource ideas on e-payment technology that will work at hawker centres, coffee shops and heartland shops.

The four agencies said the desired solution should include PayNow, an instant fund-transfer system that was launched in July, and should interoperate with international schemes such as Visa and Mastercard. Transaction fees imposed on merchants should also be negligible or standardised.

Mr Anthony Seow, DBS head of cards and unsecured loans, agrees that merchant take-up could be better, adding that the bank has been speaking to merchants to debunk "various myths circulating around digital payments: that high costs are involved in setting up the infrastructure to process payments, it is unsafe, it is complicated to use for both merchant and consumers".

Mr Rahul Shinghal, who is PayPal's general manager of South-east Asia, stresses that "cash has a huge cost for the economy, government, consumer as well as businesses. Singapore spends upwards of $2 billion in managing cash and cheques. Every percentage point increase in cashless payments benefits everybody".


Another issue with existing payments solutions is the fact that transactions can be channelled only through personal bank accounts.

Memories' Mr Lim, a member of the Ang Mo Kio Constituency Merchants Association, noted that institutions like DBS Bank and Alipay have been talking to merchants about using their peer-to-peer (P2P) apps.

Over the past few months, DBS has been encouraging cash-based merchants such as hawker stalls, wet-market vendors and neighbourhood stores to adopt its PayLah QR codes as a payment method.

A DBS spokesman said that as of Wednesday, more than 1,000 merchants have come on board, compared with some 700 in July. Most of them are food stalls at hawker centres and neighbourhood stores.

DBS pointed out that PayLah is currently free for merchants and there is no fee for any PayLah transactions, whether via mobile phone numbers or QR codes.

Memories' Mr Lim said he did consider PayLah but decided against it as transactions go through personal bank accounts instead of corporate accounts.

The DBS spokesman said it is designed for P2P usage but the bank is "working on a corporate solution, to be rolled out in the near future".

Some merchants have given feedback to DBS that since customers do not choose to use PayLah, especially when there are other options such as credit cards or cash, the merchants see no point in signing up for such banking apps.

Tech firm Razer, when asked if these issues will be considered in the proposal for a nationwide e-payment system it is working on, said it had no comment but "will share more information when we are ready".

Singapore's payments council is working on a QR code that can be read by any customer in Singapore, regardless of which banking app he is using, a move that will facilitate e-payments.

Said Demochoco's Mr Lim: "I say this like a broken record but there's a correlation. You need to consider that as a merchant, if I'm facing such fees, it's hard for me to sell using a certain platform and I'll just take myself out of the ecosystem.

"If you're a popular chicken rice stall here, it's unlikely you will care whether you take card or cash."

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A version of this article appeared in the print edition of The Straits Times on September 02, 2017, with the headline Challenges SMEs face in going cashless. Subscribe