by Jeffry Ho
February 11, 2016

Thanks to widespread contactless card acceptance and a high level of mobile readiness, Singapore is close to a cashless society

Everyone who ventures into Singapore on the road will notice: it beeps everywhere. Why? Because in Singapore every car and motorcycle driver needs an “In-Vehicle-Unit” (IU) fitted to the windscreen or the handlebars to pay for Electronic Road Pricing (ERP Toll) and for access to all Electronic Parking System car parks. ERP and EPS charges are paid electronically in real-time though a contactless stored-value card inserted in this IU, or via credit card payments through MotorPay, a service registering a driver’s credit card to his IU.

Millions of commuters are tapping their contactless card every day

Taking public transport such as trains, busses or a taxi? Millions of commuters are simply just tapping their contactless stored-value card every day at the entry and exit gates of stations, at fare readers when boarding and alighting a bus, respectively at point-of-sale terminals (EDCs) when arriving at their destination with their cab. These stored-value cards can be topped up at amongst others ticketing machines, ticket offices, ATMs, petrol stations, SingPost Outlets or 7-Eleven stores, or more conveniently by registering for Auto TopUp with the card holder’s credit card.

This shows a clear trend in Singapore: The tropical city is progressing well towards the much vaunted goal of being a cashless society. Singapore is home to a robust payments market, with a high level of contactless card penetration. Latest P&S Market Research shows that Singapore’s Cards and Payments Market is one of the most competitive and attractive markets in the Asia-Pacific region.

Today, Singapore is one of the top three cashless countries

People like to pay via credit, debit and prepaid cash cards. A big reason is the acceptance of stored value cards, which has doubled in recent years. The transactions account for more than half of all card-based transactions in Singapore. While stored value card transactions are very popular, the amount spent is relatively small compared to credit cards.

According to a MasterCard global report, 69 percent of consumer spending in Singapore is made through electronic payments – that’s higher than the global average of 66 percent, therefore, along with Japan and Korea, Singapore is one of the top three cashless countries in the region. This makes Singapore an ideal market for payment companies.

By the end of 2014, the average Singaporean held about 3.9 credit cards, thanks to local banks’ aggressive marketing strategies. Banks and card issuers often offer attractive benefits and privileges to entice customers to pay with a debit or credit card. As a result, 38 percent of people in Singapore have a credit card, while credit card penetration is less than five percent in most other countries in Southeast Asia.

Merchants and consumers like the speed of contactless payments

In Singapore, credit cards are mostly used for shopping occasions. A recent report by Euromonitor showed that for every S$100 spent on personal consumption in Singapore, S$58 are completed through electronic payments. In addition, the Visa Consumer Payment Attitudes study showed that 70 percent of consumers across Southeast Asia prefer to shop at stores that accept contactless payments.

Non-cash payments have already added up to over 3.8 billion transactions in Singapore per year, and they’re increasing every day. One reason for this, besides local banks’ marketing strategies, local consumer behaviour and government initiatives, may be the spread of contactless payment technology. Both merchants and consumers like the speed and convenience of contactless payments. What is even new in Europe, has been daily routine in Singapore for about five to ten years.

The growth of omni channel reflects Singapore’s mobile readiness

The Monetary Authority of Singapore has dedicated some US$160 million to grow the country’s FinTech industry to develop new solutions. And the Land Transport Authority plans to trial NFC-enabled wrist bands as a way to pay for train fares. Such initiatives have certainly contributed to the expansion of non-cash payments in Singapore, and the country’s booming e-commerce market acts as an even bigger catalyst, as it is an essential link to omni channel retail. Increasingly, customers are using mobile devices to browse and research products online and to make purchases either in-store or directly on their phone. The growth of omni channel reflects Singapore’s overall mobile readiness.

In addition to excellent mobile network coverage, the island city-state also has the most smartphone users in the Asia Pacific region. With half of Singaporean consumers already using their phones for m-commerce, making mobile payments at the point-of-sale (POS) may not be far off. Studies suggest that mobile wallet usage at the POS will reach 29 percent by 2020. Up to now, mobile money has been very popular so people are used to transactions with their smartphones.

There are lots of opportunities for discerning payments players

With the stage set a booming contactless market and some of the most card-friendly and tech-savvy consumers in the Asia Pacific region, Singapore faces a huge opportunity. This is due to the innovative character of the city, it’s not for no reason that Google Cars are sometimes seen driving around the city or people pay with wearables. It will require innovative and intelligent solutions from players in the payments sector to make use of this high potential.