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« Payments and profits | Main | Where's the security in that? »

Cashless country

By davebirch posted Jul 20 2006 at 6:17 PM

[Dave Birch] Channelnewsasia.com reports that Singapores InfoComm Development Authority (IDA) is working on a project together with industry players like the Land Transport Authority, NETS and EZ Link to produce a national e-purse. They have developed a new national standard, known as the Contactless E-Purse Application for Singapore (CEPAS) and have persuaded the relevant key players to adopt it. They say that expect it to be in operation in 2010 and generating $50 billion in transactions.

They could be right. For a start NETS, a key player in the financial sector, has plans to roll out CEPAS compliant Combi CashCard for mass market use later this year. Like all CashCards managed by NETS, it will be jointly issued by local banks. Ms Jocelyn Ang, General Manager for CashCard and Financial Transaction Processing, NETS, said, "CEPAS is a specification that enables NETS to offer unmatched convenience for Singaporeans, by allowing a single unified payment system for the public transport, retail and motoring".

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Back in 2001, Singapore became the first country to announce that it was going to be moving away from boring old–fashioned paper and metal money. The commitment to make digital money legal tender was driven by a desire stimulate the e–economy and take costs out of the old one. They knew it wasn't going to happen instantly and took the long view. The Board of Commissioners of Currency (BCC) for Singapore -- who spoke at the Digital Transactions Forum that CHYP ran in Singapore in 2001 -- set 2008 as the start date to give merchants and banks around the country the time to prepare. At the time, the Singaporean public were 85% in favour of the move (despite the estimated $400 million to make the change).

Becoming cashless is about more than getting rid of notes and coins. Law and regulations about legal tender may have to be revised. The Singapore Electronic Legal Tender (SELT) system has been under development to provide this kind of infrastructure for a cashless society. I'm not entirely sure what the answers are, but I know the kind of questions that were being asked about SELT: Will merchants be obliged to accept digital money? Will notes and coins be banned? In the OECD's 2002 publication "The Future of Money" (the editor, Riel Miller, kindly spoke at the Digital Money Forum that year), Low Siang Kok, a Director of the BCC, wrote a chapter on the SELT concept in which he mentions an Asian Banker survey that found the cost of handling cash in Singapore to be the lowest of all the Asia-Pacific countries they surveyed (for some reason, I think that Australia was the highest, but I can't find the reference anywhere): yet it was still too high for a forward-looking economy (he projected it a S$1 billion for 2006) and they wanted to drive it down.

The preferred strategy was to encourage the development of electronic alternatives to cash. Two cash-replacement schemes have been in operation: the bank-led CashCard and the transit-led EZ Link. CashCard, a contact card, has been operational since 1996 but never made the desired impact at retail POS despite being accepted at 30,000 merchant locations: it did, however, find a niche for car parking. Meanwhile, EZ Link ended up in everyone's pocket but didn't spread as much as Octopus did in Hong Kong (hampered, I imagine, by merchant resistance to two schemes, one contact and one contactless).

So what has changed? Is there a technology trigger? I think there is, but it's not contactless. I was out in Singapore in 2003 with the Infocomm Development Authority (IDA) when they published a review report on their m-payments initiative. I dug this report out again, and it makes for interesting reading. One of the m-payment initiatives was a 2002 pilot involving NETS and Nokia to trial a mobile phone fitted with a contactless interface (14443 not NFC). The results were unambiguous: consumers and merchants both liked it, but consumers would not buy a new handset to use it. This seems to me to hold the key. The combination of mobile and contactless is final piece in the jigsaw.

Now it appears that everyone will migrate to CEPAS providing a single, national, electronic purse based on contactless technology. My guess is that it will be embedded in mobile phones very quickly and as Singaporeans renew their handsets in a natural cycle, by 2010 it will be that installed base of handsets that will give the Singaporean dreams of cashlessness a significant boost.


Hmmm – I’m increasingly convinced that issuing Smartcards to consumers in the form of a sticker that can be peeled off and stuck to any existing mobile phone, iPod, wallet or other personal "thing" is the only way to bridge the gap between cards and phones in the eyes of the consumers...

Once the phone manufacturers see the numbers of "real" consumers using their phones as smartcards, they will have no reason to hold back bringing out NFC enabled devices.


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