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For businesses in Singapore, cash is still king

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SMEs say adopting cashless payments is costly, and they are still not widely accepted by consumers

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

Merchants said that adopting e-payments can be costly especially for small players and, unlike in other countries, they have not yet become a part of everyday life here.

While their use is growing, inter-operability has become an issue as the various systems do not "talk" to one another.

This has slowed down the pace of cashless adoption.

In a recent study by online payment service provider PayPal, 90 per cent of the 500 consumers surveyed still prefer cash as the primary method for transactions.

For merchants, the 3 per cent transaction fee imposed by credit card companies such as Visa and Mastercard is a major drawback to adopting cashless payments. The same fee applies to mobile wallets such as Apple Pay and Android Pay.

Singapore's most extensive e-payment network, Nets - run by DBS Bank, OCBC Bank and United Overseas Bank - charges merchants only 1 per cent and is gaining some traction.

But SMEs, which make up 99 per cent of businesses in Singapore, are still hesitant.

Mr Lim Jialiang, owner of chocolatier Demochoco, pointed out that credit cards are ubiquitous in Europe, with the European Union ruling in 2015 that 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.

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

Four government agencies - the National Environment Agency, Housing Board, Monetary Authority of Singapore and the Smart Nation and Digital Government Office - are crowdsourcing ideas on e-payment technology that will work at hawker centres, coffee shops and heartland shops.

They said the desired solution should include PayNow, an instant fund-transfer system launched in July, and should inter-operate with the likes of Visa or Mastercard.

Transaction fees imposed on merchants should also be negligible or standardised.

Mr Anthony Seow, DBS head of cards and unsecured loans, agreed merchant take-up could be better. He said the bank has been speaking to merchants to debunk various myths, such as high set-up costs and security.

Mr Rahul Shinghal, PayPal's general manager of South-east Asia, stressed 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 payment solutions is the fact that transactions can be channelled only through personal bank accounts.

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 are food stalls at hawker centres and neighbourhood stores. DBS said PayLah is currently free for merchants and there is no fee for PayLah transactions, whether via mobile phone numbers or QR codes.

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

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.

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

"If you are a popular chicken rice stall here, it is unlikely you will care if you take card or cash."