Technology has completely changed the way the world functions today – including how we pay. The proliferation of innovative solutions around mobile devices combined with a burgeoning internet penetration have given rise to cashless societies. Countries around the world, including China and Sweden, are increasingly swapping bank notes and coins for credit cards, digital wallets and QR codes to pay. Meanwhile, many other nations are in the midst of setting up the right infrastructure to enable a cashless ecosystem.
In Southeast Asia however, conversations on going cashless have begun but cash still remains king for the most part. According to a 2018 Google-Temasek report, less than one in two internet users in Southeast Asia have adopted digital payment services, with adoption rates as low as one in five in the Philippines and one in four in Vietnam.
Furthermore, based on a report by KPMG, more than 70% of the region are unbanked. The lack of financial inclusion has hindered many from embracing digital payments.
The rapidly developing region, however, has all the makings of a cashless economy.
With a population of more than 660 million, over half of Southeast Asians are under the age of 30. Driven by such a young and digitally savvy population, the region consequently has one of the highest internet penetration (53%) and mobile connectivity (133%) rates globally. For many in this age group, smartphones were their first personal computers.
This means that there is tremendous opportunity to nurture the transition from cash to cashless – beginning with the younger generation. However, they first need to be educated on the merits of doing so. For many, cash is easy to use, uncomplicated and inexpensive, with no transaction costs. Consumers fear the security risks associated with e-payments. The Banking Consumer 2020 study by VMware found that 77% of Indonesian consumers and half of Singaporean consumers distrust e-payment security. The recent rise of cyber attacks on critical infrastructure in the region has instilled greater fear and cynicism in consumers and merchants as well. In fact, three out of five retailers in the wider Asia Pacific region are delaying their digital transformation because of such data breaches.
Educating the masses
Transitioning from cash to cashless in any Southeast Asian country will be a monumental change and will take a village to occur successfully. Together, public and private entities in Southeast Asia must come together to educate the public on the benefits that come with going cashless. Fortunately, governments are increasingly taking action and pushing out nationwide plans and policies to enable the shift. Last year, the ASEAN Economics Ministers signed an agreement on e-commerce to foster a conducive digital economy and increase trust and certainty for businesses in the region.
More fintech players are entering the region’s various economies and making it easier for merchants and consumers to opt for digital payments too. They are collaborating with financial institutions to set up a unified ecosystem that is seamless and consistent. In Singapore for instance, a unified payment QR Code was rolled out that is compatible with as many as 27 e-payment solutions including NETS, GrabPay and DBS PayLah!.
Slowly but surely, steps are being taken in the journey toward a cashless society in Southeast Asia. However, the risks have to be addressed and eliminated where possible. Businesses and governments all have a part to play in ensuring that the avenues for digital payments are safe and secure.
UL provides a range of mobile payment test tools and services for issuers, card manufacturers, terminal vendors, brands and more, to help ensure trusted payment expertise and continuous innovation throughout their payment infrastructure. UL also guides businesses by providing a holistic approach to security – from certification to the maintenance of the whole infrastructure.
Connect with UL to build mobile security, helping to both instill consumer confidence in your business, and reduce risk and vulnerabilities toward cyber attacks and fines. For more information, click here: https://ims.ul.com/strategies-interconnected-world/ul-strategic-solutions.