Adopting the latest tech can always be an issue. There is a consensus among experts that people resent change. Be it the change in the organizational structure of an enterprise or the way things get done, and change gets rarely welcomed. In this light, we see how technology has evolved the way commerce gets done. A visit to the store to purchase a commodity can increasingly replaced by online shopping, and more and more buyers in the city-state of Singapore are adopting this change. For the businesses in Singapore, a majority of which are SMEs, the internet revolution has brought with it a plethora of opportunities. There are new digital ways to market a product, and new tools are making life more comfortable concerning managing inventory and reconciling data. Amid all this is the way payments have changed from being solely dependent on paperwork to merely sending a text message over a phone.
Digital payments are fast replacing traditional payment modes, including cheques, and the ease and speed that come along has caught the attention of many businesses. While it may sound encouraging that more and more SMEs in Singapore are adopting digital payments over traditional payment methods, an area of concern is that the transition isn’t as fast and reassuring as it appears on its face. Payment by cheques to suppliers is even today the mainstay in business transactions. It owes to multiple factors, and unless the reservations of SMEs gets addressed adequately, a complete shift to digital payments cannot attained any time soon. Technology not only saves crucial resources, including time and labor, it also adds an element of security in transactions is what we have always thought. But this isn’t what Singapore-based SMEs think of digital payments. Let’s talk about this in detail.
Are digital payments safe?
The foremost concern of SMEs is how safe is it to ditch traditional payment means in favor of digital means. A majority of users of computers, mobile phones, and other devices are aware of the term ‘hacking.’ Unseen and undetected forces do exist and are capable of extracting a person’s vital details and exploiting them for making illicit profits. The much-hyped digital currency, Bitcoin, caught the imagination of many tech enthusiasts in the past couple of years, soon lost much of its sheen owing to its vulnerability to hacking. Hackers have stolen large quantities of Bitcoin, and this has further dented the prospects of people adopting legal and safe digital payment modes, so much so that SMEs have become wary of transferring money through digital means. And all the fears are not unfounded. Let’s put this into perspective. Accenture’s white paper titled ‘Unmask Digital Fraud Today’ says that USD 31.3 billion were lost to transaction frauds globally.
According to a study by AppsFlyer, bots, and malware have perpetrated most of the digital frauds in the Southeast Asia region. Nearly all countries, including Singapore, Thailand, Malaysia, and Indonesia, have been hit by the menace of hacking. The modus operandi of perpetrators may differ; however, the result is the same- unauthorized deduction of money from the bank account of an unsuspecting user. Singaporean authorities have sprung into action to check the menace and instill confidence in the minds of people concerning digital payments. The Monetary Authority of Singapore, more commonly known as MAS, issued a set of guidelines in September 2018 that aim at providing a safe and secure environment for digital payments. Notably, consumers can claim up to $1000 in the event of non-negligence on their part when an unauthorized transaction takes place. Also included is a compulsory alert to be sent by financial institutions to customers every time an e-payment transaction gets done on their accounts.
Hence, the authorities have taken the lead in reassuring SMEs of digital payments. The MAS has addressed the fear of being prone to fraud when opting for a digital payment over cheque with directions to all financial institutions that all transaction disputes must investigate without any delay. A detailed report is provided to the customer within 21 days (for complex cases, the deadline is 45 days). All the initiatives taken by the authorities aim at encouraging more and more digital payments. SMEs are the core of the Singaporean economy, and the payments made within the supply chain form a large chunk of banking transactions. Also, that the cheques provide a sense of security over e-payments, but to reduce costs and turnover time concerning payments, SMEs are not to shy away from adopting digital means of transaction. Cheques come with their own set of concerns; for example, the instrument is prone to being lost or damaged and even being misused by way of forged signatures.
Cheques are Cheap and come with Additional Perks.
While it may be true that cheques are relatively cheaper than digital payment modes, Singaporean banks are working overtime to reverse this equation. OCBC Bank and DBS Bank have announced that to motivate SMEs to adopt electronic payment means, the levy on cheques will get raised, and correspondingly, the fee charged on e-payments will get lowered. OCBC Bank has now started charging S$0.75 fee for processing every cheque (as against the earlier practice of charging fee once the threshold of 30cheques in a month has reached). Apart from this, SMEs opting for FAST (Fast And Secure Transfers) transactions will be given a full waiver of fee for up to 30transactions every month from October 1, 2019, till the year-end. DBS Bank has waived off fee on FAST and PayNow transactions for up to 30 transfers every month, and this waiver will last till January 2020. The numbers show that digital payments are becoming ever more inexpensive for Singaporean SMEs.
Many SMEs believe that cheques also serve another purpose of acting as a security against future payment. For example, a post-dated cheque can hold as a security for future payment in a B2B transaction. By contrast, digital transactions are mostly real-time where the money gets instantly transferred or at least a direction issued to the bank for such transfer. Additionally, with cheques, the business which owes the sum gets a buffer period for payment since cheques are physically presented in the bank by the payee, and it usually takes at least 1 to 2 working days for the banks to move funds from one account to the other. SMEs in Singapore use this buffer time as an opportunity to either arrange funds that otherwise do not exist. Alternatively, they can change their mind of making any payment against the cheque to the bearer by instructing the bank not to honour the cheque. Cheques, as they say, come with such unseen advantages, and since these elements are deep-rooted in the conduct of business transactions among SMEs, the shift to digital payments has been slow.
Where are we headed?
Although SMEs in Singapore haven’t completely switched to e-payments and are finding it hard to give up their love for issuing and accepting cheques, the data holds the key concerning the future of digital payment. According to OCBC for the bank’s SME customer base, 71 percent of the total transaction volume was through cheques in 2015, but the same figure dropped to 57 percent in the year 2018. On the contrary, SMEs opted more for digital payments during the same period between 2015 and 2018, and there was an overall increase of 51 percent in the volume of transactions through digital modes. What this suggests is that SMEs are adopting the digital means, but yes, the pace of adoption isn’t commensurate with what to expect of the country that is one of the most advanced in the Southeast Asia region. For this to change, all stakeholders are to come forward and join hands in a way that electronic payment methods become the best available option of all for moving money.
With regards to adding a sense of security to e-payments, the authorities in Singapore have taken key initiatives. As mentioned above, the guidelines issued by MAS are comprehensive and well-intended towards reassuring SMEs of steering clear of any frauds. SMEs have a role to play since most of the scams take place due to the negligence or ignorance of users. For example, passwords to accounts should keep as a secret, and only authorized personnel must be in hold of critical information. Proper training to staffers that are engaged in digital payment divisions of businesses is indispensable. As far as the fee involved in transferring money through electronic means is concerned, SMEs are to know that it is their banks that take a hit when cheques are issued since banks need to maintain a comprehensive infrastructure for their clearance. On the contrary, the adoption of digital payment systems allows banks to save cost, and this translates to increased credit available to SMEs for expanding their businesses. With awareness of the benefits of digital payments by all stakeholders, it is sure that the transition will be quick and rewarding.
For any further information on digital payment security in Singapore, please refer the MAS guidelines