Is cash still king—or in the case of this female-led WTF Summit masterclass, queen? Or is that title going to digital payments now? Will we ever reach a point where we’re truly a cashless society? That was the topic at hand in a panel hosted by Erin Woo, reporter for the Information, featuring three global experts in Fintech:
- Jacqueline Poh, Managing Director, Singapore Economic Development Board
- Peggy Alford, EVP, Global Sales, PayPal
- Sherri Haymond, EVP, Digital Partnerships, Mastercard
Digital payments from different perspectives
The view of digital payments is quite different in the U.S. than Southeast Asia.
Jacqueline Poh, Managing Director of the Singapore Economic Development Board—a government agency responsible for investment promotion and growing Singapore’s economy—discussed digital payment trends in Southeast Asia. It’s a region of 650 million people, which is projected to be one of the world’s biggest economies by 2030.
“Just during the pandemic alone, simply because of the lockdowns and the need to go online, everything was done digitally from schooling to payments to groceries. We saw 60 million consumers within Southeast Asia Indonesia become digital consumers.* That's a huge increase. And all of them represent a large opportunity set for digital payments and fintech companies who are keen to expand within Asia.”
Sherri Haymond, the EVP of Digital Partnerships for Mastercard, was enthusiastic about these opportunities. She views digital payments in the U.S. not as a replacement for traditional forms of payment, but as a welcome option for consumers. “We’re really interested in facilitating this choice and on the business and corporate side. It’s an extremely exciting time for us because the environment is super ripe. There’s so much innovation in this space, and we’re expanding our strategy to include all of these payment options in a big way.”
The rise of Buy Now, Pay Later
Speaking of options, Peggy Alford, EVP of Global Sales for PayPal, brought up the popularity of Buy Now Pay Later. “The way PayPal has approached Buy Now Pay Later as a capability has been as another way to pay within the ecosystems of ways to pay. We wanted it to be seamless and we wanted to enable merchants to be able to offer them to their consumer base, who are asking about them. We don’t think it’s going to replace anything necessarily, but it is another option.”
But…can consumers around the world actually pay later?
As moderator Erin Woo noted that Buy Now Pay Later has seen accelerated adoption in Southeast Asia. In fact, consumer interest for the term has jumped 16 times, particularly in Indonesia. What’s driving this change?
The biggest driver, Poh said, is how disposable income is simply much lower in Southeast Asia than in the U.S. “If you want to buy clothing or something else, it may take you a few months to save up for it…And the environment that we are going into is inflationary as well as possibly recessionary in the next few months or years. It pays to be very cautious about the ability of the consumer to, in fact, pay later.”
Creating responsible regulation
The real-world consequence of promoting Buy Now Pay Later recklessly? As Woo said, “The benefits of Buy Now Pay Later are obvious, but so are the drawbacks…
We’re seeing this trend play out now in terms of the debt it’s left some people in,” and then asked the group “What advertising regulations need to be put in place to ensure Buy Now Pay Later is promoted responsibly?”
“In this case, we’re part of responsible lending by design,” said Haymond. “People are only allowed to issue these products if they agree to a set of guidelines. In addition, something we always try to do is provide more transparency. One of the things we’re doing is providing deeper visibility into someone’s ability to pay, including loans they may have out there that don’t necessarily show up in a credit report. I think these efforts will be helpful in facilitating compliance with whatever the regulator comes up with.”
Alford from PayPal added “Our focus is really around providing flexibility to pay within the constraints of what our consumers not only want, but what is good for them.”
Blockchain goes cross-border
No discussion about the future of digital payments can ignore blockchain, the backbone of Web 3.0.
As Poh said, “I think Web 3.0 is going to be the spark that causes a lot of disruption to financial services. One of the most promising areas for blockchain is the ability to make payments cross-border. The question for merchants is ‘How do I settle payments across borders and what is the cheapest and most efficient manner possible?’ And if you happen to be the holder of an e-wallet in one country and another e-wallet in another country, ‘How do I move money from one wallet to another easily?’” Poh believes blockchain has the potential to make the process much more efficient.
Haymond agreed. “Currently transfers are very slow and expensive…[Our goal is] to enable companies who regularly trade things in that digital currency world to settle transactions. It’s a very invaluable thing that a lot of our partners have asked us for. We can settle those directly with the partner, and we don’t have to switch to dollars which is creating efficiencies.”
Alford stressed that crypto won’t be replacing any currencies, but views it as another payment option for consumers. “This is about supplementing and digitizing what is already happening. And of course, there’s everything around traceability and transparency, and thinking about what can go wrong from an illicit payment perspective. All of that needs to be built into the strategies and we are in very early days. So there’s a lot of uncertainty and all of this will evolve.”
Becoming a cashless society
Checks and even card transactions are expensive and can have a large impact on a country’s economy. As Poh noted, “The entire cash and check infrastructure for any country can amount to several points of GDP. It is that wasteful. We wanted to eliminate checks in Singapore and then later on eliminate cash. And that would literally give us back at least 1% of GDP.”
But how do you push e-payments forward in societies (like those in Southeast Asia) that still operate on a largely cash basis? Poh and her team successfully experimented with going cashless for certain types of payments and transfers from the government.
“The first thing that we made cashless were grants and prizes for educational scholarships. We said ‘It’s on e-payment. We’re not giving you a check anymore. We’re not giving you cash.’” This was coupled with educating the population on how easy, safe and efficient e-payments can be. Before you knew it, Poh says, a lot of people were paying each other with e-payments.
Creating societal change in how people pay for goods and driving adoption of that change is a massive effort. But that effort is worth it in terms of efficiency and cost savings. And Singapore has been an early proving ground for success.
*According to Google, Temasek and Bain e-Conomy SEA 2021