Since the Singaporean government announced its intention to convert the country into a cashless society, there have been many reports and speculations on how this goal could be achieved. While many pundits have correctly identified some of the challenges that must be addressed to achieve this lofty goal, there are two critical pieces of the puzzle that are still missing in the discussion. Speficially, we look to China, where cash has essentially given way to mobile payments already, to get more clarity to probe into what must be done in Singapore to truly kill cash.
Provide massive rewards to consumers
Understanding how WeChat became the de-facto mode of payment in China reveals few important reasons why why WeChat Pay became so widely adopted. To put it simply, Tencent (owner of WeChat) spent hundreds of millions (if not billions) of dollars to incentivize consumers to build a habit of paying with WeChat. For example, WeChat provided very high interest rate investment products to encourage people to link their bank accounts with their WeChat accounts. This was so successful that it is successfully being mimicked by the Korean chat app KaKaoTalk. Furthermore, WeChat struck deals with a countless number of merchants like restaurants to offer substantial discounts for people who paid with WeChat. Ultimately, it was a simple but effective strategy: provide an irresistible amount of rewards for mobile payment users, and hope that they build a habit of using it over time.
Help merchants grow their businesses
To become a cashless society, Singapore also must ensure that cashless payment methods are universally accepted. Otherwise, consumers wouldn't feel comfortable leaving their wallets at home since they wouldn't be able to depend on mobile payments to work on all of their daily necessities. However, merely providing QR code readers for free isn't quite enough. Afterall, merchants have something lose by forgoing their cash business.
Instead, Singapore must be able to make business owners feel like it's imperative to accept card or mobile payments for them to succeed or even survive. For example, what if a mobile payment company were to offer 20% cash rebate on all hawker stall meals for a year? That would surely help attract more customers to hawkers that accept mobile payments away from those who don't accept mobile payments. There are other measures that could also be effective, like providing substantial tax subsidies for bills accepted via non-cash payments for a few years.
It's not just about convenience; it's about incentives
Currently, most of the discussion around going cashless has been focused around how to make it more convenient and seamless for people. However, it's important to recognise that convenience alone isn't big enough of an incentive to induce a population to abandon its habit to adopt a new one. On the other hand, monetary incentive has been well-known to be a powerful catalyst for such a change. For instance, credit cards have been providing rewards like cashback and miles for decades to encourage adoptions. For Singapore to become truly cashless, both the government and companies involved must recognise this point. Once consumers build a habit of using mobile payments on a daily basis, convenience alone is likely sufficient to keep people from returning to using cash even without monetary incentives.