Southeast Asia is Taking Slow Yet Steady Steps to Go Cashless
ASEAN countries have a lot of catching up to do, but these three thought leaders are hopeful
PHOTO CREDIT: Getty Images
While there have been movements toward going cashless in such countries as Singapore, Philippines and Indonesia, the cashless revolution that started in China—WeChat’s digital hongbaos in 2013 being the fire-starter—is taking its sweet time spreading across Southeast Asia.
Even in Singapore, which in recent years has become a hotbed of fintech activity in the region, the road to going cashless seems to be a long one. The country’s famous hawker centers, for example, still prefer cash to digital payments. Of the 80 stalls in the widely popular Tiaong Bahru Market, only one in six allow for cashless transactions. In a report by Channel News Asia, merchants point to cashless transactions being a deterrent to customers who do not like it when machine problems occur during peak hours.
The cashless challenge
According to Justin Hall, principal at Golden Gate Ventures, one of the biggest challenges for Asia when it comes to adapting to cashless transactions is “merchant and customer acceptance, and utilization of technologies.” Getting merchants to accept cashless payments, he adds, “be it card, aggregated applications, digital wallets, or even cryptocurrencies, is still a very difficult proposition.”
Even when going cashless is arguably more convenient for customers, Hall relates such mode of payment heavily relies on “technologies and services that may be out of reach for many users, especially emerging technologies.”
For countries like Indonesia and the Philippines, distance and their archipelagic nature also present a problem. According to JP Ellis, chief executive of C88 Financial Technologies, a fintech company that has operations in both Indonesia and the Philippines, their challenges “have revolved around access points and lack of data.”
Why cashless will rise
It may be slower in terms of adoption compared to China, ASEAN countries are still progressing towards using more cashless technologies. “Generally, people love convenience,” asserts Asim Haneef, founder and CEO of Manila-based PaidUp. “It’s why people love Uber or Grab so much [because] they hate to wait around, fumble around with cash, wait for their cash bills, and the right change, etc.”
This clamor for convenience is largely why Haneef founded PaidUp. The food app offers people the chance to discover, choose, and pay for their next meal without lining up at the store, as shown in this video. “Saving time is saving money in some ways,” he relates. “Our long-term interest and goal in the Philippines and Asia is primarily around empowering MSMEs (micro, small and medium enterprises) in a variety of ways, and since accelerating cashless payments is a part of that framework, it fits into what we're doing quite well.”
As it is, Haneef asserts that, for its sake, the Philippines has a lot to catching up to do when it comes to going cashless. “As Jack Ma so rightly pointed out when he visited the Philippines a few months ago, the Philippines and the rest of Asia must adopt cashless payments quickly because [these] reduce customer and merchant inefficiencies, unlock economic opportunities, accelerate financial inclusion, increase transparency thus reducing corruption and will ultimately be better for everyone, especially the MSMEs that are the backbone of so many emerging market economies.”
It’s slightly different motivation for Ellis. “Significant socio-economic research has suggested that cash-based economies have higher correlations with tax fraud and crime than cashless and particular digital money economies,” he says, pointing out that this has been a difficult transition in countries like the Philippines and Indonesia because of the complex nature of administering an archipelago. “Digital can unite this. Tax compliance, services, infrastructure, schools, and health should follow. Digital is a path toward participation, and participation is the path to build better societies,” says Ellis.
For Hall, the passage of time, together with consumers’ growing purchasing power, and the consequential universal adoption of technology will help the rest of Asia to adapt to a cashless society. At the very least, there’s the fact that carrying cash all the time can be a liability. “Using and carrying cash possesses a significant amount of friction and hidden costs, not only in handling and storage, but acceptance,” says Hall. By transitioning into a cashless society, concludes Hall, “you can remove or reduce the cost of doing business, which in turn will result in downstream savings for both businesses and consumers. There’s also the enforced digitalization of businesses and consumers, which can educate both in accepting and using other presumably cheaper and more effective digital tools and services.”