Digital payments and fintech – the information

Is cash still king—or in the case of this female-led WTF Summit masterclass, queen? Or does that title go to digital payments now? Will we ever reach a point where we are truly a cashless society? That was the topic at hand in a panel hosted by Erin Woo, reporter for The Information, with three global Fintech experts:

• Jacqueline Poh, Chief Executive Officer, 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 US than in Southeast Asia.

Jacqueline Poh, CEO of the Singapore Economic Development Board – a government agency responsible for investment promotion and growth in Singapore’s economy – discussed digital payment trends in Southeast Asia. It is a region of 650 million people, which is projected to be one of the world’s largest economies by 2030.

“Just during the pandemic alone, simply because of shutdowns and the need to go online, everything went digital from schooling to payments to groceries. We saw 60 million consumers in Southeast Asia Indonesia become digital consumers.* That’s a huge increase. And all represent a huge opportunity for digital payments and fintech companies looking to expand in Asia.”

Sherri Haymond, EVP of Digital Partnerships for Mastercard, was enthusiastic about these opportunities. She sees digital payments in the US not as a replacement for traditional forms of payment, but as a welcome alternative for consumers. “We’re very interested in facilitating this election and on the business and enterprise side. It’s an extremely exciting time for us because the environment is super mature. There’s so much innovation in this space and we’re expanding our strategy to include all of these payment options to a large extent.”

The rise of Buy Now, Pay Later

Speaking of alternatives, Peggy Alford, EVP of Global Sales for PayPal, addressed the popularity of Buy Now, Pay Later. “The way PayPal has approached Buy Now Pay Later as a feature has been as another way to pay within the ecosystem of ways to pay. We wanted it to be seamless, and we wanted to make it possible for sellers to be able to offer them to their consumer base, who are asking for them. We don’t think it’s going to replace anything necessarily, but it’s another option.”

But … can consumers all over the world actual pay later?

As moderator Erin Woo noted, Buy Now, Pay Later has seen accelerated adoption in Southeast Asia. In fact, consumer interest in the term has increased 16 times, especially in Indonesia. What is driving this change?

The biggest driver, Poh said, is how disposable income is simply much lower in Southeast Asia than in the US. “If you want to buy clothes or something else, it might take you a few months to save up for that … And the environment that we’re going into is inflationary as well as possibly recessionary in the next few months or years. It pays off to be very careful about the consumer’s ability to actually pay later.”

Create responsible regulation

The real consequence of recklessly promoting Buy Now, Pay Later? As Woo said, “The advantages of Buy Now, Pay Later are obvious, but so are the disadvantages…

We’re seeing this trend play out now in terms of the debt it’s put some people into,” and then asked the group, “What advertising rules need to be in place to ensure that Buy Now, Pay Later is marketed responsibly?”

“In this case, we are part of responsible lending by design,” Haymond said. “People are only allowed to issue these products if they agree to a set of guidelines. In addition, something we always try to provide is more transparency. One of the things we do is provide deeper insight into someone’s ability to pay, including loans they may have out there that don’t necessarily show up on a credit report. I think this effort will be useful in facilitating compliance with what the regulator comes up with.”

Alford of PayPal added “Our focus is really on providing flexibility to pay within the constraints of what our consumers not only want, but what’s good for them.”

Blockchain goes across borders

No discussion of 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 across borders. The question for merchants is ‘How do I settle payments across borders and what is the cheapest and most efficient way 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 single?’” 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 that regularly trade things in the digital currency world to settle transactions. It is a very invaluable thing that many of our partners have asked us to do. We can settle these directly with the partner, and we don’t have to convert to dollars, which creates efficiency.”

Alford emphasized that crypto will not replace any currencies, but sees it as another payment option for consumers. – This is about supplementing and digitizing what is already happening. And of course it’s all about traceability and transparency, and thinking about what can go wrong from an illegal payment perspective. All of this needs to be built into the strategies and we are in very early days. So there is a lot of uncertainty and all of this will develop.”

Becoming a cashless society

Checks and even card transactions are expensive and can have a major impact on a country’s economy. As Poh noted, “The entire cash and check infrastructure of any country can amount to several points of GDP. It is that uneconomical. We wanted to eliminate checks in Singapore and later eliminate cash. And that would literally give us back at least 1% of GDP.”

But how do you push forward e-payments in societies (such as those in Southeast Asia) that still operate largely on a cash basis? Poh and her team successfully experimented with going cashless for certain types of government payments and transfers.

“The first thing we made cashless was scholarships and awards for educational scholarships. We said ‘It’s on e-payment. We don’t give you a check anymore. We don’t give you money.'” This was combined with informing the population of how easy, safe and efficient e-payments can be Before you knew it, says Poh, many people were paying each other with e-payments.

Creating societal change in how people pay for goods and getting this change used is a huge effort. But that effort is worth it in terms of efficiency and cost savings. And Singapore has been an early proving ground of success.

*According to Google, Temasek and Bain e-Conomy SEA 2021