Payment News

Drive for Cashless a Mistake

The Chief Minister for Bengal has questioned the government’s focus on cashless transactions. The Minister believes that they are suitable for large enterprises and the wealthy but not for the majority of people. This focus is causing real problems for micro and small scale industrial businesses.

The government of West Bengal sees micro, small and medium size enterprises as key for growth and employment.

Commercial Banks Push for Digital Payments in South Africa

Three commercial banks in South Africa have reported the growth of digital payments amongst their customers and the benefits that it offers them. All acknowledge that cash remains a core part of South African payments and that it will stay that way for a considerable period of time. But it is clear that the push for digital is active and relentless in South Africa.

First National Bank (FNB) is one of South Africa’s big four banks. It is seeing a significant move away from cash and traditional payment methods to digital payments for both its retail and commercial customers. Its retail customers are withdrawing 6.8% less cash than in 2021, and this trend is mirrored for its commercial customers. FNB makes the point that when inflation is taken into account, the decrease is even more.

The number of customers using real-time payments has gone up 37%, and the value increase is 47%. A move to contactless card and device payments is also clear. Card payments involving contact have halved to 33% of all transactions with contactless taking up the slack, increasing to 63%.

FNB is actively encouraging the adoption of digital payments because of the costs of handling, distributing and transporting cash and the risks of theft and robbery. FNB says that the number of those electing not to accept cash is a growing trend, especially among small and medium businesses, not just the larger merchants and businesses.

Absa Group Limited is a multinational banking and financial services conglomerate based in Johannesburg. It has also reported rapid adoption of digital contactless payment methods, resulting in a more than 200% increase in e-commerce levels and debit and credit contactless card volumes. More than 70% of the bank’s core customer base now use digital channels to transact. Digital banking adoption has been growing at about 20% year on year since 2016, perhaps encouraged by Absa’s Digital Fraud Warranty.

Absa cites the personal risk of loss, theft or fraud increases when carrying cash, which consequently means cash attracts higher handling charges. The bank also highlights the additional benefit of digital payment methods in the form of access to retailer loyalty programmes as an embedded feature. Absa notes that customers use cardless capabilities up to 20-40 times per month. This generates better data which enhances customer access to other financial services, such as loans.

Capitec Bank is South Africa’s second largest retail bank. It has reported that the number of clients using digital channels for transactions increased to 11.7 million, and the number of transactions via digital channels increased significantly, by 21%. Card transactions increased by 28% compared to the previous year.

Capitec says card and digital payments are becoming more popular due to the increased safety of paying digitally and reduced digital transaction fees. Digital payment also offers consumers the advantages of more affordable transactions and cash-back rewards.

Digital banking allows Capitec to understand clients’ digital income and transactions and their financial behaviour better so that it can offer products tailored to help them live better. If small business establishments accept digital payments, it increases their chances of loan approval, which can aid business growth.

Retail Digital Transactions Double in Sri Lanka

A report by Robocash, an authorised online lender based in Sri Lanka, says that retail digital transactions have doubled over the last two years to $31 billion. Sri Lanka has a Retail Time Gross Settlement system and a Retail Payment System, providing the necessary infrastructure for this growth.

Sri Lanka has taken steps to restrict the number of electronic accounts per person, establishing uniform standards for mobile payment apps, and reducing fees.

Blockchain to Deliver Thai Stimulus Package

The new Prime Minister of Thailand, who came to power in August, has given details of how he will fulfil an election pledge to distribute money to citizens using digital wallets.

The plan is to distribute the equivalent of 3% of GDP, about $14 billion, to people earning less than THB 70,000 or with less than THB 500,000 in bank savings. About 50 million people will get THB 10,000 ($280) each. The money has to be spent within six months on food, consumer products and non-alcoholic beverages, and it has to be spent in the recipient’s electoral district. This is very much a stimulus measure aimed at driving growth.

The money will be distributed using a mobile app, Pao Tang, which will allow the government to track transactions. In addition to ensuring compliance with the conditions, it will also put digital money and blockchain technology into the hands of all recipients.

Thailand already has widespread use of instant payments. It represents half of the world’s first cross-border linkage of real-time payment systems through its PromptPay Platform, which is linked to Singapore’s PayNow system. PromptPay was introduced in 2017.

A law needs to be passed to allow the plan to happen, and the goal is to go live in May 2024. This is not certain to pass, given the debt this plan would incur and doubts about whether it would stimulate investment. It would though, have a significant impact on digital money and digital payments.

BSP Continues Digital Push

In the Philippines, the share of digital payments to total retail transactions increased from 30.3% in 2021 to 42.1% in 2022. The number of people with bank accounts has risen steadily, from 29% in 2019 to 56% in 2021 and 65% in 2022.

Bangko Sentral ng Pilipinas’s (BSP) Digital Payments Transformation Roadmap seeks to increase total retail digital transaction to 50%, and the number of adults with bank accounts to 70%, by the end of 2023.

To meet these targets, BSP is working with the payment industry on changes such as request to pay and direct debit facilities.

Enhancement of cross-border payments is a priority of the Association of Southeast Asian Nations (ASEAN). To support this, a regional payment connectivity initiative involving the central banks of the Philippines, Indonesia, Malaysia, Singapore, Thailand and Vietnam has been launched. The co-operation includes QR codes and fast payment-based cross- border payments.