Here's Why You Must Hang On To Your Digital Wallets

Pushing for a cashless society can be counterproductive to economies which aren't ready for it

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By Hari Sivan


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Recently, when I was queuing up at one of my favourite chicken rice stalls in Singapore, the sanitary glass covering the chicken was plastered over with e-payment ads. Yet, out of the six people lining up in front of me, only one decided to try to use them. All the others – comprising yuppies and fresh graduates – stuck to using notes without even looking at the cashless alternatives.

This exemplifies the problem of creating a cashless ecosystem. It may very well be the future of finance, but the industry players of today need to focus on the needs of the present – that cash is still king and remains the most preferred form of transaction.

Yes, the benefits of going cashless are attractive to many ecosystem stakeholders. For governments, it's about taxes and financial institutions that love the revenue opportunity, while the user data captured is the holy grail for data aggregators. For the layperson going about their everyday business, it frees up worries of needing to carry wads of cash around but current cash alternatives charge a fee and it increases the cost of living.

However, different countries face different sets of challenges towards cash circulation and banking access. Technology, therefore, needs to be powered to narrow the divide between improving cash management and making cash available to those who still rely heavily on it while balancing every growing concern about individual privacy and avoiding the costs. Solutions are being debated but it looks like it will take a while to convince the incumbents. It is likely that many of the payment behemoths will bite the dust if they can't give way to progress.

Economic Discretion Is Advised

Pushing for a cashless society can be counterproductive to economies which aren't ready for it.

Take India, for example, over 80 per cent of its currency was declared void in 2016 due to the government's overnight demonetisation measures. While reducing the circulation of "black money' and keeping cash supply under better control are logical measures, they're longer-term pursuits. The government practically accused the whole country of hoarding black money.

The short-term impacts? Reduced GDP output and the wipe-out of over a million jobs. This isn't critiqued on the policy, but rather a realistic assessment of how such macroeconomic measures will have drastic consequences for the masses.

99 per cent of the "demonetised currency' has been replaced and back in circulation after 2 years! Time for a new word – "re-monetisation'.

Yet, even in the US and Europe, where FinTech has exploded in recent years (and which are home to the world's most powerful global banks), cash remains king. While reliance on cash has indeed dropped there over the years, the fact that many still prefer using banknotes means that institutions can't simply drown out the voices of the few to make life seemingly easier for the many. That, essentially, is the antithesis of economic liberalism

But the conundrum faced by governments and banks to keep cash under control still needs to be addressed. Cash costs are indeed rising and is slowing down supply chains, leading to the ballooning of USD300 billion used to distribute and manage cash worldwide.

So, a middle-ground is needed before the world is truly ready to go cashless. Technology, in this regard, can show that the solving of either problem shouldn't be mutually exclusive.

Bridge The Divide With Fintech

The rise of technology applications within finance has risen in parallel to the cash management problem – especially in regions like the Asia-Pacific, where despite being home to the past century's economic growth miracles, is still pegged back by uneven banking ecosystems and significant unbanked populations.

Yet with Asia being the world's strongest internet and smartphone-savvy regions, the place is ripe for FinTech to plug the hole left unfilled by states and financial incumbents – which aren't ignoring underserved financial communities but aren't as agile as smaller, upcoming tech specialists and entrepreneurs due to their large institutional size.

We're now seeing more innovative, market-ready solutions – such as mobile banking platforms, e-wallets and P2P lenders – being imported and developed in Asia. And while banks around the world are investing in FinTech, the Asia-Pacific is where they are choosing to establish specific teams and acquiring innovative solution providers to develop their solutions in-house.

And with more global investors eyeing Asia to find the next big tech disruptor, the pace of FinTech innovation will only grow. But rather than placing heavy and risky bets on cashless options, there are significant opportunities to invest in innovations which makes use of cash rather than replacing it outright.

The future of cash is near, but for the present, we can use tech to simplify its usage before cancelling altogether.

Hari Sivan

CEO, soCash

An experienced banker and a digital native with a career that boasts stints with the world’s leading financial institutions across Asia, Hari Sivan now leverages on his rich experience with payment solutions, product development, fraud control and risk management to build Asia’s largest cash distribution network via Singapore-based FinTech start-up soCash.

Having deep expertise in global finance – and the transformational power it holds for communities everywhere, he is passionate about everything digital and an evangelist of pragmatic innovation for the common good.

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